OEMs and dealers at each other's throats in the ring of the agency system

Recently, a few dealers applying for Avita stores have been a little worried.

Unlike traditional auto brands that cooperate with 4S stores on the channel side, Avita is recruiting agency service providers that are only responsible for building and selling stores, not buying out models or carrying inventory.

The dealers are concerned that the new model makes them lose the most important sales bargaining power and after-sales, and profitability is only left to commission, which is often unilaterally decided by the manufacturer's sales policy, and the result is that the right to speak is completely gone.

They think the risk is frighteningly high.

But despite knowing all about the risks, there are still many dealers who choose to join the new model with a struggling mentality. After all, as the sales path is getting shorter and shorter, the market is becoming more and more transparent, dealers inevitably have to face the big topic of transformation.

Far away from 7,000 kilometers away from Germany, car dealers also put on a "struggle" posture. July 14, in the Volkswagen, Audi, Skoda and Seat Dealers Association of the General Assembly, more than 800 participants unanimously turned red card refused to establish the agent model.

In fact, transforming the agency system does have a number of benefits for consumers and OEMs.

? Consumers will be able to enjoy a seamless, continuous and consistent car-buying journey; OEMs will benefit from significant reductions in distribution costs, and digitization will improve OEMs' understanding of customer needs.

Only, it's the only thing that's not so dealer-friendly.

The problems of dealers struggling to make their money back and low commissions have emerged one after another in the channels of several car brands that have adopted the agency model in the Chinese market. This model does not seem to have shifted away from the sales pressure of the agents, nor has it brought more substantial profits.

? It can be imagined that in the agency system of the tide of transition, OEMs and dealers are about to embark on a long tug-of-war.

NO.1

[? Agency system is not new ]

The agency system is not new in the development process of the automobile industry.

In the historical process of automobile sales, the agency system has succeeded the direct mode.

Before the 1980s in China, the sale of automobiles was an official act, using the direct mode. With the gradual increase in the category of cars, car demand increases, manufacturers of direct outlets can not support, so the first appeared in the automobile associates, and then appeared commission agent system sales model.

It wasn't until 1999, when the first 4S store opened, that the commission agency system was replaced by the "outright buyout" agency system, or authorization model.

Today, more and more new brands in the Chinese market are experimenting with the commission agency system, including Chang'an Shamrock, North and South Volkswagen's ID. and Mercedes-Benz and Geely's smart brand.

The core reason for the reawakening of the commission agency system is a change in the behavior and expectations of a new group of consumers. Around the "price game", around the "user operation", all the brands have begun to rethink: new brand, new energy car how to sell? Is still to the traditional system of 4S stores distribution, or self-built channels to engage in APP direct?

Self-constructed channels, history seems to have evolved once, with the expansion of the scale of the host plant's direct outlets can not support the end.

To the traditional 4S stores, new energy products may not be higher than the fuel car heat, put in 4S stores if there is no targeted policy, most of the sales will be enthusiastic about the fuel main car, the enthusiasm for new products is not high. OEMs also see the many difficulties of sales and network, but abandon the original network all rebuilt, and a long process.

The agency system can avoid the cost pressure and management efficiency of direct operation, while also mobilizing the traditional dealer channel network that has been built for many years. More importantly, ideally, dealers can transfer the energy of the previous price game with consumers to the level of customer service. Dealers return from focusing on price to focusing on service, which also meets the needs of the new batch of consumers.

Some industry insiders said, Tesla and other respected direct mode of brand has not tried the agency system, but with the scale of expansion, experience centers such as asset-heavy projects bring more and more cost risk and pressure,

They probability of them will also be towards the agency system to choose a certain degree of transfer.

It's worth noting that before the agency system was enabled in the Chinese market, there was already a wave of transition to the agency system in the European market.

Volkswagen is the first clearly announced the implementation of the agency model of the old manufacturers. At present, VW and German car dealers have signed two contracts, namely, authorized dealers and agent contracts. The range of vehicles sold under the agent contract is just the VW ID range.

Mercedes-Benz plans that by the end of 2023, 50 percent of its new passenger and commercial vehicles across Europe will be sold under the agency model. In order to move forward with the agency system, Mercedes-Benz is using "coercion": dealers must sign a new agreement by September 2021, or Mercedes-Benz won't supply them with products and licenses.

The Stellantis Group terminated its authorized dealers' contracts in May 2021, after completing the reintegration of its brands, and then sent a letter of intent to the dealers it had been working with.

But while several groups have shown a determined attitude, they have invariably faced market criticism. Mercedes-Benz, for example, chose to protest, although 52 authorized dealers ended up signing the agreement before the deadline,

Most Mercedes dealers chose to protest.

Mercedes dealers argued that the move to an agency system would cut expected profit margins by nearly half, and that in many cases performance depended on dealers being able to meet a range of other targets, making it impossible to guarantee revenue.

NO.2

[ Unified pricing is a pseudo-concept ]

In the Chinese market, the implementation of the agency system has also faced many difficulties. Of the many challenges, perhaps the most difficult to overcome is the issue of price transparency.

Often, brands that introduce an agency system claim that their channels will have the same price uniformity as Tesla's directly managed stores. The word "unified" indicates that in the past there were inconsistencies in car prices around the world, which hurt some consumers. But it's not a simple matter to get agents to cooperate in reaching it.

Liu Xin, chairman of the Golden Sunshine Group (automobile dealers group), analyzed: "Because the agency model there is a target assessment, failing to reach the target can not get the assessment of rewards."

So, on the surface, the agency system to achieve price uniformity has a way to go, because it transfers what happens in the showroom to the site managed by the OEM. But the truth is that dealers have to hold down inventory in order to fulfill their mandates, and end up only entering a sale price on the OEM's website,

And then the real transaction takes place offline.

Volkswagen is a classic case. VW's ID series was originally intended to help consumers avoid the hassle of price comparison and bargaining with an agency model, but nowadays dealers are comparing prices in a number of cities. In Beijing and Shanghai, basically every VW 4S store is offering 12,000 to 18,000 yuan in discounts and giving away 20,000 ID beans.

The emergence of discounts indicates that dealers are starting to prepare inventory, and the existence of inventory more or less symbolizes the disintegration of VW's agency model.

Yang Yi, chairman of Chongqing Pepsico Automobile Co., Ltd (an auto dealer group), said, "The so-called price unification is a pseudo-concept. Volkswagen recently had to take the initiative to let us build some inventory, and although it says it's an agency system, in essence,

it's just a traditional Volkswagen store that opens in a superstore."

Similar to Volkswagen, there are many other traditional brands that put new energy products into exclusive EV sales networks, some directly letting dealers act as agents, while others use host factory teams to host the agency. But the host factory team to operate can maintain price transparency? A "dip" in the automotive channel side of the industry for many years that is not.

"Where do they get their cars? Some of them are in the 4S stores of sister brands, and some are in the delivery centers opened by dealers. As long as it's not OEM-direct, there's a lot of room for dealers to maneuver, such as making you wait a year and a half for delivery, and you're still getting a price increase, and you're using your own time to do it."

The channel source also pointed out that there is no need for OEMs to do the agency system under the banner of price transparency.

"There is no plan to do price harmonization, even if there is a direct channel will not be unified."

He took the example of the more recently discussed askworld. "Although Huawei Askworld's channel is a direct store, Huawei uses wholesale sales. There are wholesale sales, there is inventory, I often receive 10 units from the batch, 5 units from the batch of such order information, indicating that Huawei dealers between the price struggle is also unavoidable."

"There are plans to do price harmonization, and authorized 4S stores can do the same."

Currently one of the older car companies that has been more successful in unifying prices is BYD. BYD opened some directly-managed stores, but the traditional channels have not been channel innovation, has been in the original fuel car network sales, and the level of the level between the dealers is uneven.

"So, it boils down to the issue of product power, the state of supply exceeds demand dealers are naturally willing to maintain price uniformity." In addition, he believes that the manufacturer control is extremely strict is also a reason, such as BYD in order to maintain price uniformity, the implementation of a million heavy penalty system. NO.3

[ Agent system is worth to insist on exploring ]

While the agent system has not yet dispersed the "flavor" of the system, we still have a lot to do. "to, but we still see a large number of brand dealers chose to vote with their feet, to change their own store into a new energy agent stores (of course, under the wave of store closures, the transformation of the agent is also another way to live).

Any shift in the beginning will be subject to a variety of resistance and difficulties, but as long as the end result of the shift can benefit all parties involved, and the industry can be sustainable, it is worth to persist in the exploration.

Industry experts at PricewaterhouseCoopers subsidiary Strategy& also said there are three options for the current dilemma facing the auto retail industry, and that the agency model is the best solution that can be widely applied to existing auto brands.

Just how should OEMs as well as dealers make the most appropriate adjustments?

Huahong Automobile Group Operations Director Sun Lai Lai believes that OEMs should give dealers more energy in the agency system,

Invest more energy and financial resources.

He pointed out that "the traditional wholesale model in addition to earning profits on a single car, the end of the year, there are rebates, compared to the agency model from the commission of the rebate points is very low. Without maintaining a stable profit margin to cover the overall high operating costs, it is actually very difficult."

It is the low profit that makes the agency system a long game between OEMs and dealers.

More than 50% of the dealers in Germany refused the agency system some time ago, the reason is that the manufacturer's financial support is insufficient, which is divided into several cases: one is the original start-up subsidies to dealers to do the agency system canceled; the second is the commission is too low, dealers believe that 4% -6% commission is not enough; the third, in line with the manufacturer's agency system needs to be made for a store, the image of the changes done by the renovation costs The second is that the commission is too low, and the dealers think that 4%-6% commission is not enough.

Another dealer said to AutoNews: "The entire agency model in the operation of traditional dealers can not be sustained, not only in the dealers, the key lies in the upper reaches of the OEMs have no determination. But at this stage, their fixation has changed."

Volkswagen is a representative of the lack of fixation. Recently<a class="hidden" href="/vo