Right now, for the most part, when you buy a new car you’re not actually buying it from the company that makes it. Your money does not go directly to Ford, or to BMW, or Volkswagen, or Hyundai. The dealership you’re buying from is, in almost all cases, an independent business, which operates a franchise, and which buys its stock – the cars – at wholesale prices from the company that makes them or from a local distributor.
That is about to change.
BMW has confirmed to The Irish Times that it will move to an agency sales model starting in 2026, and sooner than that with the Mini brand.
A BMW spokesperson told us: “In close partnership with its retail partners, the BMW Group always aims to offer the best premium customer experience. In the context of rapidly changing customer expectations and the options and opportunities of increasing digitalisation, the company will in the future focus on direct sales with agents acting as its sales representatives in Europe.
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“The implementation of this agency model will start in 2024 within the European Mini network, with the BMW brand joining in 2026.
“As part of this new model, the company’s existing retail partners will remain the principle touch-point for customers and will focus on providing them with advice and support. In return, our agents will receive a commission for their services. In future, the BMW Group will assume a significant part of the risks and costs of selling the cars and take full advantage of the technical opportunities offered by the constant evolution of digitalisation, offering customers to move seamlessly between a digital and physical sales experience. The offer, including pricing, will be consistent and transparent across all sales channels.”
What this all means is that the way in which we buy and sell cars in Ireland is going to change significantly in the coming years, and while one might optimistically say that if it all goes according to plan, the end consumer – you, me, your neighbour – won’t notice any major difference, there is always the potential for pitfalls ahead.
What is an agency sales model? It means that you actually will be buying your car direct from the manufacturer, and the dealer will only act as an intermediary – an agent – for that sale. The dealer will no longer make a direct profit from the sale of a car, but will instead be paid an agency fee for handling the physical aspects of the sale, which may be in the form of a percentage of each sale or a flat fee with bonuses for meeting targets.
It’s a model that has been used with great success, thus far, by the likes of Tesla and Polestar in Ireland, and it’s been experimented with by other brands across Europe. While many are still officially vacillating on the subject – most, when asked if they are preparing for a transformation into an agency model in Ireland, simply say it’s being looked into – all but a handful are likely to go that way in the end.
When I started, the whole car market was about 65,000 cars, so to sell one was like doing a job interview
Why? Because it makes more money for the car manufacturer. In many ways, it’s a response to consumer demand – surveys carried out in the UK and Europe have shown that 80 per cent of buyers would like to see fixed pricing for new cars, and to avoid the haggling which many feel is somehow de rigueur in the buying process, but which many equally don’t enjoy doing. For the car maker, it means taking control of the entire sales process, allowing a faster move towards online sales, and also forging a direct relationship with the customer.
How do dealers feel about this change? Denis Murphy is manager of Blackwater Motors, the Co Cork-based group with premises in Cork, Fermoy, and Skibbereen, and franchises for Volkswagen, Audi, Seat and the newly-arrived Chinese brand Ora.
Murphy told The Irish Times that such changes are pretty much inevitable and should be viewed in that sanguine way. “The industry has changed so much since I started in it,” said Murphy. “Back then, the whole car market was about 65,000 cars so to sell one was like doing a job interview. Being in a position to buy a car was to be incredibly privileged.
“So it’s change, and it’s just another change. Digitalisation is coming, it has to come, and people want to move to the Amazon way of buying things online. So it’s really driven by customers, and what customers want to do and how they want to do it. And once you move towards an online buying experience, you have to have a fixed price, so we have to move away from the current model, towards the agency one. It’s inevitable.
“Am I worried about it? A bit anxious, but time will tell and we’ve been through so many changes over the years that I feel this is just another one.”
If the contract is with the manufacturer, then they will be the responsible party for any consumer protection issues, such as faulty goods, that arise after the sale
It’s not the first time that fixed pricing for cars has been spoken about. Back in the early 2000s, both Fiat and Opel tried to introduce what was called ‘open book pricing’ where each car had a fixed price and there was no haggling. This, though, attracted the ire of the competition authority which investigated both brands on the basis of price fixing, with the thinking being that dealers should be free to set and negotiate their own prices.
Where the agency model is now concerned, though, the Competition and Consumer Protection Commission (CCPC) is taking a much more measured path. “In terms of the move to agency models, there are positive and negative aspects for consumers. Firstly, it is critical that consumer protection responsibilities are clearly set out and that the consumer knows who they are entering into a contract with.
“If the contract is with the manufacturer then they will be the responsible party for any consumer protection issues, such as faulty goods, that arise after the sale. The benefits of the agency model for consumers are generally seen to be the fixed consistent price can give consumers more confidence that what they are paying is fair and it provides a better indication of value. However, it also means that there is no opportunity for consumers to negotiate on price, or to shop around for better value,” a CCPC spokesperson told The Irish Times.
However, a note of caution was sounded by the CCPC, which said: “From a competition perspective, agency models can constitute a form of vertical agreement. Vertical agreements can raise issues with respect to competition law, and competition authorities, including the European Commission and the CCPC, publish detailed statements on what vertical agreements they consider acceptable.”
Vertical agreements are those between two different companies or entities in the supply chain for a product, and the CCPC will be carefully watching those switching to agency models to ensure that they’re not exceeding their limits in those regards.
Officially, the motor trade here is carefully circling the agency model. Tom Cullen, the deputy director general of the Society of The Irish Motor Industry (SIMI), told The Irish Times: “Some manufacturers have moved to agency models, some are staying with franchise, some to a hybrid version and some haven’t yet decided. At this stage there is a great deal of speculation, and we are monitoring the situation. Like most new arrangements, the devil is in the detail.
“A business model that creates certainty between the manufacturer and the retailer is good as long as there are clear benefits to both parties – this will also benefit the consumer. It is not yet clear what model will apply to the Irish market. The decisions by manufacturers may differ from country to country and the effect on Ireland might be different to that our European neighbours. The sector is going through a time of significant change, much of which is hugely positive, with the rapid advances in technology and the transition of our cars and goods fleet to electrification to meet our climate change objectives. Whatever unfolds, changes of this magnitude will create great opportunities as long as we manage the consequences of this change along the way.”
While some brands hedge their bets for now, a few are very definite about not moving to agency sales. Ciaran Allen, sales director for Mercedes-Benz in Ireland, told The Irish Times that: “We have no plans to introduce the agency model here in our market. We will maintain the traditional model. Therefore it will be business as usual.” Jaguar Land Rover Ireland, in spite of confirmation that it will be moving to agency sales in the UK, told The Irish Times that it also definitely won’t be going agency in Ireland.
One that already has is Polestar, Volvo’s electric and performance offshoot. Volvo as a whole is moving beyond agency sales and towards a subscription model for new cars, although that is yet to come to fruition in Ireland. Volvo Ireland’s commercial operations director and acting managing director Alan Cowley told The Irish Times: “Volvo Cars is in the midst of a fundamental change in how we do business, evolving what, where and how we sell. With our move to the direct and online sales model our ambition is to create the best possible consumer experience – online and offline – delivered to a lower overall cost. This will offer greater clarity to the customer in terms of pricing, what’s included in their purchase, and delivery times.
“There is no set date for Ireland just yet. Our retail partners are aware that it is on the horizon, and we have received no immediate negativity on the planned transition. We will ensure that our retailer network is both consulted and kept fully up to date throughout the process.”
Like most new arrangements, the devil is in the detail
Polestar, though, already operates here on an agency model and currently only has one physical outlet, in Sandyford in south Dublin. Kieran Campbell, head of Irish market operations for Polestar, told The Irish Times: “Speed to market is the main aspect, as the car maker has the main control here and implements its own strategy in its own format. The business model is clear and transparent, in product, in price, and in transaction. Investment can be realised quickly and you have a more agile, adaptive business.”
Campbell did allow that there are some drawbacks to the setup, saying: “Building brand awareness can take time, especially in a settled and competitive automotive landscape.”
It will also likely mean fewer physical dealerships in the country. An agency sales model is predicated on most of the sales process taking place online, with the dealer simply taking care of physical handovers of cars and the after-sales care. Given that cars can be collected and dropped back for later servicing, it means that the need to have dealership boots on the ground in every town is receding fast. It means that there will be far less of the personal touch in car sales, and far less of the traditional ‘my parents bought their cars here so I’m doing the same’ sense of loyalty to a particular dealer.
That’s a process which has already begun, Denis Murphy tells us. “The number of dealers has been declining since I got into the business” said Murphy. “Just pulling back and back and back, especially as margins got tighter. When that happens, the only way to increase your profitability is through volume, so that means more cars being sold from one premises.”
Nonetheless, Murphy feels that agency isn’t the be-all and end-all of car sales, and that there’s still room for something a little more old-fashioned. “Agency hasn’t been a success in every market, and some of the brands that have brought it in are struggling,” says Murphy.
“I think from a consumer’s point of view, it’s a hugely competitive market and that competitiveness will always be there. Whether it’s online competition or dealership competition, we’ll always be trying to take sales and customers away from, say, a Toyota dealer. On top of which, buying a car is still different to buying a pair of jeans, because it’s so much more expensive.
“I think that buyers will still want to touch and feel a car before they decide, so I think we’ll end up with more of a hybrid model. As I said, the consumer is king, so they will decide what model is introduced here. It’s part of constant change we have always faced, but we don’t fear it.”
