VOLKSWAGEN is reviewing its plan for an agency model for European sales of its EV range after witnessing depressed sales of EVs and internal moves to slash EV production.

Under an agency sales model, the cost of holding unsold vehicles lies with the manufacturer while under a conventional franchise model the dealers buy and hold the cars; thus the retailer bears the holding cost burden.

Volkswagen said its review would conclude in March 2025. Three years ago, Volkswagen Group UK began implementing agency-style contracts for some of its dealer networks selling its EV range.

Volkswagen Group has told UK publisher Automotive Management (AM) that its long-term ambition remains “a full agency” sales model, however it believes it may need a different approach “in the short- to mid-term” to better serve its customers.The company’s statements read like code for saying that Volkswagen is now being exposed to the true cost of overproduction from its own car manufacturing divisions with increasing potential for internal conflicts as the holding costs weigh heavily on the balance sheet.

AM said some observers thought Volkswagen’s change of tack was designed to serve Volkswagen, not its customers.

One industry observer told AM that “I think the tough market for EV sales has left VW Group feeling it doesn’t want to bear so much risk.”

“Why would it want to be responsible for its EV stock while waiting to persuade buyers when, under a traditional model, it can push it out onto its franchisees’ balance sheets?”

Meanwhile, the agency model hasn’t fared well in Australia with it being blamed for falling sales and leading to disputes with some former franchisees. Honda sales in November were 547 units, beaten by Porsche (550), Land Rover (663) and Volvo (622).

Agency advocate, Mercedes-Benz Cars, sold 1526 units in November, down 23.6 per cent on the same month in 2023, and outsold by companies including BYD, Chery and Suzuki.

AM said that although VW Group UK has used agency contracts successfully for fleet sales for years it has been rolling out agency across its brands for EV sales gradually since late 2021. Those brands are Cupra, Volkswagen and Skoda while Audi adopted the model in April this year starting with the launch of the Q6 e-tron.

Volkswagen Group’s official statement read: “Due to the slower transition to electric mobility across the industry, two sales models for private customers would need to be operated in parallel longer than originally anticipated: The Agency model for all-electric vehicles (BEVs) and the indirect sales model for vehicles with other drivetrains.

“Maintaining this high level of complexity for an extended period of time would be a key challenge for the sales organisation.“Therefore, a joint review process with the wholesale and retail organisations will start immediately to determine whether returning to an indirect sales model for BEVs might be a favourable alternative for the short- to mid-term.”

AM quoted Marco Schubert, a member of VW Group’s extended executive committee for sales, as stating: “The full agency with direct sales to customers clearly remains our guiding star in the long-term.

“However, given changing framework conditions we have to re-evaluate if our current agency model for all-electric vehicles delivers the best possible customer experience.

“Therefore, we will initiate a joint review process with our wholesale and retail organisations whether returning to an indirect sales model might be a favourable alternative in the short- to mid-term for selected markets.”

Of interest, Volkswagen in Australia is out of the Top 10 sellers with November sales half those of Kia and outsold by others including Isuzu Ute and GWM. The total market for November is down 11.6 per cent.

The apparent appeal of agency to OEMs is that they believe it is an opportunity to bring them closer to the buyers of their cars. They have said it would create a better experience for customers and more consistent pricing.

But the current global market, where more brands – particularly Chinese – are giving consumers greater choice, has this year made the market very competitive and price sensitive.

It has led to several manufacturers, including Stellantis, BMW Group and JLR, to delay or cancel their plans to go to agency sales in some markets.

In Australia, the agency model is used by Mercedes-Benz and Honda, while a hybrid program is used for online purchasing with OEMs including Genesis (which previously considered the agency model). Genesis also has a dealership presence.

In Europe, the agency model is used by Mercedes, Honda and Volvo (which has not embraced the move in Australia).

Brands including JLR, Lotus, Polestar and Ford have experimented with the agency model but have since reverted to more traditional approaches.

Those which have since delayed or cancelled plans include Stellantis and BMW Group.