Following a precedent set in Canada, Honda dealerships across the United States are facing reduced profit margins as the automaker seeks to streamline costs in anticipation for the increase in Electric Vehicles (EV) reports Car Scoops.
A corporate memo that was obtained by Auto News, Honda dealerships in the U.S. have been informed of a 0.5% reduction in the profit margins between the invoice and the manufacturer’s suggested retail price (MSRP) for new vehicles. Additionally, adjustments are being made for marketing, advertising, and service payments, much to the dealerships’ dismay.
Brian Kanyan, the chairman of the Honda National Dealer Advisory Board, expressed concerns to Auto News about the financial implications of these changes to the dealerships. “It will impact our bottom line. The extent of that impact will unfold over time,” he stated. “Adjustments will be necessary, and we’re hopeful Honda will assist in this transition.”
This adjustment comes on the heels of an announcement that Honda’s Canadian dealerships would see profit margins cut by up to 44%. The changes are slated to take effect from May 1, including a standardized dealer marketing allowance of $150 per vehicle.
Dealers have expressed their frustrations with these changes. “Obviously, Honda dealers are not happy about the change,” shared one dealer anonymously. “We don’t think the change is appropriate but it’s also not necessarily surprising.”
Mamadou Diallo, Senior Vice President of Sales at American Honda Motor Co, mentioned that the company had discussions with the National Dealer Advisory Board regarding these changes, with more details to be announced in April. “Honda is making strategic investments to ensure we continue meeting our customers’ needs and fostering a profitable future for our dealers,” added American Honda spokesperson Jessica Fini
Cost cutting effects the Service Department Too
Besides the possibility of the dealer adding extra fees or finding other ways to make up for the lost profits per car, Honda owners will also feel the effects with the service department. Starting with the 2025 model lineup, the Honda Service Pass program will be scaled back from two years of complimentary routine maintenance to just 12 months or 12,000 miles. However, vehicles from the 2023 and 2024 model years will still enjoy the original two-year or 24,000-mile service plan, which includes oil changes, inspections, oil filter replacements, and tire rotations.
“Whether we’re getting reimbursed from Honda or reimbursed from getting paid by the customer, I think it’s relatively neutral,” an anonymous dealer explained, adding that the Service Pass “had the benefit of driving more customer service with dealers”.
