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May 24, 2022 02:07 AM

BMW and Mini could move to 'agency' sales model in Europe, sales chief says

BMW and Mini could follow Mercedes and Audi in a move to a direct-sales 'agency' model, BMW Group's top sales executive says.

Luca Ciferri
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    Mini dealership Nuremberg 2021
    BMW

    A Mini dealership in Nuremberg, Germany.

    COMO, Italy -- BMW and Mini may switch to the so-called agency distribution model in Europe, BMW Group's sales and marketing boss Pieter Nota confirmed.

    "We are currently talking with our European dealers about a move to a genuine agency model," Nota told Automotive News Europe on the sidelines of the Villa d'Este Concours here.

    Autohaus magazine had reported in March that BMW planned to end its authorized dealer system in Europe from 2024 for Mini and from 2026 for the core BMW brand and instead rely on agency sales for new cars.

    Nota said that the timing is still under discussion and that the agency model could be applied to the BMW and Mini brands, but not to the company's Rolls-Royce ultraluxury brand, which will stay with the current franchised dealer model.

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    BMW’s premium competitors, Mercedes-Benz and Audi (e-tron electric cars only), are moving to the agency model, in which automakers invoice customers directly and hold the inventory, while dealers receive a fixed fee for every vehicle sold.

    The agency model would be used only in Europe, Nota said. China is not on table at the moment, he added, and it is not possible in many U.S. states, where franchise laws prohibit automakers from selling directly to consumers.

    BMW was one of the first automakers to implement an agency model in Europe, when it launched the i subbrand for electrified cars in 2013. Although BMW abandoned this sales model a few years later, it began testing the agency model on its entire range in South Africa in 2020.

    “If we will move to the agency model, this time it will be for the entire range,” Nota said.

    Related Article
    Mercedes to cut dealerships, move to direct sales in distribution overhaul
    Automakers warned that 'agency' retail model could break EU antitrust laws
    Agency versus franchise

    In the current franchised retail model, dealers buy stock from automakers and assume costs of promotion as well as holding inventory. They make profits from the margin on vehicles sold, but it can vary depending on negotiations with individual customers.

    The agency model transfers much of those costs to the automakers. Dealers would receive a fixed fee per vehicle sold, comparable to a commission.

    They would make less money per vehicle, but make up the difference by not having to incur costly inventory and promotional expenses, automakers say.

    The agency model is expected to offer the consumer a transparent and equal price between online sales and contracts signed at a dealership. Automakers say such standard pricing will reduce discounts offered through independent online marketplaces and eliminate competition between same brand dealers, which can also lead to increased discounts.

    Premium automakers in Europe generally offer dealer margins of 12 to 16 percent, with amounts varying according to the product line and the market. In the agency model, sales commissions are expected to be roughly halved, to a mid-single digit, but dealers will not incur inventory and promotional costs.

    Nota declined to say if BMW and Mini will move to a single-digit commission for their agents.

    VW Group, Stellantis

    In addition to Mercedes and Audi, a number of other automakers that sell in Europe have signaled their intention to switch to the agency model, in part to cut distribution costs and also to have greater control over the selling process.

    Stellantis, created in 2021 from the merger of PSA Group and Fiat Chrysler Automobiles, plans to move to genuine agency model it calls “retailers” beginning in June 2023 with the Alfa Romeo, DS and Lancia premium brands, as well as for light commercial vehicles at Citroen, Fiat Professional, Opel/Vauxhall and Peugeot.

    Volkswagen Group uses an agency model only to sell electric vehicles for the VW brand’s ID lineup and for Audi, and the Spanish brand Cupra is moving to a non-genuine model. Polestar, co-owned by Volvo Cars and Geely, launched in Europe in 2021, applying an agency model.

    Related Article
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    Why Stellantis' dealer network shake-up is a game-changer
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