Toyota could join the ever growing list of car manufacturers that are switching to the ‘agency’ or direct sales model.
“Every part of our business is going to get turned upside down,” the brand’s head of Europe, Matt Harrison, told the Automotive News Europe Congress recently. “The existing distribution margins and models are undoubtedly not sustainable.”
The shift to the agency model has become the leading topic among dealers in recent months as they try to work out the impact on their profitability when car makers move away from the decades-old wholesale business model, under which dealers can choose to sell at full list or stimulate greater demand by discounting that price.
The wholesale model benefits outright sales, but as companies scramble to improve profits on more expensive EVs, they are questioning whether they really need to give away all that margin to dealers and country-specific national sales companies – “legacy margins that are 20-25%”, said Harrison. “There is no way in the move to electrification this type of approach is sustainable.”
Toyota, Renault, Hyundai, Kia and Mazda are among those wary of shifting because they value the relationship between dealers and customers.
“I’m reluctant to say we are fans of the agency model,” said Harrison. “We want to protect our strong values and strong partnerships with the retailers. But I do think in terms of margin structures and the business model, it’s going to look very different in the future. I guess we’re stepping partly towards the agency model.”
Mercedes-Benz was the first car maker in the UK to shift to the agency model, starting on 1 January this year, and its progress has been watched closely. In April, Penske – the US owner of the UK-based Sytner Group – reported that profits made from Mercedes cars at a fixed 5% commission per sale were actually up on pre-pandemic numbers, when it was discounting to shift cars.
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