Agency model update

Much heralded in recent years, the agency car sales model, which at its most simple, would see manufacturers sell cars directly to consumers, operating with control over national pricing, bypassing the traditional dealership model, which would have a new retail role in test driving, delivery and aftersales, has seen the initial enthusiasm and commitment wane recently.

Initial manufacturer enthusiasm coincided with the global pandemic and its immediate aftermath. At the time, online sales and delivery dominated car sales, but subsequently, the trend has been towards an omnichannel experience.

Another impact of the pandemic was a shortage of semiconductors. The impact on new car supply was dramatic, as was its effect on new car pricing. A demand-led market saw an end to discounts and strong new car margins. Again, this trend has changed, and supply is exceeding demand for many brands. It is a situation that, for some, is exacerbated by the Zero Emission Vehicle (ZEV) Mandate.

For some manufacturers, the net result is that they could find themselves sitting with unsold stock on their balance sheets. Under the historic dealer model, they could rely on dealers to incentivise dealers to buy and retail such excess inventory.

The final dilemma for the agency model is a legal one. Switching to a ‘genuine’ agency model is fraught with legal curve balls; my first paragraph summary is very much a simplistic interpretation!

So, where are we today?

A few of the main headlines;

BMW Group

BMW Group launched the rollout of its new sales, starting with MINI in Italy, Poland and Sweden. The remaining European countries, including the UK, whose MINI launch has been delayed countries, will follow ‘gradually’, with BMW scheduled to transition from 2026.

Stellantis

In September 2023, Stellantis tested their agency model in Austria, Belgium, Luxembourg and the Netherlands, with an initial plan to roll it out across Europe in 2024 for premium and light commercial vehicle brands and for large volume brands by 2027. It appears it did not go as hoped. In December, a spokesperson for the business commented; "The pilot phase did not give the expected results on the IT side, so our aim is now to reduce complexity in comparison with the previous plan,"

Again, in December, the new head of Stellantis UK announced that their plan to roll out agency contracts had been paused.

JLR to review agency move in 2027

At the end of March, JLR announced that it had cancelled plans to move to an agency model and is instead refocussing on a ‘refined’ franchise model with 'elevated concierge levels of client care'. The business has also said it will look again at agency in late 2027.

Lotus considers dropping agency for a franchise

In November, Auto Retail Agenda published a story suggesting that having operated agency agreements for the previous two years, Lotus was understood to be planning a return to the franchised sales model.

The Net Impact

Introducing an agency model, especially a ‘genuine’ agency situation, was always a major step with plenty of regulatory and logistical challenges. It feels appropriate that some manufacturers are slowing down their processes. The market landscape has changed dramatically since the high-water mark for agency models. The push on BEVs, the potential balance sheet inventory costs and simple logistics are all causes for a reassessment.

Some change still feels inevitable, so seeing how the market adapts will be interesting.

Debbie McKay, Commercial Sales Director