Is Agency Selling the Future for "Dealerships"?

As more and more brands allow for online sales, the agency model may be coming for dealers’ heads. Two years ago if you had told us that the future of car dealerships was in trouble, we wouldn’t have believed you. While online vehicle purchases were on the rise, the vast majority of people were still buying cars the “old fashioned” way. Pre-pandemic, less than 2% of vehicles were purchased online. In contrast, nearly 30% of new car sales happened online in 2020. 

A bill has been introduced in Vermont (S.47), and a similar bill (SB127)  was also introduced in Connecticut in early April that would allow for direct-to-consumer sales, bypassing dealers. This legislation comes from pushes by brands like Tesla and Revian. There have been numerous attacks like this on our franchise system in Connecticut over the last three-to-four years. 

Additionally, in Massachusetts the Attorney General is simply ignoring the statute stating that a manufacturer cannot own a dealership, and NO ONE is doing anything about it. In our opinion, MSADA should lobby to have the statute changed to allow them to have standing to sue in order to protect Massachusetts dealers! If these onerous attacks on the dealer body are allowed, they would allow “non-franchised zero emissions motor vehicle manufacturers'' to become registered dealers within these states, thus allowing them to circumvent our very successful franchise system. 

Legislation like this cuts out dealers and paves the way for more dealership closures down the line. In the next 15 years almost all vehicles will be ZEV, meaning all carmakers could take advantage of current and looming direct-to-consumer laws.

There are currently 12 states, including Massachusetts (because the AG ignores existing statutes) which give Tesla and companies like it free reign for sales. Eight others allow limited sales, but only 10 remain that ban it all together.

But does that mean dealerships will go away? Some argue that dealers will be a thing of the past someday, claiming that internet sales will overtake the traditional dealer experience.

For now, dealers who embrace the shift to digital will remain competitive in this changing market. Allowing consumers to complete their car purchases 100% online can keep your dealership profitable in the years ahead.

But what about long-term? Will OEMs go completely digital, shifting dealers from direct sales to an agency model? In North America, Tesla, Chrysler and Ford are already offering inventory choice, financing and vehicle delivery through their websites. For now, Ford dealers can control their pricing to some extent through this online shopping tool. In addition, Volvo has announced it will sell EV models using the agency model in the US.

In Europe consumers can purchase 100% online through the OEMs’ websites. Hyundai, Mercedes, Ford and BMW are among them.

Around the world, Volkswagen recently made its dealers into agents for the brand’s all-electric ID models. It wouldn’t be surprising to see more of this moving forward. Consumers want to know what to expect, especially when it comes to price, but taking away that negotiation aspect of the car-buying process could also affect sales negatively. If nothing else, OEMs will always need service stations. In theory there would be some happy medium for all of it.

Volkswagen suggests this future dealership, which is what the brand is working toward. It would allow for test-drives, vehicle delivery and service. Giant sales departments are replaced with data management centers and expanded customer service and business development departments. The modern dealer would utilize the bricks-and-clicks agency model, remaining incredibly profitable and in charge of its own revenue.

Dealerships are still vital to the car-buying experience. They connect consumers to the brand. They facilitate a level of customer service that people can’t get in a chat window or on the phone. A fully-digital experience removes the personal touch and overall personality of a brand.

Some sort of agency model is likely in the future of all dealerships, at least for new and CPO vehicles. But if brands go with something like the goal of VW, then it could help dealers stay in charge of their businesses and, ultimately, their profits. It will likely be some time though before we see these very long-term visions become a reality.