It was evident during our interview that the automotive landscape is undergoing a profound transformation. Following the exceptional years of 2021 and 2022, the sentiment among our experts was that 2023 presented a more challenging period and 2024 looks set to follow suit. From the enforced shift towards EVs, new entrants, supply chain complexities and the evolving agency model, resilience and adaptation will be key for dealers aiming to thrive in this dynamic landscape. However, there was also cautious optimism amongst our experts, particularly regarding robust aftersales and potential recovery in the latter half of 2024.
The unfolding automotive agency model
Although the spotlight this year is very much on EVs and the rise of the Chinese brands as manufacturers vie for market share, the topic that triggered most debate during our interview was the ongoing evolution of the agency model. Reactions were mixed among our panel, with some expressing positivity and detailing successful partnerships, however this sentiment was certainly not held by all.
As the dealer on our panel, JCB Group Managing Director, Jonathan Bischoff, offered a balanced perspective. In his experience, “most major brands in the UK either sit in the ‘agency is a part of our transactional world’ model and others sit in the ‘we will never introduce agency in our network’ model.” Whichever camp a manufacturer sits in, Jonathan strongly believes they understand the pivotal role the dealer plays in the retail sales channel. However, he agreed agency brings some challenges when it comes to retailers transacting with customers, explaining “we currently have agency across some of our brands and early indications show that the new margin retention is very similar to the previous franchise model. However, these are small numbers, and we will get a clearer picture as the year unfolds and more volume is sold on agency.”
UHY’s Paul Daly, stated feedback from his dealer clients with agency brands has been more positive than he expected, adding that while teething troubles are inevitable, the “willingness to take a partnership approach to some of the issues that have presented themselves is really refreshing.”
Anticipating potential turmoil in the new car market due to the ZEV mandate, Paul thinks there is “an understandable school of thought developing that a reduction in profit in exchange for the transfer of risk to the national sales company (NSC) is quite attractive.” However given Stellantis' decision to delay the transition to an agency model until late 2026, Cambria’s Mike Allen pointed out that some manufacturers appear to also be taking a more cautious approach to market changes. He elaborated that the delay, primarily to address stock issues, “suggests a slower-than-anticipated adaptation to new sales models”, adding “there are a lot of diverging strategies at play from the OEMs towards agency though as we know.”
UHY’s Ian McMahon is concerned about the sustainability of the agency model without genuine collaboration between the NSC and the dealer. The complexity of customer challenges, he argued, requires the personalised touch that only dealers provide. “I don’t believe the NSC will ever be able to replicate this level of customer service, nor deliver against the expectation a customer has for such a significant high value purchase.”
In response, Mike envisaged an evolution in the role of the dealer, expecting focus to shift more towards customer service, vehicle servicing and localised marketing, adding “manufacturers must leverage the critical role dealers play in understanding local markets and maintaining customer relationships ensuring mutual profitability and customer satisfaction. The ultimate success of agency will come down to implementation and execution, from both the manufacturer and retailer.” Jonathan echoes this sentiment, emphasising that “agency must never impact on a customer’s experience with us and the brand. It is vital that the integrations between all parties are seamless.”
However, not everyone could muster enthusiasm with UHY’s head of automotive, David Kendrick, firmly declaring the agency model a "complete shambles". In contrast to Paul's unexpected positivity amidst the challenges, David highlighted the issue with Mercedes dealer profitability since moving to the model in January 2023 and voiced concerns about the imposition of agency by OEMs without “genuine demand from consumers or dealers.” Summarising, the debate on agency, David said “ultimately the consumer will decide and initial feedback is that it’s not well received. A number of OEM’s are delaying the launch and, personally, if it was abolished all together, I think that will be a much better outcome. Dealers are good at moving metal – when a push market returns, I am unsure how an agency model will allow the OEMs to hit the required targets!”
Read the full interview here
You can read the rest of the very honest debate between our experts on page 23 of our Automotive Outlook.
Other topics addressed during our interview include predictions for used car prices, thoughts on tactical-based EV registrations, the impact of the ZEV mandate, tips on identifying the best new brands entering the market and more predictions for 2024.
