I recently attended an event focused on Industry Agents in my hometown of Philadelphia where a prominent dealer, having just returned from Europe, verified that the “agency” model is taking over there, and obviously the trend is coming here. A recent Ford dealer announcement, which dictates both investment and margin for dealers who want to sell electric cars to the automaker, is another indication that justifies that.
While this takes the historical level of price control away from new car dealers, there may be benefits when demand/supply levels return to normal. This is because competing franchisees will not be put in a “race to the bottom” position on price in an attempt to make a sale, and manufacturers with an agency-type approach pay the cost of carrying demos and inventory.
Without comment on the potential success of such a strategy in the United States, the OEM’s own drive to cut distribution costs in simulating a Tesla model is leading to some annoying moves on the used car side of the equation.
OEMs control hundreds of thousands of fleet exit, lease and rental returns that historically have returned to dealers through wholesaler auctions or, in the case of retail leases, offered first to the lessee and then to the dealer. This practice may change.
For example, Ford has already stated that all retail cars at the end of the lease term will return to Ford, and neither the renter nor the dealer will be given the right to purchase the used car. There are rumors that Ford is in talks to sell its off-lease vehicles through large, online-only, non-dealer used car retail markets.
I don’t know if this rumor is true, but the fact is that Stellantis, in Europe and Africa, is actively expanding and promoting their newly created consumer used car company, Auto24. Highlighted in a recent Wards article, it was reported that Auto24, a Stellantis subsidiary that sells used cars directly to consumers, has already completed an investment and partnership deal with Africare Group, a non-dealer online used car retailer that is the market The leading e-mail in Africa.
Remember, in May 2021 Stellantis canceled all EU concession agreements and invited all merchants back under the “agency” model. The automaker has been aggressive in Europe with its Spoticar brand of used cars, which is somewhat similar to the dealership’s model of used vehicles listed on the online OEM platform, forcing retailers wanting to sell out-of-fleet/rental Stellantis to open storefronts. Actual Spoticar-branded.
With Stellantis’ latest move with the Auto24 used car model in Africa, it’s not hard to see where this might be headed.
For those who say “that could never happen here,” note that over the past year or so, General Motors has created a consumer-focused online used car sales portal, CarBravo, and Ford — the same Ford that announced the retail sale. – Leasehold EVs will not be made available to the renter or dealer to purchase at the end of the term – it also has a consumer-focused used vehicle portal, Blue Advantage.
The scary part is that if any manufacturer wanted to exercise more power and control in the used car market over late-model used cars, I’m not sure any government franchise laws governing new car sales would hold them back. Once again, OEMs are the largest “manufacturers” of used cars, financing and owning hundreds of thousands of unleased, leased and non-leased vehicles. At the end of the term, these are used cars, so any retail controls or dictates are fair game, as I think state franchise laws focus only on protecting new car sales.
In normal supply/demand periods, the profit margin on a used car has traditionally been much greater than the profit margin on a new car. Given recent global developments and the desire to emulate Tesla’s retail model, both dealers and dealers’ trade associations may want to focus more attention on trends in this segment.
John F. Bosomato (Pictured, top left) He is an attorney, founder and CEO of DriveItAway, which provides a ready-made cloud platform/application for consumers that enables merchants to offer new mobility solutions, including purchase subscription options for new sub-mortgage and EV buyers.
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