ICDP CEO Steve Young believes the stellantis decisionFord and Volvo to delay the implementation of the model agency retail agreements for their franchised car dealers is a positive step.
The reform supporter within the auto sector says that while the transition should be a positive one, OEMs need to take their time to ensure its success.
In recent days we have heard about delays in several planned implementations of agency agreements in Europe.
Ford has delayed the launch of the agency in the Dutch market by two months, from January 2023 to March, and Stellantis has delayed the rollout in all markets except the three selected as pilots by six months (Austria, Belgium and the Netherlands). so now Iran lives in January 2024 instead of July 2023.
Volvo has delayed the launch of the so-called ‘aftermarket’ agency model by two to three months due to IT development delays.
Mercedes rollouts in Germany and the UK look set to stay on track for January 2023 and despite some dealer concerns about the readiness and the deal itself, the VW Group will roll out the agency to its BEVs on a rolling basis over the next year. next year, with ongoing national negotiations.
As someone who views agency as a good approach to managing omnichannel effectively and a way to enforce better supply disciplines on manufacturers, if implemented correctly, you might be surprised to see in the title that I welcome these delays.
Surely, the sooner we change the industry to agency, the happier I’ll be. However, that is not the case, and this week I wanted to summarize some concerns about the wave of agency implementations and explain why these announcements are good news for manufacturers, distributors, customers and the very concept of agency.
Since early 2020, when ICDP was almost a lone voice promoting agency as an option worth considering in the context of automotive distribution transformation, there has been what one industry participant described as an ad “rush”. of implementation.
Areas of concern
There are three areas of concern from my perspective.
The first is that there are quite specific requirements for a manufacturer-distributor relationship in order for it to be treated as an ‘agency’.
There is no legal framework for a ‘non-genuine agency’; said arrangements are really just a tweaked franchise, though some of the proposals could act as a stepping stone to true agency if that was the desired path.
However, if a manufacturer tried to control prices centrally under a non-genuine agency or retail prices were effectively set because there was no realistic opportunity for the distributor to negotiate prices, then competition authorities are ready to intervene in such arrangements. The last thing we as an industry need is more legal and regulatory battles.
My second concern is that the rush has led to plans being made without full recognition of the depth of changes that are required from the manufacturer.
While there are examples where the necessary retail skills are being acquired and there is genuine recognition of the need to maintain balanced supply under agency (where conditions exist to allow oversupply), there are other cases where this shift in mentality may have been neglected.
My impression is that cultural, process, and particularly systems readiness is well below what will be needed for a successful implementation.
My third concern is related to the very concept of agency.
If too many agency implementations are seen to fail, there is a high risk that this will tarnish the image of the agency as a concept. Industry players and observers are very likely to attribute the failure to the concept rather than the way in which failed implementations were planned, negotiated, financed and supported in terms of technology.
Rushed, one-sided launches that attract negative headlines and the attention of competition authorities will be seen as proof that the agency is broken in auto retail, rather than a reflection of faulty planning or implementation.
So delays are good if they reduce the likelihood that any of these outcomes will become less likely.
Time to change
Whatever the reason manufacturers decide to delay, they now have the opportunity to spend more time improving all aspects of their plans.
Obviously, it’s possible, even likely, that they instead simply become more introspective and task-focused, with all effort focused on whatever the perceived current obstacle may be. That would be a missed opportunity in my opinion.
Hopefully manufacturers still in the planning phase will also take note of the delays and reconsider their own schedule and whether they have fully considered the implications of the transition.
They certainly should not now be under the illusion that this is simply a contract change, but is in fact a fundamental change in the manufacturer-distributor relationship that has huge implications for roles and responsibilities, and for the people who work in operations. on both sides. .
Equally important is the fact that, based on current expectations of when supply restrictions will be eased, unless demand falls sharply due to the current economic climate, it will still be possible to sell almost any car in 2023 at list price.
As a result, we will learn nothing about how fixed and transparent prices under agency work in a competitive environment.
Manufacturers will not be forced to make difficult decisions about seeking volume and market share instead of focusing on balanced supply and maximizing profit.
There is logic for the implementing agency while inventory levels are low, and customers have been tied to fixed prices to some degree, but that could imply a late 2023 or early 2024 ‘go-live’ window.
Until then, resources may be better invested in testing and refining processes and systems, and building the new shared culture that will be key to getting the best out of the agency.