Ford Motor Company’s CEO, Jim Farley, recently confirmed the automaker’s plans to move forward with a new “agency model” dealership approach starting in its European market. This model is intended to completely overhaul the traditional dealer model completely, focusing on streamlining the car-buying process, creating a digital buying experience, and improving the overall customer experience.
But what does this mean for the dealers? And how will it impact the car distribution and sales supply chain?
In this article, we will explore what the new dealership model entails, how it will impact car sales and the car-buying experience, and how it could disrupt the dealership sector of the automotive industry.
The New Agency Model Dealership
For decades, the car buying experience was primarily left to the dealerships who purchased vehicles from the OEMs. The manufacturer sets the MSRP (Manufacturer’s Suggested Retail Price). However, dealerships can set the retail price of the products they sell.
This model drove up sale prices, creating price volatility and an environment where customers felt like they had to haggle with salespeople and shop at different dealerships to find the car they wanted at the right price.
Now, the European market will soon be able to simply go to Ford’s comprehensive eCommerce platform to browse and build their next vehicle and see exactly how much it will cost with one set market rate. No guessing, no more haggling, no more shopping from dealer to dealer. Just log in, browse, build and purchase. Ford hopes this will create a smoother, more enjoyable purchasing experience for its customers.
So, what will happen with the dealership?
Well, the brick-and-mortar stores aren’t leaving altogether.
Dealers who partner with Ford will serve more as “facilitators” and “service providers” in purchasing. In this model, dealers can still sell vehicles and facilitate purchasing using preset prices and commission rates, but that will not be their primary function. The central role of the dealers will be to provide customers with an opportunity to view, touch, and test drive the different vehicle models. It will also serve as a location for customers to pick up their new cars or service current vehicles.
Why Change from the Traditional Dealer Model?
There are several reasons why Ford is moving away from the traditional dealer model. One of the primary reasons is the changing landscape of the automotive industry.
With the rise of electric and autonomous vehicles and the growing popularity of ride-sharing and other mobility services, the traditional dealer model is becoming less relevant. Customers increasingly seek a more personalized and convenient buying experience, and the conventional dealer model simply cannot provide that.
Another factor driving the change is the increasing importance of digital technology in the automotive industry. With the rise of e-commerce and online marketplaces, customers expect more from their car-buying experience. The new agency model will allow Ford to leverage technology to create a more personalized and convenient customer experience while streamlining the buying process and improving efficiency.
Probably the biggest reason for the change is a result of the disruption in the entire automotive business model caused by Tesla. Tesla has a direct-to-consumer sales model, meaning it sells its cars directly to customers without using dealerships as intermediaries. Tesla’s direct-to-consumer sales model allows it to sell its cars at vehicle’s price than traditional dealerships models used by not only Ford but also GM, Stellantis, Toyota, Nissan, etc. The Tesla model also allows it to control the customer experience and for the organization to collect more customer data.
Impact on Car Sales and the Car-Buying Experience
The new agency model is likely to have a significant impact on car sales and the car-buying experience. One of the fundamental changes will be the shift away from traditional dealership lots. Instead of large, sprawling lots filled with cars, the new model will focus on personalized service and a more streamlined buying process. Customers can pre-order and deliver their vehicles directly to their homes without leaving a dealership.
Another potential impact of the new model is the disruption it could cause in the dealership sector of the automotive industry. Traditional dealerships may struggle to keep up with fewer dealerships and a greater emphasis on technology and digital marketing. Some dealerships may leave the business, while others may need to adapt to the new model to survive.
Ripple Effect on the Automotive Industry
Several automakers such as GM, Daimler, Volkswagen, and Volvo are selling electric vehicles directly to consumers or have announced plans to do so. BMW’s CFO has also indicated that a direct-to-consumer sales model is coming. This is a ton for these carmakers to move to a more competitive model to compete with the new industry entrants like Tesla. This new model will have a ripple effect on other areas of the automotive industry. For example, shifting away from traditional dealerships could impact the aftermarket sector, which relies heavily on the standard dealer model. It could also affect the way car manufacturers approach marketing and advertising, with a greater emphasis on digital marketing and e-commerce.
Overall, the new agency model is a bold step forward for Ford and the automotive industry. It represents a significant shift from the traditional dealer model towards a more personalized, streamlined, and technology-driven approach to car sales. While there are still many unanswered questions about how the new model will work in practice, it will be interesting to see how it will perform in the European market and if other automakers will follow suit.
