Agency creating negative impact on the industry

EXPERIENCED senior automotive executive Dale Wyatt (left) has reiterated his opposition to the agency model.

He believes the agency model is having a negative impact on the industry amid claims that several manufacturers are pushing back on a UK rollout.

The director of Suzuki UK and Ireland is warning that OEMs seriously underestimate the value of dealers.

These various OEM pushbacks on agency should not come as a surprise, says Cox Automotive’s insight director Philip Nothard.

Writing in Cox Automotive’s Insight Report, Dale Wyatt said:

Some manufacturers view the dealer as a cost. And they want to use agency to effect a knowledge and relationship transfer. I think some manufacturers underestimate the value that the dealer brings. They see the dealer as almost a supplier, a service provider, or a subcontractor rather than a partner.

Dale Wyatt, director of Suzuki UK and Ireland Tweet

In recent weeks, rumours have surfaced that BMW is making plans to delay the implementation of agency for MINI in the UK by six months.

MINI was due to be the first of its marques to implement agency in 2024, with BMW due to roll it out in 2026. The MINI plans have seemingly been pushed back to 2025. Meanwhile, Lotus is reportedly reversing on its introduction of the model.

The apparent reversals on the part of some OEMs suggest that the model is still a work in progress. Although not a major player in terms of market share, Lotus’ apparent change of heart is incredibly significant and could trigger more negativity about the agency model.

In our latest Insight Report, we delve into the complexities of the agency model and make the point, among other things, that it can’t be a ‘one-size-fits-all’. A new kind of dealer is emerging, and various strains of the model will be rolled out that address the concerns many dealers no doubt have. It’s a fluid space with many details still to be ironed out.

Philip Nothard, insight & strategy director, Cox Automotive Tweet

What is the agency model?

The agency model is a distribution strategy where the OEM is the legal and primary seller of vehicles to the consumer, with the dealer acting as an ‘agent’ for the OEM in selling and servicing vehicles.

Key characteristics of agency, in its purest form, include OEM vehicle ownership as well as their control over national pricing.

While some experts say agency will be a positive development for automotive, making for greater efficiency and profits, others say its adoption will have a major impact on some dealerships, including a reduction in revenues.

Mercedes-Benz went full agency at the beginning of 2023, but has suffered in market share and is struggling to offload its 2023 stock. Auto Retail Agenda reports that pre-reg Mercedes models were exiting at significant discount via lease comparison websites.

“The dealer is the physical embodiment of the brand,” Dale said. “Whatever promise the brand makes is either undermined or built on during first contact between the consumer and the dealer. The front line determines the bottom line.”

Dale has consistently voiced concerns about the agency model, while his company has, so far, not announced any plans to introduce a version of its own.

Philip Nothard insists that for agency to work, in whatever form it takes, there has to be closer collaboration and support, especially as dealers need assurances to succeed in any new sales environment.

He added: “The outcome of that collaboration has to be a triple win in that there’s an upside for the OEM, the dealer and, of course, the customer. If one is negatively impacted, then everyone else will be too.”