It's touted as a win for BMW, the dealers, and the customers.
BMW is in the process of developing a new direct-sales agency model in Europe. In short, customers will be able to order a car online, after which BMW will invoice said client directly. The dealer involved with the delivery receives a fixed commission percentage, which is obviously a drastic change from the current manufacturer and dealer dynamic.
The German publication Automobilwoche sat down for an interview with Pieter Nota, Chief Sales Officer, to learn more.
Nota revealed that direct sales via the new agency model will start with the Mini brand in Europe in 2024. All BMW cars will only move over in 2026. Nota also said that BMW is not interesting in getting rid of its dealer network but rather in finding a way that will be beneficial for the manufacturer, dealer, and customer.
"We will improve the buying experience for the customer, continue to provide our agents with an attractive business model, and at the same time give us more direct access to the customer. Those are the three most important aspects in our plans," said Nota. For this plan to work, BMW requires the support of its dealer network.
The agency model is essential to BMW because it doesn't have a uniform IT system. According to Nota, its customers start looking at cars in the digital space but then want to experience them physically at a dealer. This results in a "systemic break" because BMW's web activities and dealer system are not linked.
An example of this could be a customer that will use the website to configure a new BMW i4. Once they're happy with the car, they'll head to a dealer, but that dealer might not have that car in stock. Once everything is connected, the BMW website can point that same customer to a dealer with that particular model on the lot.
As you can imagine, there has been some pushback from the dealer side, but not at BMW. Dealerships stand to lose a lot of money, which is why direct-sales manufacturers in the USA are constantly caught up in a legal battle, despite research that shows customers would much rather buy a car online than go to a dealership.
According to Nota, dealerships will remain profitable thanks to the previously mentioned commission. Mercedes-Benz has already implemented a similar system, with the commission set at 6.5% initially. Nota did not provide percentage figures but said that BMW would take the dealers' profitability into account. This sounds like the more profitable a dealer is/was, the higher that percentage will be.
The backlash from BMW's dealers has been minimal because they were involved in developing the agency system. Also, Europe has price protection, which means the dealers across the pond can't use the same infamous markup system used locally.
Along with direct sales come massive savings, and not just from dealerships. As Automobilwoche points out, Stellantis CEO Carlos Tavares has already stated that there's a potential to save 40% in distribution costs. While Nota says that savings would be welcome, it's not the main aim of the agency model. BMW is placing customer experience above all else and will not offer only select cars for sale online as Audi does with its EV range.
"When we launch at Mini on January 1, 2024, Mini will be completely ready. Mini is not a guinea pig for anything that we could then do better at BMW two years later. All things considered, we are already very far along in terms of IT development and the new structures," said Nota. The agency model will be introduced in three waves, but Nota could not provide more information on these stages.
The agency model will not be available in the USA. "[The agency model] would not be compatible with the general conditions in the USA," said Nota.