Surveys and trials agree: the public isn’t ready for a wholesale shift to online sales. But there’s still a huge, online-led change ahead in the way dealers sell cars.
Retailers in mainland Europe and the UK are preparing to shift their relationship with manufacturers from the wholesale model to the agency model. This means that instead of buying a car from the manufacturer for a price with a built-in margin, they simply accept a fee for each car sold.
“I think we will move to agency,” Daksh Gupta, the CEO of Marshall Motor Group, told Autocar. “It’s going to be a fascinating change.”
Moving to an agency model might not sound like a fundamental shift, but it really is. An agency model means manufacturers control car pricing, instead of dealers, giving them a better chance of achieving the goal of haggle-free purchasing that, until now, only a few have achieved (Dacia being the most notable).
By becoming the vendor, the car makers can also track the online purchase journey of the buyer right to delivery and even beyond as they move into the world of Tesla-style upgrades.
The ultimate goal is to generate more income for manufacturers rather than for third-party businesses in an era where legislation is forcing car makers to spend billions developing EVs, necessitating savings wherever they can.
As it stands, dealers pay the manufacturer for a new car at a price well below list but, as Gupta explained, the nature of the business means that they inevitably have to discount much of that margin away if they’re to achieve a sale.
“It’s a bit crazy. We get a 13% margin, but we’re only able to retain 3-4%,” he said, adding that it typically rises to around 7% once extras such as finance and insurance are added. “In future, that margin will be retained by the OEM and will lead to a more transparent process for the customer. There will be a lot less haggling, and ultimately that’s going to be a good thing for the customer.”
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I cant believe so many buyers are so 'limp wristed' when it comes to driving a deal these days....must have money to burn!
Discounts are absolutely huge at the right times...to throw away £10-12 k needs deep pockets (thats £15k earned income pre tax).
Yes it might superficially firm up residuals, but two points here:
1) Residuals will still be damaged by over-supply. Roughly there is 30 % oversupply globally, which no manufacturer or nation is prepared to address due to the number of auto-workers who would end up without jobs.
2) Nobody much cares about true residuals anymore due to the fact that they are all buying new cars on finance packages (PCP, Lease etc.) with manufacturer underwritten (artificial) final values.
The 'no pressure' selling (product experts) principle of retailing new vehicles is all very well in principle....but few brands (if any other than maybe Tesla) enjoy such brand loyalty as Apple, and sadly in the end most are all chasing the same slice of the market - again with a huge over supply problem, so shifting the metal is the name of the game, much though they would like the soft-touch illusion to be real. In short, you need to chase that deal or you will lose!
Finally, the manufacturers business model depends on the dealers paying for the cars even before arriving in stock.....the cashflow implications for a manufacturer are enormous, and with all the other financial implications currently - cost and time pressure of switching motive power, potential emission fines etc. there just isnt that kind of money in the pot!