According to foreign media reports, Volkswagen Group is considering whether to abolish the direct sales (or agency) retail model of electric vehicles in major European markets, on the grounds that the transition to electric vehicles is slow.
Volkswagen says it is complex and challenging to sell electric cars through the agency model and internal combustion engine cars through the traditional retail business in Europe’s weak car market.
“in view of the challenging framework conditions, we must re-evaluate whether the current pure electric vehicle agency model can bring the best experience to customers,” Marco Schubert, a board member responsible for sales at Volkswagen, said in a statement on Nov. 27. Acting sales will remain Volkswagen’s “long-term goal”, he said.
The review will cover Volkswagen brands, Audi, Skoda and Volkswagen commercial vehicles, including France, Germany, Poland, Spain and the UK.
It is reported that Volkswagen Group launched the direct sales model of electric vehicles in 2020.
Volkswagen said the results of the review were expected to be released around the end of March next year.
Volkswagen said that the Cupra brand will continue to sell its electric vehicles through the agency model.
In addition, Volkswagen’s cars in Ireland and Sweden will be sold as agents, no matter which powertrain they use.
Source: Volkswagen says the transition of electrification is slower than expected, which means that Volkswagen dealers will need to run both sales systems for longer than expected.
“maintaining this high level of complexity over a long period of time will be a major challenge for sales organizations.
” According to foreign media reports, Volkswagen passenger car dealers receive a fixed profit of 4% and a flexible reward of 2% for every electric vehicle sold, but dealers want to get a fixed fee of 6% and a flexible fee of 3%.
The report also said that there are also problems in the sales of used cars.
Volkswagen also said on November 27th that it wanted to expand its agency model for fleet sales.
Martin Sander, head of sales at Volkswagen, said in a recent interview: “at Volkswagen, the agency model in the fleet business has been operating successfully for 20 years, and dealers and manufacturers are very satisfied with it.
Therefore, we hope to promote this agency model in the fleet business throughout Europe.
” Carmakers have been seeking to introduce an agency model in the European market to reduce distribution costs and simplify the online sales process.
However, in the United States, due to the franchise laws of various states, the implementation of the direct selling model is faced with greater challenges.
In the traditional model, dealers buy inventory from manufacturers and are free to negotiate prices with customers to some extent.
In addition, dealers also bear marketing costs, and in return, dealers can earn higher profits from each sale.
In the agency mode, automakers keep inventory and buyers buy cars directly from manufacturers.
Dealers earn fixed and low profit margins without having to bear marketing and inventory costs.
Volkswagen is the latest carmaker to reconsider whether to adopt an agency model in Europe.
This spring, Ford reportedly abandoned its plan to set up agency sales and postponed it until 2026 at the earliest.
Stellantis also adjusted its agent sales model following the launch of pilot projects in Austria, Belgium and the Netherlands.
After information technology problems in the test market, the company plans to introduce the system in a national way rather than a brand.
It is reported that the agent sales plans of BMW and MINI have also been delayed due to information technology problems.
Mercedes-Benz has been firmly promoting its agency business in Europe since it first retailed cars through the agency model in the UK in 2022.
Hyundai Kia, Renault and Toyota said they would stick to the dealer sales model.
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