Car makers haven't given up on the dream of selling cars direct to customers, even as the number actually doing so has dwindled to just four.
Currently Mercedes-Benz, Volvo and Mini are the only car makers of any scale in the UK using the so-called agency model of selling directly to customers via their network of dealers, who get paid a flat fee per sales as the car maker’s agent (hence the name). Tesla also sells directly but owns its dealer network.
Other car makers, including Stellantis, Ford, JLR and Polestar, have decided to reverse earlier plans and continue with the wholesale model, in which they sell cars to dealers who then sell them to customers.
In this system, the dealer assumes the responsibility of sale and so can pull all kinds of levers to close the deal, including giving away their profit margin in the form of discounts. But the impetus to overhaul a system that often works against the customer remains.
“One of the big problems that we've got as an industry is we really want to be consumer-centric but the majority of manufacturers are operating on legacy systems that were built for manufacturing cars, not for dealing with consumers,” Steve Catlin, managing director of Vauxhall, told Autocar.
The Stellantis brand has no plans to move to the agency model after initially planning to in 2023, delaying until 2026 then cancelling altogether. But Catlin’s experiences working for Volvo Car Financial Services has persuaded him of the benefits.
“There are some principles in the agency model that I think we would continue to try and bring into our business within the franchise model,” he said, citing a flatter pricing system on cars like the new Frontera that reduces the need for haggling as an example.
Car makers’ move to take over control of the sales process was born of a desire get closer to customers, standardise pricing and save money. Many agency model plans were conceived directly following Covid, when shortages of stock meant it was easy to fix no-haggle prices.
When the regular production flow started to come back two years ago and new Chinese brands added to the competition, car makers returned gratefully to the selling ability of dealers.
“It's not a natural skill set [for us],” Catlin said. “You can write a system plan for what we would call the happy path, but in reality 99% of consumers aren’t on the happy path. There are nuances that at the moment the retailers deal with, because they're expert in being able to do.”
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