Farewell, merchants!
Volkswagen and BMW, two of the world's leading car manufacturers, have announced their plans to return to the agency sales model after initial challenges with direct distribution. The agency model, which involves partner businesses acting as intermediaries between the manufacturer and the customer, was intended to make distribution more streamlined and reduce sales areas. In this model, manufacturers take on risks such as financing display and inventory vehicles, a shift from the traditional dealer-led approach. Volkswagen implemented direct distribution in 2020, but the expected savings did not materialize. The pre-financing put pressure on Volkswagen's balance sheet, leading to a decision to abolish direct distribution and return to the agency model as of January 1, 2026. The implementation was accompanied by numerous side effects, including the termination of all contract dealers and a strong sales slump for the ID models. BMW and BMW Motorrad are set to follow suit, with plans to switch to the agency-based sales model by 2027. Mini has already started this transition in 2024. BMW's sales board member, Goller, stated in a corporate statement from summer 2024 that customers would benefit from greater price transparency and a more digitized purchasing process. Mercedes has also embraced the agency model. BMW sees the future of sales in Europe in the agency model and believes that customers, the trade organization, and the manufacturer will benefit from this approach. Advantages for manufacturers in the agency model include maintaining control over final sales prices and lower commissions for dealers. Partner businesses in the agency model do not build up their own car inventory, reducing costs and streamlining operations. The Association of German BMW Dealers (VDB) described the previous implementation of the agency model by BMW as partnership-based and constructive. Volkswagen, however, has backed away from the agency model after initial challenges. As we move towards 2026, it will be interesting to see how these changes impact the car industry and the customer experience.
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