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<\/a><\/p>\nVolvo, Mercedes-Benz, Mini and Honda are among those to have cracked the difficult ‘agency’ formula<\/p>\n
Have established car makers finally found the magic solution to sell direct to customers?<\/p>\n
Volvo for one reckons it has, praising its system for boosting private sales (the most valuable sales) in the UK by 21% in the first six months of this year.<\/p>\n
Direct sales were popularised by Tesla and eagerly rolled out by other brands starting around 2022, as manufacturers looked to cut their distribution costs and remove a crucial barrier to their customers. The original dealers were retained,\u00a0but instead they acted as agents paid a fixed fee, with car makers officially selling the car.<\/p>\n
But many, including Ford, the Volkswagen Group and Ineos, have abandoned or postponed the shift to the so-called agency model as increased competition exposed car makers\u2019 unpreparedness to move into the selling game;\u00a0most returned to the time-honoured system of wholesaling to dealers.<\/p>\n
Most, but not all. Volvo, BMW (via Mini), Mercedes-Benz and Honda are persisting with a full or partial embrace of the agency model, showing that with perseverance\u00a0this system may yet work.<\/p>\n
\u201cUltimately, the model works because it aligns everyone’s interests,\u201d Nicole Melillo Shaw told Autocar in a statement. \u201cOver the past three years we have learned a huge amount.\u201d<\/p>\n
Melillo Shaw cites the advantage to consumers, Volvo itself and even retailers, who have traditionally been most resistant.<\/p>\n
The benefits for the car maker include a better insight into buying habits, which they get to see first-hand via online ordering systems. \u201cWe have much, much more data and insight about our customers and customer behaviour,\u201d Hans De Jaeger, head of Honda in the region that includes Europe, told Autocar. \u201cIn the past, we didn’t have that.\u201d<\/p>\n
Honda UK began on one model, the electric eNy:1<\/a>\u00a0and last year rolled it out to all models. Now it\u2019s considering rolling the model\u00a0out across Europe, De Jaeger said.<\/p>\n Mini is also sticking with what BMW calls The New Retail, which was\u00a0rolled out in the UK last year. It is providing a learning course for BMW, which has delayed its own version but says it is committed to adopting the model. \u201cThere is no way back,\u201d BMW\u2019s former CEO Oliver Zipse told investors in March. \u201cWe will introduce that step by step because individual mobility will be closely linked to understanding the customer individually. And that is something you can only do as a retailer and not as a wholesaler.\u201d<\/p>\n Mercedes is another\u00a0choosing to work its way through the issues. The company now sells 50% of its cars direct to customers in Europe, including in the UK. More markets in the region planned to make the switch, Mathias Geisen, head of sales and customer experience, told investors in February. The original goal, set in 2022, was to have 80% of Mercedes sales via agency by 2025.<\/p>\n Persistence can pay off, however. \u201cExperience with Volvo UK and Mercedes in a number of markets suggests that such a fundamental change is difficult to get right from day one,\u201d Steve Young, head of dealer-focus consultant ICDP, told Autocar.<\/span>\u00a0“But once the early wrinkles are sorted out, it can bring a win-win-win outcome for customers, dealers and manufacturers.”<\/p>\n Switching is not easy. Dealers generally dislike agency because the fixed-fee system in genuine agency removes their ability to hustle more of the margin in each car for themselves. \u201cThey\u2019re entrepreneurs,\u201d David Allison, head of product and planning at MG in the UK, told Autocar. \u201cIf they\u2019re good they can increase the amount of money they make on each car.\u201d<\/p>\n That also helps the car makers, who found it easy to sell cars themselves when the market was constrained during the chip shortage but much harder when supply returned, quickly followed by hard-charging Chinese entrants.<\/p>\n \u201cMaybe we were too early,\u201d Markus Haupt, CEO of Seat\/Cupra, told Autocar. Cupra made the switch to agency back in 2021, starting with the Born EV, but it has since reverted to wholesaling cars to dealers along with the wider VW Group. \u201cWe went back to the traditional business because it’s what dealers and importers are used to,\u201d Haupt said. Cupra will focus on reducing costs at the vehicle development end, rather than via its distribution model, he added.<\/p>\n Former VW Group UK boss Paul Willis has gone on the record saying he always opposed agency. \u201cI was in the room in Ingolstadt when we started putting the whole agency thing together, he told Car Dealer Magazine<\/a>. I\u2019m afraid to say, from the very beginning\u00a0I questioned it.\u201d<\/p>\n The VW Group looked to agency to improve margins by reducing the amount given away to dealers, but it hadn\u2019t considered how it impacted its sales network, Willis said. Willis now works for\u00a0Dubai-based dealer group Al-Futtaim Automotive.<\/p>\n