To sell autos, Honda turns to its motorcycle dealers
Automaker quickly learns the difference between selling cycles and selling cars
Honda had 32 motorcycle dealerships here. Handing the first auto franchises to those small businesses seemed the natural thing to do.
But Honda quickly realized the huge difference between selling motorcycles and selling cars and nimbly changed course. Only a few of the original motorcycle dealers are still in the car business.
"Honda started as a motorcycle company and wanted to consider those dealers who already helped make Honda a viable business in the United States," says Tom Elliott, American Honda's former executive vice president of automobile operations, now retired. "For a lot of them, it was a business they were not used to."
Honda started recruiting experienced automobile dealers, he says. Selling and servicing autos are far more complicated than peddling motorcycles. And new-car dealerships must be much better capitalized than bike stores.
Over their heads
Most of the motorcycle dealers found they were in over their heads, Elliott says. Motorcycle dealers had limited service business. But new-car dealers had to perform extensive warranty work and frequently maintain customers' cars.
The automotive inventory was far more costly to purchase and manage. In the early 1970s, American Honda says, the typical motorcycle retailed for $250 while after 1973 the company's small cars sold for more than $3,000.
Motorcycles were purchased by dealerships in packages of two. Motorcycle dealers weren't used to stocking eight cars at a time. But "eight cars is a truckload," Elliott says.
Most motorcycle dealers also didn't take trade-ins. But the vast majority of new-car buyers wanted to trade in their old cars, he says.
"The motorcycle dealers were telling people to go sell their old car somewhere and come back to buy a new one," Elliott says. "They'd go somewhere else, and they would buy a new car from whatever dealer bought their trade-in."
Wanted: Car experts
American Honda soon found it best to sign up domestic new-car dealers with roomier dealerships, well-equipped garages and the know-how to sell and service automobiles.
Rick Case is a high-volume new-car dealer with 16 locations in Atlanta, Cleveland and Fort Lauderdale, Fla. Case got his start with Honda as a motorcycle dealer. He was more able to adapt to the new-car business than most of the other bike dealers because he had experience selling used cars.
"Car dealerships are more sophisticated and more heavily regulated. It requires more capital, and the inventory is much more expensive," says Rita Case, vice president of Rick Case Automotive Group, in Fort Lauderdale. "Motorcycle retailing is really an enthusiast business."