STELLANTIS AND THE “HYBRID MODEL” – For decades, the distribution of automobiles has had a consolidated pattern in which the dealer sells cars to end customers thanks to the “concession” of the car manufacturer that produces the vehicles themselves. The dealer is therefore a third party who buys from the manufacturer e sells to customers with a certain margin, necessary to support themselves and hopefully earn money. However, Stellantis plans to change this model in Europe by increasing its involvement and reducing the margins of dealers. In this context there is also talk of a reduction of the intermediate steps to increase profit margins. These and other advances were collected by Automotive News in an interview with Maria Grazia Davino, head of the group’s European sales Stellantis. This evolution could lead to a dealer-manufacturer relationship hybrid because it combines aspects of the current model, the one mentioned above, with the so-called “agency model“, in which car manufacturers pay the dealer a commission for each car sold and control prices more rigidly to improve transparency and eliminate bargaining, one of the most characteristic aspects of the customer-dealer interaction.
MORE EARNINGS FOR EVERYONE? – The Stellantis executive expressed optimism, saying “We are convinced that, if properly implemented, this distribution model will benefit everyone“. That things were destined to change was quite clear, given that Stellantis had sent notice of cancellation to all European dealers (except those of Maserati) with effect from 1 June 2023, a date that coincided with the entry into force of a new European competition law (read more here). A little more than a month ago Davino herself had anticipated some of the changes that would have happened, for example by citing the fact that the dealers of Alfa Romeo, Lancia and DS would have been the pioneers (who the news). Now more is known, starting with the fact that this new model sees the customer still paying the dealer, but Stellantis will bear all distribution costs, including stock costs and incentives. In fact, remember that if a dealer reaches certain sales targets, he gets incentives, a sum-bonus on which he will then pay taxes. Distribution costs are a large chunk of a vehicle’s list price, as it is estimated to be around 30%. Stellantis European retailers have on average a margin of 9%, a value that could be halved with the new scheme: Maria Grazia Davino in fact stated that: “The discussions are still ongoing, but we think that the retailer’s commission could settle between 4% and 5%“. The company believes the margin loss will be recovered from the savings on distribution, inventory management and incentive taxation costs.
TRANSPARENT PRICES FOR ALL CHANNELS – The advantages for the Group would derive from withholding a higher rate of the sale price and a greater control over prices themselves, an important issue since online sales of Stellantis vehicles are expected to steadily increase (who to know more). In this way we would avoid the “spins” that the consumer makes at various dealerships to look for the best price. These hypotheses obviously sparked discussions in the sales networks: Pietro Carlomagno, president of ADEFCA (the European association of Fiat, Alfa, Lancia and Jeep dealers) declared that the group of associates is “in a constructive discussion with Stellantis on the implementation of change “. An important issue is, in light of what has been said above, that dealers do not lose any profit before tax: “The main issue is to be sure that the reduction in commissions corresponds to the savings they get from the reduction in costs they pay now. as part of the current model of concessionaire “, explained Charlemagne. Maria Grazia Davino underlined how Stellantis is very committed to this change and said she was more than willing to accept and take into account the opinions of dealers: “My door is always open, I can be reached through all channels and I try to answer all the questions I receive”.
WELCOME TO CASA STELLANTIS – Steve Young, managing director of the research and consultancy firm ICDP, comments: “The fact that Stellantis seems committed to taking on the responsibility and costs of the warehouse and the investments in the structures related to the brand is good.” His idea is that the car manufacturers and dealerships could better manage stocks to avoid excessive market saturation and the consequent discounts to dispose of them and losses in value. Another thing that had been heard was that you would like to have as many brands as possible in the same dealer. To achieve this, the company changed the specifications on the surface of the showrooms for a retailer to have the Stellantis brands. Therefore several dealers will be able to increase their portfolios adding brands such as Alfa Romeo, Citroën, Fiat, Jeep, Peugeot and Opel. These multi-brand spaces will be called Stellantis House and Maria Grazia Davino thinks they will appear “over time, since size is not the only principle guiding our redesign of distribution”. But Stellantis will “shake up” its dealer network even with careful studies of their commercial performance. The company measured the commercial performance of a dealership in its territory by comparing it with the market share for the brand in the reference country. If, for example, a Fiat dealer in Rome has a better market share compared to the Fiat brand in Italy then Stellantis will propose to this seller the sale of other brands.