Driving the skills change: The agency model

Most people have no doubt heard of the industry’s pivot to agency models. The latest report from the IMI Driving Auto Forwards, has identified it as one of the top 10 short-term drivers of skills change in automotive, up there with headline-grabbing challenges such as future-proofing for EV and ADAS, addressing diversity issues and prioritising sustainability.

The agency model refers to vehicle manufacturers selling direct to consumers, with significant implications for dealer workforce skill requirements. Last year, Auto Express described it as “a revolution in the motor industry”.

The most obvious change from a consumer perspective is the end of haggling, replaced by fixed pricing, but there’s much more to it than that. Under the long-cherished franchise model, stock is owned by the dealer and the sale contract is between the dealer and their customer. Dealers set the prices and can offer discounts as they see fit.

Conversely, under the agency model, the manufacturer retains ownership of the stock, sets the prices, and sales contracts are between the vehicle brand owner and the buyer. Stark differences.

So, which companies are agency enthusiasts, and which less so? Last summer, Car Dealer Magazine asked 47 carmakers whether they had any plans to switch to an agency sales model: 18 said they had. 21 effectively said “no comment”. Only eight categorically ruled it out.

Tesla was early on the agency model, followed by Mercedes, after reaching agreement with the European Association of Mercedes-Benz Dealers in 2021. Cupra, Lotus, Polestar and Volvo are also now agency. Alfa Romeo, Audi, BMW, Citroen, Fiat, Honda, JLR, Mini, Peugeot, Skoda, Vauxhall and VW are either in the process of switching or have said they’re keen.

In February 2023, Mercedes-Benz UK CEO, Gary Savage, enthused: “The launch of our agency model is a hugely exciting time for us and our network. In an increasingly digitised world, customer buying habits have changed. An agency model provides a consistent and transparent purchase journey, whether that’s online, in a physical showroom, or a combination of the two.”

Robert Forrester, CEO of dealer group Vertu, was more circumspect, saying: “It is a radical change in who does what… a process that both retailer and manufacturer will learn from and improve over time.”

Meanwhile, Claire Evans, consumer editor at What Car?, reported: “When we spoke to sales staff in Mercedes’ showrooms soon after its switch to agency, there were concerns about sales dropping due to fewer discounts, and sadness at the demise of haggling, seen as part of the fun of the job.”

Not everyone’s a fan

Mixed reviews then, and the list of those resisting the switch (to put it mildly for some) is even more intriguing: a rare mix including Dacia, Ferrari, Kia, Mazda, Nissan, Porsche, Renault, Suzuki, Toyota, and fast-growing Chinese brands such as BYD, GWM Ora and MG.

The Director of Suzuki, UK and Ireland, Dale Wyatt, has been particularly vocal in his opposition, telling Cox Automotive: “Some manufacturers view the dealer as a cost. I think some manufacturers underestimate the value that the dealer brings.”

Insight and Strategy Director at Cox, Philip Nothard, has suggested that BMW could yet delay the implementation of agency for Mini, and that high-ups at Lotus are contemplating a U-turn, potentially re-establishing a franchised network.

However, such developments are likely blips, certainly if consumer approval for agency remains high. Quoting What Car? research showing that half of British drivers already prefer to buy using the agency model, the IMI’s Driving Auto Forwards report highlights five key implications for skills:

• A Shift in Job Roles: Traditional in-house roles may shift to external agencies, altering the landscape of employment within the sector. This change could see internal marketing, sales support, and data analytics move to specialised agencies, potentially reducing the need for these roles in-house.
• Increased Demand for Specialised Skills: With increased reliance on external agencies, there’s a growing need for roles focused on managing these partnerships, like agency managers or coordinators, who need strong communication and project management skills.
• Flexibility and Adaptability: The agency model allows for greater flexibility in scaling up or down certain functions based on demand. This may need existing employees to be adaptable and be willing to work collaboratively with external agencies to coordinate and integrate agency efforts into their overall operations.
• Emphasis on Relationship Management: With the agency model, building and managing relationships with external agencies becomes crucial. Job roles that involve vendor management, contract negotiation and performance evaluation may become more prominent. Strong relationship management skills will be valuable in ensuring effective collaboration and achieving desired outcomes.
• Evolving Skill Sets: The adoption of the agency model may necessitate a shift in skill sets for existing employees. They may need to develop competencies in areas such as project management, vendor management, data analysis and strategic decision-making to effectively work with external agencies and maximise the benefits of the model. 

Helpfully, the IMI report goes on to detail five effective strategies to address these wide-ranging impacts:

• Invest in Skill Development: Invest in training programmes to cultivate required new skills, ensuring employees can transition smoothly and continue to provide value.
• Foster Collaboration and Integration: As the agency model relies on collaboration with external agencies, it is important for businesses to foster a culture of collaboration and integration. Encouraging strong communication channels, promoting cross-functional teamwork, and establishing effective processes for working with external agencies can enhance overall effectiveness.
• Talent Acquisition Strategies: With the changing job roles and skill requirements, businesses may need to revise their talent acquisition strategies. This may involve identifying the specific skills and competencies required for new roles that emerge from the agency model adoption.
• Continuous Monitoring and Evaluation: The sector should keep a close eye on the agency model’s effects on the workforce, regularly evaluating its effectiveness and identifying further training or recruitment needs.
• Industry Collaboration and Benchmarking: It can be beneficial for businesses and the sector to collaborate and share best practices regarding the agency model adoption. This can include participating in industry forums, conferences or associations where experiences and insights can be exchanged.

We’ll leave the final word to IMI CEO, Steve Nash, who said: “As the industry evolves, identifying and addressing the key drivers shaping the future skills landscape is crucial. The challenges facing the sector vary greatly, reflecting the fast-moving and dynamic nature of automotive today.”

For further info on the agency model, check out the IMI Driving Auto Forwards report.