11:04 am, January 4, 2023
Renault isn’t ready to switch its dealers to an agency model, branding it a ‘risky game’.
Luca de Meo, Renault Group CEO, said potential gains in transitioning to the model are outweighed by the need to hold hundreds of millions of euros of stock.
‘As a company in a sector that has a problem generating cash, to have that working capital around your neck, with all the risk, market volatility, downturns, it’s a very risky game,’ he told Automotive News Europe.
With Renault selling two million cars a year, the firm would have to hold billions of euros of capital, he said.
The chief said agency’s no-haggle policy is problematic, too.
‘You do agency because you want to control the price and you want to cut distribution costs,’ de Meo explained.
‘So you give a five per cent margin to the dealer, there’s no discount – but you need to have a very unique product not to offer discounts.’
He added: ‘We need the dealers to make money because if you cut their margins, you don’t help them to reduce unnecessary costs by asking them to build showrooms that are like temples or cathedrals.
‘You know what they will do? They’re going to say, thank you very much, I’m going to go to a brand that gives me a higher margin.
‘When you make this decision [to switch to an agency model] you need to know how sales and marketing and distribution works in the automotive business.’
De Meo’s comments come as Mercedes-Benz transitioned to an agency model in the UK this week.
The German carmaker announced in December 2021 that its Swedish and Austrian car dealers had already switched to the model, and that it expected half of its sales would be done via agency by 2023.
At the time, Britta Seeger, member of the board of management of Daimler AG and Mercedes-Benz AG, responsible for sales, said: ‘Our concern is that we achieve even stronger customer loyalty to our Mercedes-Benz brand worldwide..We want to make it as easy as possible for our customers to interact with us. It doesn’t matter if it’s digital or physical.’
Taking to LinkedIn this week to comment on Mercedes UK’s switch to agency, marketing director Rob Halloway said: ‘Today sees the launch of Mercedes-Benz Agency – a brand new way for retail customers to buy a new Mercedes-Benz.
‘There’s been an obviously massive amount of effort over the past couple of years from hundreds of people at work. Everyone’s been working to make things easier and clearer for our customers.’
To back up the launch, the company premiered a digital marketing campaign on its YouTube page.
A video called ‘There’s a new way to buy your Mercedes-Benz’ explains how customers can now purchase a new car.
While Mercedes-Benz has embraced the agency model, Stellantis is dipping its toe in the concept with its Alfa Romeo, DS Automobiles and commercial vehicle brands.
The carmaker said last year dealers representing Alfa Romeo, DS and its commercial vehicles would switch to the model in 2023.
But a leaked memo from Stellantis to its dealers, seen by Car Dealer in November 2022, said the plan in the UK had been delayed to 2024, although would go ahead in mainland European markets.
It’s believed the agency model change to contracts for UK dealers has been pushed back to January 1, 2024.
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