Honda Canada to slash dealer margins by up to 44%, several dealers say

But already on the hook for costly dealership upgrades tied to electrification such as the installation of EV chargers, retailers say they have already done their part and shouldn’t be penalized because Honda can’t handle its own expenses.

“It’s a bit cheeky to expect dealers to shoulder the costs of the manufacturers’ margin implications,” one dealer said.

Margin is also already lowest on sales of the Honda Civic and CR-V, meaning dealer profitability on the brand’s two highest-volume vehicles will be particularly hard hit.

WAYS TO MAKE UP LOSSES?

Some dealers expect the company to give retailers other ways to make up the margin losses. Honda Canada, they say, has expressed openness about allowing dealers to charge buyers administrative fees on purchases, a practice not allowed by the automaker in the past. Such a solution could effectively pass costs along to consumers.

“These things are always shocking, but as long as they are working on an offset, that’s the important thing,” one dealer said.

Not all retailers are approaching the issue with as much leniency. Sources say a range of dealers, including several of Canada’s large dealership groups, are mobilizing to push Honda to reverse course. They’re also exploring other avenues, such as a legal challenge built off Canadian franchise laws.

With the retail network “up in arms,” this “is going to become a major issue if Honda doesn’t back down here, or start adjusting and start considering dealer input,” the industry source said.

“This could be a real challenge for Honda if the dealers do activate,” a dealer source said.

With the ongoing loss on margin, dealers could see the value of their franchises erode because of the change, said Samir Akhavan, managing partner of buy/sell advisory Templeton Marsh.

Akhavan, who did not have direct knowledge of the automaker’s plans, said the sudden shift will create “reticence among buyers” considering acquiring Honda franchises, softening valuations.

They’ll be asking: “What’s next, when’s the other shoe going to drop?” he said.

He liked the expected damage to Honda franchise values ​​to that experienced by Volkswagen dealers following the diesel-emissions scandal in 2015.

Dealers, likewise, said they were concerned about what other top-down changes could follow.

“The bigger concern is what does it lead to next,” one dealer said.