Purchasing a new car will become easier than in the past with the transition of dealer networks of some car brands to the title of agents. A new step towards online commerce, this approach by some car manufacturers brings, in addition to benefits, less pleasant effects.
The idea with which the Americans from Tesla amazed the car industry, that of selling cars only by ordering online without using the classic dealers except for delivery, initially seemed risky. Most of those involved in the car business believed that the loss of direct contact with the customer at the time of the order prevented a large part of the customers from making the purchase.
Well, now that the Tesla model has proven to be not only functional, but also extremely cost-effective, more and more car companies are declaring themselves ready to turn their dealers into agents. What exactly does that mean?
Journalists LifeNews.ro I write that a potential new car customer will be able to see the vehicle in an “agent’s” showroom, but will only be able to order directly from the manufacturer. A new step towards the online sale of cars, this approach has displeased many dealers, especially because it eliminates the possibility of negotiations on the spot. And this can mean reducing the importance of the dealer becoming the manufacturer’s agent in the relationship with the customer and, worse, reducing the possibility to set a different price than other dealers or to offer discounts depending on the negotiation with the customer.
With this new business model, customers will no longer be able to negotiate the price with the dealer, nor will they be able to obtain discounts or other specific offers, nor will they be able to claim small benefits that the merchant’s service unit could mount such as mats, shield, system. alarm etc.
Basically, in the “agency model”, the dealers’ relationship with the customer will only consist of delivering a ready-to-order product online and providing after-sales services.
According to the traditional retail model, dealers had to finance their own stock, promotions and branding. Instead, they were free to negotiate prices.
According to the agency model – so named because the manufacturer acts as a sales agent – the carmaker owns the stock, invoices the customer directly and finances the branding. Dealers deliver the car to the customer, earn a commission set by negotiating with the manufacturer for each vehicle delivered, and can generate money from after-sales service.
An important detail in this process of changing the way cars are sold is that the agency model will ensure better transparency of vehicle prices and the elimination of price differences between certain markets. In practice, the agents of a car company will deliver a specific model at the same price in all EU countries, as well as in countries with which the EU has free trade agreements that eliminate customs duties.
Unfortunately for dealers, even if this type of trade eliminates competition between them, including those in different countries, the limitation on the role of agents will also decrease the margin collected from the manufacturer with each vehicle sold.
According to Automotive News Europe, in the case of premium brands, the average margins of dealers in Europe were between 12% and 16% depending on the product and the market, a percentage of which they could offer discounts. The role of agent who only delivers a vehicle will turn the margin into commission and, according to some analysts, will mean only about half of the money received so far from the manufacturer.
Mercedes-Benz gives up some dealers
After the Stellantis group’s intention to turn its dealers in Europe into agents has given rise to lively disputes and even reproaches, now Mercedes-Benz is also announcing a radical change in its marketing model.
With the transition to the agency model, the German company will reduce by 15% – 20% the number of dealers in Germany and by about 10% of the worldwide network.
By 2025, Mercedes-Benz aims for 80% of all sales in Europe to be made directly through agents. Dealer networks in 20 states are targeted.
The carmaker rightly claims that this change will reduce distribution costs and allow it to better control its discount or offer policy.
“We want to be closer to our customers and therefore have better control over our prices. That’s why we’re giving up the current role of dealers, “said Mercedes-Benz chief financial officer Harald Wilhelm, according to Automotive News.
At the same time, Bettina Fetzer, vice president of communications and marketing, said that Mercedes-Benz “needs fewer large showrooms in mature markets. We will move on to direct sales. “
She also mentioned that “this gives us a direct management of the relationship with the customers and thus we will get to know them better (…). Our customers are getting younger, richer and more “digital”. They want to interact with us on multiple platforms, when and where they want. ”
BMW seems ready to apply the recipe in Europe
The Bavarians at BMW do not miss such an opportunity. According to Pieter Nota, the head of the Bavarian manufacturer’s sales and marketing departments, there are discussions “with our European dealers about switching to an authentic agency model”.
This statement comes after Autohaus magazine wrote that BMW was planning to end the system of authorized dealers in Europe from 2024 for the Mini and from 2026 for the main BMW brand by switching to the agency model.
According to Nota, the sale of new cars by agents will be used by BMW only in Europe, as the Chinese market is not in question at the moment. Even in many US states, it is not possible to implement this new business model because the law does not allow car manufacturers to sell directly to consumers.
It should be noted that BMW was one of the first car manufacturers to attempt to partially implement the agency model in Europe when it launched under the “i” brand dedicated to electrified cars in 2013. Although BMW abandoned this sales model a few years later, it began to test the agency model across its entire South Africa range by 2020.
Another important detail is that luxury brands such as Mercedes-Maybach, Bentley or Rolls-Royce will not enter the chorus of changes prepared for premium or volume cars. This is because studies have shown that they have customers who prefer to discuss every detail of the purchase with a representative of the dealer or manufacturer.
Of course, Tesla, Mercedes-Benz, BMW or Stellantis are not the only companies planning to implement this new way of selling new cars. The Volkswagen Group also announced that two of its brands – Audi and Cupra – will switch to the agency model, and the Polestar brand is already using such a way of selling.
Instead, there are carmakers who still prefer the traditional way of selling cars. Renault and Toyota are just two examples.
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