From car dealer to agency: not everyone agrees

AGENT OR DEALER? THIS IS THE DILEMMA – The theme of sales model by car manufacturers (dealer or agente) assumes an ever-increasing weight, also because it is May 31 2023 the current European Block Exemption Regulation (BER) for the automotive sector expires and the next one, 461/2010, will introduce significant innovations such as the presence of separate contracts for the sale of vehicles, spare parts and assistance. Stellantis has already sent a notice to its dealers in which they suggest transition to the role of agentI am reading here the news), but other brands have no intention of abandoning the current model, at least in the short term. It emerged during a debate organized by Autonews Europeand who saw as participants managers from Renault Italia, Stellantis and Mercedes.

EXPENSES AND MARGINS – A theme that has emerged is the reduction of distribution costswhich according to a study by the ICDP company (its CEO Steve Young moderated the debate) they make up 30% of the car’s total price. A few months ago, Stellantis announced that it intends to reduce the distribution costs of new cars by 50% in Europe by 2030, a goal that can also be achieved thanks to the transition to sales with agency model, active since 2023 for Alfa Romeo, DS and Lancia and the light commercials (for Austria, Belgium and the Netherlands the switch will take place for all brands). According to Maria Grazia Davino, Stellantis’ sales and marketing manager in Europe, “the merger of many brands with different traditions was an opportunity to rethink our activities, sometimes crystallized in inefficient conditions. This new model provides the same profit with a different risk profile and the sellers find it very interesting”. In fact, Stellantis should assume various costs, such as storage and distribution costs, which are currently borne by the retailers, reducing margins and eliminating incentives. Since the latter is taxed, the group claims that the profit for the seller would remain the same because costs and taxes would decrease (here to know more).

MERCEDES IS ALREADY AHEAD – In the home Mercedes we have already switched to the agency sales model in Sweden and Austria, a modality that in 2023 will also be extended to the key markets of Great Britain and Germany, and which the company wants to account for 80% of its sales by 2025. the characteristics of this way of sell on is transparent price, which is fixed, which according to Wolfgang Bremm von Kleinsorgen, managing director and president of Mercedes for Central and Eastern Europe, meets with the customers’ favor. In the Swedish market, organized in this way since 2019, “there has been positive feedback from both dealers and customers, who appreciate the fixed price because they feel treated fairly and transparently. In this way, the same question will not have different responses at different stages”.

THE DEALERS? FOR NOW WE DON’T “STRESS THEM”. – ICDP assesses it Ford will switch to the agency model in the Netherlands in 2023 and should do the same the following year Jaguar Land Rover in Great Britain. In 2024 the brand Mini could switch to this form of sale in Europe, while BMW it should follow in 2026. However, not all automakers are convinced that this move is right. The agency model makes the dealer an “agent” who sells the vehicles at the final price set by the company, while the dealer is a kind of wholesale buyer of cars. This gives him freedom to apply discounts and set the price concludes with a negotiation that is a kind of ritual in the collective imagination. Raffaele Fusilli, CEO of Renault Italy, believes that “staying with our dealer network is right and allows us to improve a very valuable asset”. The thinking is that such a move would be too much change in these years marked by inflation, post-pandemic, supply problems, and which also see technological changes such as electrification and autonomous driving: “We don’t need another stress test in the system and besides Dacia it has a fixed price and Renault can also do the same with a dealer system: the same goal can be achieved with different tools”.

NO MORE UPGRADED PURCHASES – The dealer system need however off corrective because, in order to obtain the incentives of the manufacturers, for example, they buy cars themselves and then resell them as a demo or zero km. If a certain number of demos are physiological, buy units to chase aggressive targets imposed by manufacturers it has caused dealers to sacrifice margins, which must no longer happen: “dealers must not continue to practice this arrangement, but rather will have to order cars according to orders received from customers. We will try to prevent dealers from registering cars to themselves in order to meet their quarterly targets”.

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