The increasingly popular agency sales model – whereby the car maker sells directly to the customer with the dealer acting as their agent – is facing its first big test as new-car supply returns and demand dips.
Manufacturers that sell directly to customers – including Mercedes-Benz, Cupra, Tesla, Polestar and Volvo – are now offering some of the biggest visible incentives to buyers as they try to boost sales, data from What Car? shows.
Car makers are moving away from the wholesales model – whereby they sell cars to dealers who then sell them to customers – for the purpose of keeping a tighter control on costs, establishing direct contact with customers and keeping more of the money generated from selling the car.
That worked well when cars were difficult to get hold of during the recent post-Covid supply-chain shortages, but as the market becomes more competitive, the car makers have to replicate the same tricks used by the dealers to stimulate demand but without going back to the old system.
In the traditional wholesale model, dealers are free to set the levels of discount. The size of that might depend solely on the customer’s willingness to push the salesperson.
Car makers have long wanted to eradicate this haggling aspect as well as clamping down on discounting that affects residual values. But any action they do make must be repeated across every dealer and shown for all to see on their website.
Many are turning to cheap finance deals instead, offering for example zero-interest loans at a time when borrowing is expensive.
“Under agency, the car makers want to protect their - now very visible - list price and deter consumers from believing that it’s flexible like in the past,” said Richard Peberby, UK head of automotive and mobility at consultancy KPMG. “Therefore they will use finance, warranty and service packages etc as levers to pull instead.”
What deals are car makers now offering?
What Car? research shows that the top three on PCP-finance interest rates are Cupra at 0%, Tesla at 2.1% and Mercedes at 5.1%, all of which sell directly.
The deals get better on electric cars. Mercedes is currently offering 0% finance on all its electric cars from now until January, for example.
Car makers are increasingly using EVs to test the water for introducing the agency model as they try to boost profitability on what’s still an expensive drivetrain compared with combustion-engine equivalents.
For example, Cupra started agency sales with the Born and Toyota is selling its EVs and plug-in hybrids directly, as is Ford with its Mustang Mach-E. Honda is switching to agency in the UK starting with its new e:NY1 electric SUV. Skoda meanwhile will move to direct sales for its electric models towards the end of the year.
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