[LTAutoMad]

Honda Australia went in for a fixed pricing model from 01 July this year. This is a fixed driveaway price, with no negotiations allowed. Moreover, it is an agency model, with dealers having no say in the customer's end price. Many long-established dealers were "rationalised" and axed.

Now, the results of the first full month's sales on this new pricing model are out - Honda's sales are down a whopping 62.6% compared to last year!

Totally expected. Anyone with half an interest in things automotive (except, of course, Honda Australia's management & marketing!) would have told them this would be the guaranteed outcome for a mass market player like Honda.

Once upon a time, Honda used to be a serious player in Australia, having a more premium image over Toyota. The Civic 3 door hatchback was THE car of choice for youngsters over a mundane Corolla, while the VVTI & V6 Accords were the family cars of choice for people who valued driving. The CRV, of course, was then a standout crossover offering.

But, Honda's design & value perception have completely stagnated over the last two decades (just like Subaru's) - their Australian sales also started sliding as more nimble & focused players like Mazda & Hyundai made huge gains. Civic became a fringe player in the largest car market segment, the small hatchback, as Mazda 3 & Hyundai i30 battled the mighty Corolla for the hearts & wallets of the common man.

Then, of all the things they could do, Honda thought they could get away with a fixed price, agency model like Tesla! They went about this very arrogantly, with price INCREASES , while hectoring the lay public how they were providing more value!

A base model Civic that was selling for a $25k driveaway deal was dropped and the price of the next model was hiked so that Civic range now starts at $31k driveaway! Yes, a 20% hike for a small car at the very price-sensitive end of the market.

Well, Honda is NOT Tesla! Tesla can get away with their fixed price model as they are playing in the luxury end of the market. But, I am sure, once there are equivalent competitors to Tesla from Mercedes, BMW etc; they also will be forced to negotiate.

I heard that Toyota in NZ also went for fixed pricing, but sensibly, reduced the driveaway prices, factoring in the real prices people would have played after the usual negotiations. Honda, on the other hand, took the full on road pricing and then increased it. As if every single customer was happily paying full list for Hondas (maybe they thought they were Ferrari, with a two year waiting list)! Customers, naturally, felt cheated and treated with contempt and voted with their wallets.

I hope this is a good lesson for other companies who treat customers arrogantly. Mazda is trying to move upmarket and have drastically hiked the prices of its small car 3, which is a direct competitor to Corolla. The stylish Mazda 3 was going head to head in sales with Corolla for the last few years, but the current model is nowhere in the reckoning due to its high price.

Mercedes Benz Australia was also planning to introduce the fixed pricing model from 01/07/21, but have deferred it to 01/01/22. Let's see how that goes!

Link to a news article:

https://premium.goauto.com.au/honda-...agency-starts/

[padmrajravi]

I prefer the fixed pricing model and want this to come to India badly. I am bad at negotiations and almost pay the full price anyway. I see even the Honda sales drop as a positive. They now have a better idea about their customers and will be able to adjust the prices that work best for them looking at the data without middlemen.

[benbsb29]

Originally Posted by LTAutoMad

Honda Australia went in for a fixed pricing model from 01 July this year. This is a fixed driveaway price, with no negotiations allowed. Moreover, it is an agency model, with dealers having no say in the customer's end price. Many long-established dealers were "rationalised" and axed.

Ah! This explains the Honda dealership who were located near my office, which has now shut down. Infact, i used to see cars with bows on them, waiting to go to their new homes, and so came as a surprise when i saw the dealership had just disappeared!

Honda has clearly lost their way in the Australian market. Other than the CRV and WRV, no other car seems to sell at all.

[greenhorn]

I hope Mercedes India is taking note!

On another hand, is volume all that matters? If you sell 1/3 of the cars but at 4x the margin each, is it really a loss?

[abhishek46]

This 'fixed price' model does not work in Automotive scene.

When someone is plonking down such a substantial amount of cash, getting a small discount/freebies always sweetens the transaction.
In general, People feel happy, even if they get some very minor things for free.

As an example,
The last time I check out the Honda City, the dealership mentioned that Honda has strictly enforced 'No Offers' for the City.
However, the dealership themselves mentioned that they give some freebies etc. just to keep the customer happy.

Originally Posted by greenhorn

I hope Mercedes India is taking note!

On another hand, is volume all that matters? If you sell 1/3 of the cars but at 4x the margin each, is it really a loss?

Year On Year, that 1/3rd will become 1/4th, 1/5th and then suddenly, it becomes time to shut shop.

[speedmiester]

Honda is trying very hard to dislodge themselves from the market. This is one such move.

Mercedes India also brought in fixed price model in India. Would like to see them fail similarly. Buying a car is an experience and should be treated as such. Let's not make it as mundane as buying an AC or refrigerator.

[kiku007]

Originally Posted by LTAutoMad

Honda is NOT Tesla! Tesla can get away with their fixed price model as they are playing in the luxury end of the market. But, I am sure, once there are equivalent competitors to Tesla from Mercedes, BMW etc; they also will be forced to negotiate.

Mazda is trying to move upmarket and have drastically hiked the prices of its small car 3, which is a direct competitor to Corolla. The stylish Mazda 3 was going head to head in sales with Corolla for the last few years, but the current model is nowhere in the reckoning due to its high price.

Honda is not the Honda we know from two decades ago. They don't seem to care anymore. Honda is one car showroom I haven't set foot in many years. They have more fundamental reasons for their drop in sales and the fixed-price model is just one of them.

I personally won't warm up to this fixed-price model.

Couple of other points though.

Tesla
Tesla doesn't get away with their fixed-price model. Sure I love their fixed and uniform pricing. But what I don't love is their random price changes. Imagine plight of my friend who saw his Model 3 price slashed by around 10% in a span of 6 months.

Tesla has slashed the prices of its Model 3 sedan – now sourced from China – with savings of between $3000 and $9000 off the most recent RRPs, and more than $17,000 off the highest price from 12 months ago.


Mazda
They've consciously taken the decision to go upmarket in both product and pricing. It didn't start well but now I understand they are doing well.

The Mazda 3 isn't really far off from the Corolla. Also, I don't think Mazda 3 is a darling of the fleet industry. I've never seen a Mazda 3 rental but there's heaps of CX-5 rentals. They love the Corollas and KIA Ceratos.

We do own a Mazda 3 and IMHO its several steps higher than the Corolla, i30 Sedan or the Cerato in many areas that justify the price gap. Everything from the actual car to the service experience is aiming to be like it is in the luxury segment.

However, their almost $70K MX-30 EV is a strange attempt. I don't know why they even made it.

Link: https://www.carsguide.com.au/car-new...brands-premium

[CrAzY dRiVeR]

Honda didn't lose sales because of the fixed price model IMHO, but the fixed price model was implemented because Honda lost sales drastically and it was one of the only options before pulling out of the market. Now with sales dropping even further, the market pull out may happen sooner than planned.

Fixed price, dealership restructuring, reduction in number of dealerships - it's a last effort at profitability from Honda before they pull the plug from the continent.

Some reviewers had outright called for no-buy on Honda products, as their future is too risky:

https://youtu.be/6aukTWYMmuE

[ssjr0498]

Honda marketing and analytics has been smoking the wrong kind of stuff from a long time across all their markets.
In India, they have been basking on their past glory for a very very long time now and their standards have fallen.
Being a hardcore Honda fanboy, I could have never imagined writing this myself, but even I am appalled at the recent line of events!

[amvj]

I find the Japanese are slowly fading away from their technological prowess. The only Japanese car company doing good is Toyota. The place is slowly occupied by Koreans and who knows in a few decades time it might be the Chinese (regrettably).

Mitsubishi is nowhere. Can someone believe that Mitsubishi will stop making the Pajero and Lancer when they were rallying. The same with Sony, once it was a behemoth, but now they even stopped selling Mobile phones here.

I wish Honda to replace their top management team and remove the stubbornness associated with the brand. They need to be flexible and bring what the market wants instead of dishing out stuff that nobody wants and charging a premium. I thought it is just the Indian market they are lackluster, but this is news to me.

[AJ56]

Honda got brain damage in the 2008-09 GFC and never recovered fully it seems. They were pioneers of engine technology (VTEC) and made iconic driver oriented cars that were cheap and accessible like the S2000 in the early 2000’s. The Accord and Civic of the 2010’s were market leaders and rivalled Toyota in terms of reliability and ease of maintenance.

In 2021 they’re nowhere, they lost the 10-30l market segment they once dominated, then tried again in the economy segments with Brio and Amaze and lost again to Suzuki and Hyundai. Now they don’t have a single market success (apart from the City) and even that has seen massive drops in quality levels. Top management is just confused and lacks a clear vision for Honda’s future it seems.

[Sarinkrc]

Well as far as I remember Honda Cars has been always like this. Their dealers tell Honda maintains fixed pricing with no discounts . Probably in India Honda has had change in this fixed price styling policy during the last decade after churning out duds and duds. The older Hondas were built to last but unfortunately the new models aren't as good as the good old Hondas. So better Honda rethink their strategy and return to their good old by manufacturing reliable vehicles so that they can remain relevant and customers would flock to their showrooms.

[allinbalance]

It's really strange - this hubris! Honda may not make the sexiest or niftiest cars everywhere, but it still has solid technology and reliable cars - which are practical and good to use.

It's really strange that the bosses in Japan are just letting these marketing theories jeopardize a going business in countries where Honda is not a dominant player - but has a loyal following nonetheless - sure there is a need to improve profitability, but this kind of "shooting from the hip" strategy is hardly the way. Really sad for Honda.

[Mafia]

Originally Posted by greenhorn

On another hand, is volume all that matters? If you sell 1/3 of the cars but at 4x the margin each, is it really a loss?

Volume is all that matters if you are a volume player and not a premium segment player.

Outside India, Honda is another Japanese carmaker like Nissan or Toyota. There is a certain premium Honda demand in prices and dealerships tend to be arrogant as well. That hardly makes the products premium.

On one hand, I too appreciate a fixed price model as one will never be sure what a good bargain is and when to walk away. A realistically priced product will sell well lesser negotiations. That is something Honda has never gotten right from what I have seen.

[ShivWason17]

Isn’t Mercedes doing the same in India Now? Hope it doesn’t comes to bite their sales in the near future. I know many people who buy a car only when they are satisfied that they have won the negotiation round.

Surely after looking at the numbers falling for Honda, MB India will relook in to their policy.