CAR-MAKERS are having second thoughts about introducing the agency sales model into some markets, with news from the UK showing BMW and Mini are delaying the planned change while Lotus has backtracked.

Against this backdrop, the head of Suzuki in the UK, automotive veteran Dale Wyatt – who  has previously voiced his opposition to the agency model because of what he sees as the negative impact it could have on the industry – has gone public again by commenting on reports that several manufacturers are pushing back on a UK rollout.

Mr Wyatt, the director of Suzuki, UK and Ireland, has now warned that OEMs are underestimating the value of dealers at their peril. 

Writing in Cox Automotive Europe’s Insight Report, Mr Wyatt said: “Some manufacturers view the dealer as a cost. And they want to use agency to effect knowledge and relationship transfer. 

“I think some manufacturers underestimate the value that the dealer brings. They see the dealer as almost a supplier, a service provider, or a subcontractor rather than a partner.”

Dale Wyatt, director of Suzuki in the UK and Ireland during a video presentation to Suzuki dealers suggesting dealers ‘burn their boats’.

Cox Automotive Europe’s insight and strategy director Philip Nothard’s commentary on the Future of Automotive Retail said that the agency model was not a “one size fits all” proposition.

The changing landscape of the model is seen in recent weeks when Kia UK revealed that it had locked its dealers into the franchised retailer model until the end of the decade. In addition the grapevine is saying that BMW GB is making plans to delay the implementation of the agency model for Mini in the UK by six months. 

Mini was due to be the first of the BMW brand names to implement agency in 2024, with BMW due to roll it out in 2026. 

Now the Mini plans appear to have been pushed back to 2025. Meanwhile, Mr Nothard’s commentary points to Lotus now reversing its introduction of the model.

Mr Nothard said: “The apparent reversals on the part of some OEMs suggest that the model is still a work in progress. Although not a major player in terms of market share, Lotus’ apparent change of heart is incredibly significant and could trigger more negativity about the agency model.

“In our latest Insight Report, we delve into the complexities of the agency model and make the point, among other things, that it can’t be a ‘one-size-fits-all’. 

“A new kind of dealer is emerging, and various strains of the model will be rolled out that address the concerns many dealers no doubt have. It’s a fluid space with many details still to be ironed out.”

Mr Nothard defined the agency model as a distribution strategy where the OEM is the legal and primary seller of vehicles to the consumer, with the dealer acting as an ‘agent’ for the OEM in selling and servicing vehicles.

Philip Nothard

Key characteristics of the agency model, in its purest form, include OEM vehicle ownership as well as their control over national pricing.

While some experts say that agency will be a positive development for automotive, making for greater efficiency and profits, others say its adoption will have a major impact on some dealerships, including a reduction in revenues.

Mr Wyatt said: “The dealer is the physical embodiment of the brand. Whatever promise the brand makes is either undermined or built on during first contact between the consumer and the dealer. The front line determines the bottom line.”

Mr Wyatt has consistently voiced concerns about the agency model, while his company has, so far, not announced any plans to introduce a version of its own.

Mr Nothard insists that for the agency model to work, in whatever form it takes, there has to be closer collaboration and support, especially as dealers need assurances that they can succeed in any new sales environment.

“The outcome of that collaboration has to be a triple win in that there’s an upside for the OEM, the dealer and, of course, the customer. If one is negatively impacted, then everyone else will be too,” he said. 

The Cox report said that agency was a result of manufacturers being forced to address issues including removing cost from the supply chain and improving the level of control they have with a direct consumer relationship.

“Other factors include price transparency, the shift to more expensive technologies (in line with net-zero goals), the pandemic and geopolitical events,” it said.

“The agency model is still somewhat shrouded in mystery, however, at least until its full implications become fully understood. 

“To date, the most prominent manufacturer to go agency is Mercedes-Benz. About 18 brands – including Mini, Skoda, Smart, Genesis, JLR and Alfa Romeo – have also revealed plans to switch to the model soon. 

“Stellantis has begun piloting an agency model in the Benelux countries and Austria and has also announced plans to adopt a more widespread version in 2024. 

“Ford has indicated a similar move, while BMW had planned to unveil its take on the agency model in 2026.”

The report said that ostensibly, the so-called ‘no-haggle’ model will operate in both the virtual and physical space. 

“It promises a consistency of pricing and a more straightforward way for the manufacturer to collect revenue, while presumably benefiting more from captured customer data (for sales, marketing and vehicle stocking purposes) than was previously the case,” Cox said.

But it added that while it is designed to deliver efficiencies in the sales process, increase customer satisfaction and reduce distribution costs “the model effectively raises serious questions about the dealer’s role, in the sense that it could, in the short term, affect their margins and overall control”

“It’s likely that the model will take different forms (likely by manufacturer and/or market), so it’s difficult to predict what its long-term implications will be,” the report said.

“A possible upside for the dealer is the reduced financial risk that was a staple of the old model. Historically, they bore the risk of interest payments on new vehicle consignment and adopted vehicle stock. But agency means the manufacturer shoulders that burden. 

“This could make agency an attractive prospect for some dealers. It could improve the dealer’s cashflow, depending on the type of agency model implemented. 

“For some manufacturers, questions remain over who will bear certain ‘brand’ costs, e.g., the cost of demonstration vehicles and/or manufacturer training, as well as details of new gross margins that the dealer receives both now and in the future. 

“Manufacturers are starting to learn that dealers provide considerable added value beyond the valuation of the vehicle when handling part exchanges.”

The report said that after consulting with dealer groups “privately, many dealer groups worry that the pure model won’t work because many aspects of the traditional arrangement, in their view, are essential to their everyday working”.

“It’s feared that such aspects, which could be upended by agency model implementation, may render the new system impractical,” the report said.

“Indeed, if manufacturers fail to comprehend the work dealers are already doing on the ground, introducing agency in many cases will prove to be both painful and costly. 

“Surely, manufacturers will be aware of the significant capital cost that lies behind agency model adoption? If it doesn’t work for them, financially speaking, many will think again.”

Read more:

UK dealers urged to “burn their boats” on agency