Carmakers have “no interest in putting a bomb under the sector” with agency, says Vertu boss

Vertu chief executive Robert Forrester has said that it’s not in the interest of car manufacturers to “put a bomb under the sector” with the move to new agency models.

Forrester spoke to AM following the AM100 group’s latest financial results that saw it break £4 billion turnover for the first time.

Under the agency model, in respect of new vehicle sales, the manufacturer transacts with the customer while the retailer remains the physical touchpoint with the customer and undertakes the sales process and customer contact as  an agent.

The retailer-turned-agent receives a commission on each new vehicle sale but  will own no inventory and will no longer set prices or discounts.

There are varying iterations of the agency model proposed and the picture is evolving both legally and how they are being implemented.

Vertu represents 34 different brands across the UK and will naturally have to navigate a mix of franchised and agency model agreements across its group.

The group has already operated on an agency basis for a significant proportion of its fleet and  parts sales.

The first of the Vertu's significant manufacturer partners to operate the agency model for new retail sales was Mercedes-Benz passenger cars which moved to a genuine agency model on January 1 this year.

Forrester said the implementation has been successful from a systems perspective but is monitoring how the change will act as one of the factors that can affect volume and profit levels.

Forrester said: “Agency does add certain complexities when looking at the mix of different systems across our businesses, but it’s something we’ll deal with.

“It’s not in the interest of OEMs to put a bomb under the sector and to destroy their retail networks. It’s a big change for the OEMs and they need to get the skills and the experience to support the move.

“The biggest question on the agency model is still whether retailers are going to make money. 

“You’re not going to judge something after a few months and so we need to see where things are after more time.”

Building scale with existing partners

Building scale is one of the key strategic pillars for Vertu and the group added 31 sales outlets over the last 12 months, including 27 from its Helston acquisition and two from its BMW Motorrad purchase.

Forrester is keen to grow further through acquisition where they make strategic sense and confirmed there are “several opportunities in the pipeline” already.

However, this growth is most likely to come from existing partners, rather than the potential host of new entrants to the market with new brands from China like BYD, Omoda or Lynk and Co.

Forrester said: “I have wished the Chinese brands good luck and we may explore representing them in the future, but I think right now that’s more of a medium to long term prospect. 

“We’ve already seen with Cazoo and Cinch the kind of investment needed to be a new entrant in the UK market. All the manufacturers we represent have clear EV strategies and to say the Chinese brands are the only ones that are going to capitalise on EV is nonsense.

“Operating a dealership with no aftersales parc is a big challenge and that’s one of the biggest concerns.

“We have 3,700 people and 34 OEMs and my biggest focus is to try and narrow what we’re already concentrating on, not broaden things even further with new brands.”