MHA | Agency Sales Model – results so far

Agency Sales Model – results so far

Alastair Cassels · January 19th 2023 · read

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Agency sales model in new car sales

First mover advantage?

The move to Agency Sales Model was amongst the hottest topics in the automotive sector last year. January sat the first implementation from a major manufacturer. How has it gone so far?

With many of the vehicle manufacturers signalling a move away from the franchise/wholesale approach that has served them so well for a century, it was bound to be a subject that stimulated a lot of speculation, debate and anxiety amongst those invested in the sector.

Naturally, stakeholders wanted to understand what it would mean for them and their business, but such clarity would not be possible for several reasons:

  • Confidentiality - discussion between OEMs and their partners need to be handled respectfully but also within tight legal supervision. Anytime the OEM and its dealers get together to discuss the future business model they must tread carefully around matters of competition law. Added to that is the requirement not to share all your best plans with other OEMs.
  • Uncertainty - This is new territory for most OEMs and as such there is an element of “test and learn” (formerly known as, make it up as you go). In all seriousness flipping an optimised 100-year-old model is a huge task and the knowledge of the entire process within the OEM or the consultants who are supporting these projects is incomplete.

    OEM management typically know how to make the wholesale model work but there is more of a superficial appreciation of what happens once the car is sold to a dealer.
  • Poor Communication  - These are delicate matters and there is always a current imperative that ensures that OEMs will tread carefully around their dealer networks for fear of making the natives restless. Not knowing all the answers is also a concern. Typical OEM management likes to be correct and project an authoritative, confident stance on strategy changes. Dealers take re assurance from clear direction. Neither party is skilled in ambiguity, and therefore it’s tempting to default to safe, minimal comms.
  • Systems chaos - The move to agency requires an overhaul or fresh start approach to IT systems in terms of order management and fulfilment. Most OEMs have legacy systems that just about worked for wholesale operations but had poor integration with the platforms required for the direct to consumer digital age. Most manufacturers have huge IT projects underway to support a move to Sales Agency and a more integrated view of the customer.

However, these projects are hideously complex and a challenge to resource in the current labour market.

When Mercedes Benz volunteered to be the first major OEM to implement Agency in the UK market it was viewed as a brave move and whilst it is very early days in terms of evaluating the success of the project, they should be acknowledged for managing the change process as well as they have.

They have launched on schedule and feedback from a select cohort of dealers is complimentary in terms of how things have been handled. It would appear they have navigated the four challenges above successfully enough to facilitate a fundamental change in the business model that is comfortable for the customer. Part of this success can be attributed to understanding what is best done by an agent and what can be done by the OEM whilst remaining legally compliant to prevailing competition law. Here is my understanding of how the model will operate at least in the initial stages. Importantly, all customers have to visit an MB agent to buy a car.

It’s unclear at this stage if agents will realise any operational efficiencies. The sales process is more complex than previous and administration burden has not transferred to the OEM however, in terms of a smooth transition the first two weeks have progressed well, and customer demand is better than might be expected for January.

The real test for this new model will be March 2023. Questions will remain about the OEM ability to self-generate sufficient leads to absorb the supply of stock. Without the dealer self- registration lever to pull there is a risk of a market share impact as other OEMs look to close out the quarter. However, MBUK will be aware that this is a long journey that won’t be defined by the first three months of such a fundamental change.

MBUK and their agents have taken the first step and the rest of the sector can hopefully learn lessons from the approach and ensure the subsequent implementations prioritise the customer experience and appropriately value each party's role in delivering it.

Get in touch

Please contact us for an informal discussion and see how we are able to support you and your business.

Alastair Cassels

E: [email protected]
Steve Freeman
Partner – Automotive & Mobility Sector Head

E: [email protected]