June 18, 2024


Automotive pure lust

Fleets and rental companies spell out fears on agency model

Fleets and rental companies spell out fears on agency model

Fleets and rental companies have raised concerns over carmakers’ introduction of agency model in the UK.

The British Vehicle and Rental Association (BVRLA) in its Industry Outlook 2023 report found that 38% of fleets feared under agency terms they would get reduced discounts and support from carmakers while 32% feared increased vehicle prices.

A total of 15% said they through they would get reduced access to personal contract hire (PCH) products while 4% said they thought they would get reduced access to EV models.

One in 10 said they had no concerns about agency and viewed it as an opportunity.

The relationship between fleets and carmakers had deteriorated as a result of the pandemic. Supply shortages has led to carmakers pumping more vehicles through more profitable retail channels, leaving fleets with ageing vehicles.

Pre pandemic carmakers used rental channels to mop up excess stock but the balance of power has shifted with lower production and higher profits on vehicles sold.

“Anxiety over vehicle supply is being compounded by the upheaval and uncertainty of a number of vehicle manufacturers transitioning to an agency model for their distribution, which will see the manufacturers set the sales prices of their vehicles and remove dealer margins.

“In an ideal world, manufacturers would compensate leasing and rental companies for the loss of dealer discounts, but 42% of rental companies and 37% of leasing companies expect a decline in manufacturer discounts and marketing support, which will lead to them having to increase rentals.

However, many of these large fleet buyers have operated an agency-type arrangement with manufacturers for a number of years, negotiating directly with head office.

They have also dealt centrally with new electric vehicle makers that are successfully launching without a traditional dealer network.

From a back-office perspective, leasing and rental companies welcome the process efficiency of one invoice itemising all buying terms.

However, they also concern that some of the conditions of agency agreements might deny them access to specific customer groups or specific vehicles.

The report cited the example of one carmaker restricted the leasing of a new electric car to its captive finance house at launch.

It said another was refusing to recognise personal contract hire drivers as the customers of leasing companies and therefore declining to extend fleet discounts to this sector of the leasing market.

PCH customers, it insists, are retail drivers who have to engage directly with the manufacturer and dealers.

Overall, it concluded that agency made sense while demand outstripped supply but if production levels rose to pre pandemic levels carmakers will need dealers to drive sales.

“The consensus is that the full impact of the agency model has yet to strike, and while this approach makes sense for OEMs while demand outstrips supply, if production volumes rise to pre-Covid levels, industry executives believe manufacturers may well need their dealers again to drive sales at a local level and, if necessary, register and sell excess stock.”