Despite unveiling the all-new Jazz compact hatch just two months ago at the Tokyo Motor Show, a local business case for the latest generation of the capacious-yet-compact Honda Jazz is looking murky – and it all comes down to the exchange rate.
“The current Jazz will certainly continue through 2020, and we’re still working through what will happen with the next generation Jazz. That segment is very, very challenging,” said Honda Australia managing director Stephen Collins.
“It’s possible (it will be discontinued), because it’s a very challenging segment,” Collins continued. It’s a full business model issue, it’s the cost of the car, where the segment’s at, where we can position the car - that’s what we’re juggling at the moment.
“It’s no small decision, and we’re very conscious of that – there are very loyal buyers and it’s the entry to our range.”
Cars in the compact and sub-compact class are widely known to be a problematic product for Aussie car dealers, with slim to non-existent profit margins making them a commercially unattractive proposition. On the other side of the coin, as a low-cost entrypoint to a manufacturer’s range they play an important part in attracting new customers to the showroom. It’s a Catch-22.
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But for Honda Australia, the value of keeping a sub-$20K hatchback in the family may be outweighed by the sheer cost to the business of bringing it in. As such, the company’s local office not only says that the arrival of the all-new Jazz has yet to be locked in, but that the Jazz may be discontinued altogether.
“It depends on your long-term assumption of where the Aussie dollar sits, but if it’s sitting where it sits today, I think those days [of $15K light cars] are gone,” Collins explained.
For reference, the Jazz range begins at $14,990 for the base VTi manual and stretches to $22,990 for the VTi-L automatic.
“I think the trend is clear that a lot of manufacturers are moving away from base grades and recognising that the light [car] segment is very challenging. For us when we’re buying 21 Baht to the Aussie dollar - whereas six years ago it was 30, a 35 percent deterioration - we think those days are gone unless it bounces back – and we don’t think it will bounce back.”
For the Jazz’s sedan-shaped sister, the City, its execution date is already on the horizon. Citing a dramatic drop in light sedan sales, Collins says the Honda City will be dropped in 2020.
“The segment is absolutely dying. This will be the last generation of City, and we’ll stop City towards the middle of 2020.”
Will Jazz get the same fate? Either the dollar’s strength improves dramatically over the next 12 months or Honda pursues a higher-margin strategy of lifting the price of entry and only bringing in high-grade variants – a strategy recently employed by Mazda when it updated the Mazda 2 range earlier this month – or, in the worst-case scenario, the Jazz disappears entirely.