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  • Dealers
  • Manufacturers
  • 04/04/2024

Challenges and opportunities of the Agent Model in the automotive distribution

By Robert Raiola – Nextlane Chief Marketing Officer  

 

The agent model could disrupt the world of automotive distribution. By seeking to better control distribution, margins, and the relationship with the end customer, some manufacturers are attempting to implement this direct sales system; but numerous obstacles remain. 

A paradigm shift

With the agent model, dealerships no longer own the vehicles and become intermediaries paid by the brand on each sale. Only the revenue related to the services provided (business contribution, vehicle preparation, etc.) will then enter their turnover, and stock management becomes the problem of the manufacturers, who, however, have better control over the selling price. This upheaval, and its numerous implications, raise questions about the future of automotive distribution. 

New roles and challenges

Agents order vehicles from the brand and have them delivered to customers, while dealerships manage the administrative part and after-sales service. For dealers, this transition proves to be a significant challenge: 

  • A significant decrease in turnover due to commissions received but an increase in margins, thus an evolution of their financial profile.
  • Uncertainty regarding contracts and their application, particularly for multi-brand dealerships, which constitute the majority of dealerships.
  • Complexity liked to the coexistence of traditional models and agent models.

 Towards a new organization

Facing these challenges, dealerships are restructuring their operations to improve customer loyalty: 

  • By strongly focusing on the quality of customer service, offering personalized advice and impeccable after-sales service.
  • By developing new services such as remarketing and used vehicles’ trading, or even rental activities.
  • By diversifying their sources of income with additional services such as installing charging stations or selling electric bicycles.
  • By diversifying the business sectors in which they operate: trucks, motorcycles, agricultural vehicles, recreational vehicles, etc.

DMS at the heart of this transformation

Dealership Management Systems (DMS) are evolving to adapt to the agent model by: 

  • Facilitating real-time communication between brands, agents, and customers.
  • Managing shared stocks and service coordination.
  • Becoming more flexible to allow the sale of certain models according to the traditional model and others according to the agent model. 

On the other hand, it should be noted the need for manufacturers to rethink their information systems, historically focused on the vehicle, towards a better understanding of the end customer, both for sales and after-sales, by equipping themselves directly or by investing in CRM systems made available to the network. 

An uncertain bet for manufacturers

After presenting it as the future of automotive distribution, many manufacturers have faced the difficulty of implementing this new model and revised their plans downwards or even reversed course due to practical difficulties, resistance from their distribution network, or dissatisfaction from their customers. Very few brands can claim to have implemented this new model today, some remain very cautious, and others have clearly postponed.   

The arrival in force of Chinese car brands on the European market, very well positioned in the electric segment, is adding further pressure; they are ready to occupy the space left vacant by these hesitations, and several major dealership groups have clearly opened their doors to them.  

An uncertain future but real progress

Despite these difficulties, the agent model continues to develop in the automotive industry. Its adoption promises to be slow but progressive, despite the numerous obstacles.

As for specialized software solution providers for the automotive world, we remain, as always, at the service of our clients and will adapt to meet the challenges resulting from this fundamental transformation of distribution models, both for our historical solutions (DMS and CRM), and in terms of innovation for specific solutions serving the agility and efficiency of our clients. 

 

To continue this discussion and find solutions together to help you meet these new challenges: