The Intersection 6-6-22

Watch creep of agency model in European market

Auto reservations

Conversation around the controversial direct-sales model is rearing its head once again, showing evidence of automakers’ wishes to steer more of the retail process as the new-vehicle sales market evolves. Parts of a revamped sales model could be beneficial to dealers and the industry, but dealers should be wary of giving too much control to automakers.

Last month, Mercedes-Benz said it would cut 15 to 20 percent of its dealerships in Germany and about 10 percent globally in favor of a more direct sales model, where the automaker sets the price and dealers deliver the vehicle to the customer for a commission.

Other automakers, including Volkswagen and Stellantis, are also experimenting with the agency model in Europe.

The change may be indicative of automakers’ true desires globally. Manufacturers have long tried to influence more of the retail model in various ways, such as requiring expensive dealership facility upgrades or publicly shaming dealers who flex their pricing power. Dealers should be cognizant of changes that significantly impact their business and restrict their independence. Retailers who agree to an agency model should be aware of potential changes to delivery fees. Those who remain independent, forgoing an agency model, should be wary of allocation punishment.

Mercedes-Benz confirmed that there are no plans for dealership consolidation in the U.S.

State franchise laws prohibit legacy automakers from launching direct sales in the U.S. Still, the line between dealers and automakers as the sales agent has become murkier as many dealers become reliant on orders and reservations during the inventory shortage. Rather than helping customers select a vehicle from the lot, dealers have taken on the role of online-order concierge, delivery valet and eventual service center.

Especially as automakers roll out expensive electric vehicles, more control over the sales process has obvious automaker appeal. A set price prevents dealers from gouging, although some dealers continue to apply pricing adjustments despite automakers’ stern warnings. It also prevents dealers from driving down the value of a vehicle with heavy incentives.

For now, franchise laws protect U.S. dealers’ business practices. But if automakers find success with a direct model elsewhere, expect them to try to replicate it everywhere.

We have a page 1 story this week looking into how some states are reviewing their franchise laws. That’s as automakers are beginning to introduce new technologies and practices, such as over-the-air updates and vehicle reservations. Some state dealer associations are backing franchise legislation that includes provisions addressing these emerging areas.

Hannah Lutz   

Mercedes-AMG One

In Monday’s Automotive News:

Lexus RX

Lexus’ electric future: Lexus’ polarizing spindle grille — derided as the Darth Vader death mask by some critics — is getting a face-lift for a kinder, gentler look thanks to the brand’s shift to electrification. The makeover is already underway, with the new RZ full-electric crossover unveiled in April and the soon-to-arrive redesigned RX — the top-selling family hauler that crushes the midsize premium crossover segment. The next-gen RX will lead Lexus deeper into electrification, with the nameplate’s first plug-in hybrid as well as a fire-breathing F Sport turbocharged hybrid.

Buick Wildcat

And Buick’s, too! Buick plans to stop selling gasoline-powered vehicles in North America by the end of the decade and will roll out a full lineup of electric vehicles, reviving the Electra name from its heyday. The brand plans to go all-EV in roughly the same time frame as Cadillac, pushing General Motors closer to its goal of having all light vehicles it sells be fully electric by 2035. Buick boss Duncan Aldred walks us through the plans.

Weekend headlines

Musk’s warning about recession seen as ‘canary in the coal mine’: Tesla CEO Elon Musk’s warning is the first loud and public dissent in a united stance by the auto industry that underlying demand for cars and trucks remains strong despite two years of global pandemic.

Magna makes transmission transition to EVs — carefully: Magna International is homing in its r&d efforts on electric- and hybrid-vehicle projects as it works to balance light but growing volumes of parts for next-generation vehicles with demand for its “traditional” lineup of products.

Scott Keogh

Surprise! The Volkswagen announcement about plans to build a Scout brand SUV and pickup in the U.S. has roiled the relationship between VW and many of its U.S. dealers. But Scott Keogh, CEO of Volkswagen Group of America, believes that the VW brand is in the best position it has been in for a very, very long time.

Elon Musk

Musk has had quite enough: Elon Musk has had it with this whole working-from-home business. The Tesla CEO sent an email last week to “everyone” at his electric vehicle company, elaborating on an earlier missive to executive staff about the need to be in the office. “Everyone at Tesla is required to spend a minimum of 40 hours in the office per week,” Musk wrote in an email titled “To be super clear.” “If you don’t show up, we will assume you have resigned.”

Rimac Group

More money for Rimac: Rimac Group has raised another $536.6 million to help it build future Porsches, Bugattis and Koenigseggs. SoftBank Vision Fund 2 and Goldman Sachs Asset Management led the latest round of funding, which also included Rimac shareholders Investindustrial and Porsche. Mate Rimac, who founded his eponymous company in a garage in 2009, remains the largest shareholder.

Top Five U.S. Lease Deals  
MarketScan
What are the best deals nationally this week across the U.S.? Market Scan’s Payment Value Index (PVI) analyzes the relationship between MSRP* and the monthly payment to determine which lease deal delivers the best “bang for the buck.” For more information, visit www.marketscan.com.
Electric Vehicles & Hybrids  
PVI Year Make Model Average MSRP*   Average Best Payment
90.71 2022 HYUNDAI KONA EV $39,490.00   $407.72
90.55 2022 CHEVROLET BOLT EV $33,595.00   $349.80
90.52 2022 CHEVROLET BOLT EUV $36,245.00   $378.57
90.31 2022 GMC HUMMER EV $110,395.00   $1,172.58
89.56 2022 MAZDA MX-30 $36,150.00   $407.24

 

Convertible  
PVI Year Make Model Average MSRP*   Average Best Payment
86.72 2022 CHEVROLET CORVETTE $72,195.00   $996.81
85.89 2022 MAZDA MX-5 MIATA $31,815.00   $461.10
85.70 2022 MINI CONVERTIBLE $33,750.00   $491.61
85.65 2022 CHEVROLET CAMARO $40,808.33   $600.07
84.64 2022 BMW Z4 $57,795.00   $901.30

 

PVI Year Make Model Average MSRP*   Average Best Payment
87.41 2022 SUBARU OUTBACK $35,782.50   $469.73
87.22 2022 VOLVO V60 $68,395.00   $908.54
86.39 2022 MINI CLUBMAN $34,950.00   $490.68
85.39 2022 VOLVO V60 CROSS COUNTRY $46,795.00   $698.44
85.28 2022 AUDI A4 ALLROAD $50,445.00   $759.21
* Average MSRP is the average of the MSRP of all the individual trim levels for each model, and includes all taxes, registration and average dealership fees. Based on 36-month lease, 12,000 miles per year, 720 credit score, customer cash = 5% of MSRP, Selling Price = MSRP

Source: Payment Value Index (PVI) ™, a trademark of Market Scan Information Systems, Inc.

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June 6, 2012: Autoliv agrees to pay a $14.5 million fine over allegations it conspired to fix prices of seat belts, airbags and steering wheels installed in U.S. vehicles for an unidentified automaker, and allegations it conspired to fix seat belt prices for another. The plea agreement is the first to show that a multinational investigation into price-fixing and bid-rigging in the automotive supply chain that dated to at least February 2010 had spread into occupant safety systems.

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