Variable business model

With the exception of the Volkswagen Group, which plays the role of transparency in Europe and clearly declares its desire to switch to an agent contract for marketing electrified cars of its various brands, manufacturers remain somewhat conservative about their intentions and the exchanges that they currently have with their networks and representatives.

On the occasion of the intensification of the marketing of electrified vehicles and the digitization of car services, car manufacturers tend to turn the table and shift the contracts that have governed the entire distribution of cars for more than twenty years. The whole is framed at the European level by a set of rules that will also be called into question by the European Commission for sales and aftermarket in 2023.

The debate is pivotal to the future of the distribution groups, whose structures have evolved aggressively over the past 20 years with the momentum of multiple brands within the group as well as the effects of investor focus that have affected automotive distribution over the past ten years.

The premium is mainly affected by the agent contracts

“As far as we know, it is the insurance premium that will be primarily affected by these changes.explain to us Anthony Magat, Jato’s automotive retail specialist. We can say that Mercedes, Volvo, Alfa Romeo, Lancia, Jeep, Fiat Professional and Iveco will switch to a dealer contract with lighter standards. Meaning that dealers no longer buy cars, the demo car belongs to the manufacturer and the dealer will get a commission ». And to add: “At the moment, we don’t have a clear view, but it seems clear that manufacturers want to take back control of customer data and the new car buying process, both in terms of financing and aftermarket. This also means managing discounts and margins while preparing for a change in purchase from purchase. physical to phygital and then to digital”.

Agent or Commission Contract: Big Swing

Even if its sales volumes are obscured by the semiconductor crisis in Europe, Tesla impresses and fascinates many manufacturers. The agility of the distribution model seems to give them ideas

In October 2021, an event did not go unnoticed. With the market valuation of Tesla at up to $1,000 billion, the American manufacturer is shaking up the entire auto industry. Should we make Tesla the only source of inspiration? With the dealership or commission contract, the car dealer has the right to ask questions about the evaluation of his business.

Automotive expert Antoine Magat explains: “Manufacturers are seeking to standardize contracts through a dealer structure and lighter investments in distributors to manage and store customer information and needs at home through a geographic platform to connect cars with the help of ‘genius people’ in showrooms.” JATO Retail Specialist. “The first decisions have already been made for some manufacturers in Europe. Remember that in the UK, FORD will eliminate between 160 and 180 dealerships (out of a total of 400) until 2025 because the economic model is not more profitable for dealers while in Spain 39% of dealers are terminated Stellantis”.

Stock Transfer, Invoices, and Fixed Rate: Questions About New Contracts

By becoming a distributor, he no longer holds NV stock financing. In some cases, it no longer bills the end customer but receives the agent’s commission, as the originator bills the buyer directly. A new contract in which the price of the car is more or less fixed, which will prevent the distributor (or the new dealer) from affecting the discount usually given to the end customer. Finally, remember that the dealer contract may potentially open the way to direct sales from the manufacturer. Lots of changes in the business model that the distributor will have to absorb into their economic equation in the coming years.

The outlines of these various new contracts are still not clear… It also remains to be seen whether they will be valid in the eyes of the European Commission when BER renews car sales and aftermarket.

Aftermarket: The Great Unknown

These new vehicle distribution contracts do not, for the time being, open the way for aftermarket contracts to be called into question. Remember that in the classic distribution contract, the two activities were closely related to the distributor. Will the agent or commission contract discredit this activity in brand networks. Professionals rather expect the status quo in this aspect. However, the recent agreement between Stellantis and the network of Feu Vert for the supply of spare parts raises some questions … it could, in fact, pave the way for an intervention by independent networks in the after-sales of electrified vehicles.

All of these topics will be in the upcoming #CONNECT Distribution Program in La Baule on November 18-19, 2021. It’s never too late to participate, attend and discuss with distributors and experts. To register, just follow this link.

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