Implementing the agency model has caused friction at Daimler’s dealers in Austria, Automobilwoche reported in November.
Dealers are unhappy at not being able to set transaction prices and think the maximum agreed agency fee of 5.8 percent of the transaction price isn’t high enough, especially as they still need to hit volume targets to earn it.
The fee drops to 2 percent if the car is sold online and the dealer acts purely as a center for test drives and delivery, another source of friction with dealers who felt the payoff was too low. A spokesperson for Mercedes-Benz Austria told Automobilwoche it had received a commitment from all of the current dealers, “to implement the system in time for the second half of 2020.”
Daimler’s agency model in Sweden pays a fee on car sales but also pays a share of the rent of dealers’ premises, recognizing that Mercedes showrooms need to offer a premium experience, ICDP’s Young said.
In South Africa, BMW pays a straight commission fee, a system that has harmed bigger dealers. “Under the old system, the larger dealers used price discounts to drive volume over a larger area, stealing sales from smaller dealers,” Young said. “Under the agency system, they can no longer do that, so the smaller dealers are winning back customers.”
BMW declared the South African trial a success. “Today I can honestly say not one of the retailers wants to go back, they do not want to return to the old wholesale model, they love it. And the customer reaction we are getting is exemplary as well,” BMW South Africa Managing Director Tim Abbott told UK motoring publication Autocar.
The move to direct sales – where the automaker sells the car to the customer, rather than the dealer – shifts the financial burden. “You’re moving billions out of inventories, removing risk of the inventory out of dealer books on to the manufacturers,” Vertu’s Forrester said. “There are lots of advantages for dealers – lower capital employed, less credit and stock risk.”