VW Kills Agency Model
Hi dear Readers,
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Let me take a beat to wish you all a fabulous 2026!! May it bring you just enough challenge to keep you energized, but not too much leave you stressed out.
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It flew largely under the radar in the last few weeks, but the biggest car company in Europe has decided to go back to old school selling of vehicles. They are going to roll back the so-called Agency Model where dealers were a mere "agent" or pass-through channel and the manufacturer established a more direct relationship with the end customer.
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The news by itself is not that surprising. It turns out that all those strategic plans made in headquarters about how to capture more value by cutting out intermediaries were a bit over-simplistic. Dealers clearly weren't thrilled in being relegated to mere conduits who performed the more tedious tasks of the sales process. Things like providing test drives, handing over the vehicle, signing the documentation, getting your digital environment setup, etc.... not sexy at all! Gone were the entrepreneurial haggling over price, fine tuning the model mix and maximizing your profits at the expense of competitors in the vicinity. VW is definitely not alone in shelving its plans. Ford, JLR, Stellantis and others have indicated that they would scrap or at least severely slow the pace of introducing the new sales model. Dealers and their proximity to the customer turn out to have quite a bit more value and power than expected.
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It's not just that dealers seem to be more crucial in moving the metal either. Dreaming up plans and then executing them flawlessly in today's world is a momentous task. While it seems quite simple for the uninitiated to just change who sells to whom, the myriad of processes and systems that connect the journey of a vehicle to a driver are mind-blowing. Payment, pricing, sales bonuses, contracting, transport, stock management,.... the list goes on and on. Trying to introduce and maintain two separate systems like VW did for the combustion and electric vehicles only doubles the drama. In a world where manufacturers are facing plenty of other problems from new legislation to electrification and strong competition, I'm sure this headache is one they are more than happy to get rid off.
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While all the different reasons for the unexpected difficulty in the roll-out of the agency model are well documented, I feel like one is going unnoticed. And it gets to the core of the struggle. When you run over the list of brands that continue, albeit also with considerably more headwinds than foreseen, with the new sales model, you notice that it is premium manufacturers that stick to the plan. The likes of BMW and Mercedes have publicly doubled down on their plans and seem to be happy enough with the results. The marketing guy in me recognizes a vindication here, brands can hold extreme power. Yes dealers have tremendous value and provide essential services, but that leverage only goes so far. When it comes to these names we all have to be humble and realize that we are standing on the shoulders of others who created the legacy and pulling power of the name. Customers are coming to the website or walking through the door solely for the expectation of greatness, regardless of the contribution of the current sales staff. Given the choice most want to be connected to that aura, even if it means relinquishing part of their "agency" in the process.
Grtz
Pieter
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