Dealers say agency model ‘effectively over’ as manufacturers pull back
New research from Startline shows 71% of dealers believe the shift to the agency sales model is over, with many saying manufacturers are retreating from the strategy.
Seven in ten dealers (71%) believe the car industry’s move to the agency sales model is “effectively over”, according to the latest Startline Used Car Tracker, with more than a third saying the model has failed to deliver results.
The April Tracker reveals that 33% of dealers believe the agency model hasn’t worked for most, while 31% say manufacturers are abandoning their plans. Only 15% think it has worked for some dealers, and just 13% believe it has worked for manufacturers. A further 10% say the model is bad for customers.
Paul Burgess, chief executive at Startline Motor Finance, said: “Just a few years ago, there was a widespread move among manufacturers to shift away from franchises towards the agency model and some pushed ahead but the momentum has faltered.
“The reasons for the initial enthusiasm were because manufacturers felt agency would give them greater control and access to more of the margin on car sales and other profit opportunities, but the reality has often failed to live up to the hype. A few manufacturers have backtracked and others have quietly abandoned their plans.
“Some dealers who work under agency have been moderately happy to do so but generally speaking, the motor retail sector has been doubtful about the idea from the start and now appears to believe the strategy is unlikely to deliver the revolution that was once promised. It seems that the franchise model is going to remain the norm.”
Despite the overall negative sentiment, 15% of dealers believe wider economic pressures may prompt manufacturers to return to the agency model in the future. Burgess added: “It seems almost certain that manufacturers are going to come under increasing pressure to maintain profitability – ranging from the huge ongoing investment required for electrification through to an increasingly competitive new car market that is seeing many new entrants. It could be that at some point in the future, agency will once again appear to be an area where generating additional revenues is possible. It could yet reemerge.”
The Startline Used Car Tracker is compiled monthly by APD Global Research and this edition surveyed 306 consumers and 58 dealers.
