VW Group Confirms Considering Agency Selling Model For Its Brands After Letter Leaked
VW Group boss Alex Smith has written to car dealers that an agency sales model is being considered.
Affecting dealerships of the group’s brands – which include Volkswagen, Audi, Seat and Skoda – the letter says the group plans to introduce an agency sales model for electric vehicles.
This is believed to be a precursor to a wider rollout of agency sales across the VW Group on its other models.
The agency models see car dealerships paying a processing fee for new car sales.
The automaker sells the cars directly to consumers through its main website.
In a leaked letter marked “ highly confidential, ” the manufacturer told its “ investors ” that a model retail agency for battery-electric vehicles (BEVs) was in the works.
VW has now confirmed to the car dealership its intention to “implement an agency model for the sale of battery electric vehicles”.
It comes after the manufacturer tested the model in Germany and Austria for ID electric vehicles in 2020.
Smith’s letter goes on to say that Volkswagen wishes to “co-develop” the model “in partnership” with its dealers.
He says the model will be presented for VW, Skoda, Cupra, Seat VW Commercial and Audi.
VW says it recognizes its retailer network as a “key player” and wants to engage with dealers in a “positive” way on the changes.
A VW spokesperson said: “ We can now plan a full engagement program as we co-develop implementation plans and timelines with our retail partners, ensuring the sales network retail remains a key player, and also ensuring that the new sales model is profitable. growth for brands and individual investors over the long term ”.
A boss of a dealership group said: ‘The letter was a bit sketchy, but shows that the agency model will definitely hit the VW network soon.
“In my opinion, this is not a bad thing. They will still need dealerships to hand over the cars, maintain them and demonstrate them, so it’s just a change in business terms.
Mike Jones, Industry Analyst and Compiler of the Top 100 car dealers, said it was no shock the move was planned.
He said: “ The shift to an agency sales model for retail sales for the VW Group would not be a surprise following the shift from fleet sales to the agency model in recent years.
“This has been well received by retailers and it would also be the case for a well-structured agency model.
“What worries me is what happens to the agency’s vehicles when clients return.
If they are routed directly to customers through the brand’s advertising platforms, it will cut off a vital profit stream for retailers, which will have a serious impact on dealer profitability.
“This will be a key area to watch for all brands as they move to a hybrid agency model.
This morning, Marshall Motor Group boss Daksh Gupta spoke to Car Dealer Live about the agency sales model (comments start at 11:27 a.m.).
He said: ‘Look, agency sales are going to come in my opinion. I don’t think this is something we should be afraid of.
“ Basically I can see this is a good thing because it will protect residual values for customers, it will allow manufacturers to have a lot more capacity when it comes to pricing, it will potentially be a challenge for disruptors because if everything is at the same price, it is surely a good thing from the point of view of transparency.
“In addition, the money for the storage of new cars is taken off our balance sheet and we save interest costs there.
“It comes down to – and it’s no more complex than that – do you fundamentally believe that there will be an obligation for retailers to provide services to OEMs? If you believe it, it’ll be all right.
“As long as the pay is what we earn today, what’s the problem?”
Jim Holder, Editorial Director of Haymarket Automotive, Editors of What Car? and Autocar, said the challenge will be to deploy it.
He said: “ The theory of agency sales is excellent – it could be fine for anyone, as dealers are paid a fee for running a relatively low profit sale without – you can imagine – the cost of purchase and holding inventory, while customers have an end – a seamless shopping journey.
“But the challenge comes from the implementation.
“Will dealers be equally motivated to fulfill orders? Will the balance of their attention shift to more profitable areas of the business, such as used cars?
Holder said it would be interesting to see if manufacturers can “keep their cool”. He explained that his publications had already heard of “huge discounts” on the ID.3 models offered.
Holder added: “ It is a huge undertaking to remove some of the key responsibilities of retailers who have perfected their practices over the decades.
“ The agency model can work, but whoever moves first has to take a big, courageous pill. It must be executed perfectly the first time.
“The investment to get there has to be huge. The implications of getting it wrong are also significant – and there is no guarantee of success.