Car manufacturing companies are planning to change the way they sell vehicles to the customers and it could be good for them. But, it won’t be easy to attract the customers in the beginning. The surveys and trials also say the same thing, proving that customers are not yet ready for online sales. But, we will see a huge change in the way dealers sell cars in the future.
In Europe and the UK, the retailers are planning to change their association with manufacturers to the agency model. Previously, it was a wholesale model, so that’s a big change. If you don’t know what this means, you should know that if this change occurs, they will take a fee for each vehicle sold, and not buy a vehicle from the manufacturer for a price with a built-in margin. The CEO of Marshall Motor Group, Daksh Gupta, also agrees with this change. He told us that there is a big chance they will move to the agency and it will be a fascinating change.
Some people may think shifting to the agency model is not a big deal, well, they are wrong. Some may also believe that it’s not a fundamental shift, but in reality, it is. This change would mean that instead of dealer controlling the prices, the manufacturers would control them. The manufacturers will be able to decide the prices at which the customers buy the vehicles. When they become the vendor, they can track the online purchase journey of the customers from the very beginning to order delivery, and even after that. The basic goal is to increase income for carmakers and not for third-party businesses, as they are already forced to spend billions to develop EVs.
In the current model, the manufacturers are paid for a vehicle well below the list by the dealers, but they have to discount some or much of the margin if they want to make a sale. This is the current nature of the business as Gupta indicated. He also added that it can rise to about 6% when extras such as insurance and finance are added. The new model will result in the OEM retaining the margin, leading to a very transparent process for the buyers. When there’s less haggling, the customers would be more pleased.
A few companies have already trialed the agency model including Mercedes-Benz, Toyota, and Honda. The results have been good and the dealers are very satisfied with this model.