With Honda’s announced intention to shift to an agency model, Mercedes-Benz doing the same for electric vehicles, and Volkswagen likewise in Europe, it raises a number of questions AADA believes Dealers deserve to have answered.
AADA is not against a change in model in principle, but has several questions around trade-ins, ramifications for staffing, facilities, equipment, and the like.
“Dealers being asked to sign up to an agency agreement, deserve to have all the facts and OEMs need to address some key questions,” said AADA CEO James Voortman.
“For example, how does the trade-in work, will there still be sales targets, will compensation be offered for facilities which may no longer be fit for purpose?”
OEMs are yet to provide details with information on how agency models will address these concerns. Given they are as accustomed to the traditional dealership model as Dealers are, perhaps they don’t yet have the answers, and these ‘toe-in-the-water’ beginnings will be as much a learning exercise for them as for Dealers.
A 2018 report prepared by EY, titled Automotive retail 2030: Evolution of dealerships and potential new roles in retail, concluded that even with the ongoing transformation, the role of traditional dealerships as a link between the OEM and the customer is not likely to diminish, at least in the short-term.
“Reduction in the number of visits to dealerships has made the initial visit even more crucial while also increasing the prominence of sales personnel,” the report says.
Disruptive competition in the form of direct sales and brand boutiques by OEMs, and third-party service providers including digital giants such as Amazon in the automotive retail space, are challenging traditional dealership operations with enhanced flexibility and accessibility to customers.
“Automotive retail is undergoing a significant transformation with increasing digitalisation, evolution of mobility-as-a-service and with OEMs taking an even larger role in managing the customer journey and experience. This, however, does not dilute the role that a dealership plays — linking the OEM and the customer,” the EY report says.
“Most OEMs lack the necessary people, processes, technology and, most importantly, the seller mindset to make the shift from a wholesaler to a retailer. Further, a majority of the customers prefer visiting a dealership to take a test drive and conclude the vehicle purchase. Dealerships remain critical for customers.”
An EY-Puls survey in Germany found that 58% of respondents say they will choose a traditional dealership over other channels to buy a car even in 2025. However, when broken into age groups, the numbers become 66% of over-50s who would select traditional dealers as the preferred sales channel in 2025, but just 49% of over-30s.
So, perhaps a shift is coming. OEMs need to keep an open dialogue with Dealers, who are their representatives and still the customer’s preferred agent. As business models evolve, communication is vital to ensuring all involved make informed choices.