Volvo moves to agency model

[Frankiee]

As someone has said Agency model is the way a lot of manufacturers are going. It does give them more control over there market place and model mix as well as ensuring future residual values. The main issue Volvo has faced in my opinion is a dealer network that due to the manufacturers mis-marketing were trying to compete in the premium space but with mid market volume targets. This led to loads of unsold vehicles forcing Volvo and there dealer network to hemorrhage margin and profits. I’m in the industry and have been incredibly well looked after by HFS Group in Orpington and Tonbridge, however post covid the manufacturers have realised that they don’t need thousands of cars parked up in an airfield in Oxfordshire. Stream line the model range drop complex manufacturing of lots of options and sell to order. The price is the price and Volvo will price adjust according to demand (like Tesla). Will the dealers feel the pinch? Possibly. The dealers who weren’t good at new car sales won’t notice it as they weren’t good at retaining margin in the first place and the operators who are good at Used car marketing will excel.

[Discoman]

Originally Posted by Frankiee

The main issue Volvo has faced in my opinion is a dealer network that due to the manufacturers mis-marketing were trying to compete in the premium space but with mid market volume targets.

Stream line the model range drop complex manufacturing of lots of options and sell to order. .

I find these two points in your post interesting. Volvo might struggle with the first as it is not a premium brand to my mind. Even with cheap finance I'm not paying £80,000 just to get the spec I want on a petrol XC90.

Selling to order is pointless as ordering implies a degree of individually but Volvo has stopped this with the effective cessation of options. As implied by another poster, Porsche understands this and offers a massive range of options to bespoke a car and enjoy the ordering process. I can now get a V6 Cayenne with some options that work for me for less than the price of replacing my XC90. This is nuts. I have no problem with the agency model but not as an effective way to cement in massive price rises which have little to do with affordability or indeed costs, it is purely a way of us boosting automotive margins. Enough! I'm now wondering which brand to buy next.

[James77]

Originally Posted by Discoman

I find these two points in your post interesting. Volvo might struggle with the first as it is not a premium brand to my mind. Even with cheap finance I'm not paying £80,000 just to get the spec I want on a petrol XC90.

I agree Volvo do make a good car, always have but I don't think many on the street would call them a premium brand. Simply increasing prices doesn't make it premium either. 70-80k for a Volvo no thanks c100k for a Porsche that actually holds it's value yeah I'd do that.

[Familyman 90]

Not a premium brand...yet is selling products of premium specification, type and price to its premium rivals. Hhmmm.

That's big problem among consumers in the UK - they believe clever marketing rather than believing that which their very eyes could see if only they bothered to look.

Porkers hold their value because the supply is tightly controlled and demand always outstrips it. That's not really possibly for a mass market brand, premium or otherwise. VW tried in the 80s and 90s and failed as their customers went elsewhere, but smaller volume and specialist manufacturers can get away with it. You cant compare apples and oranges.

[Tony Harrison]

Originally Posted by Familyman 90

You cant compare apples and oranges.

I agree.

But I also agree with those that think Volvo is now really pushing its luck price-wise.

My current S90 was priced at £28550. This was in October 2020, was 36% below list, pre-registered with 10 miles on the clock. In my view that's a lot of very nice car for the money. The part-ex value was decent too.

I know things have moved on in a number of ways since then, as very well documented above, but £80+k for a non-EV top spec XC90 seems to me an awful lot of money for a Volvo, not helped by dodgy software.

As for £68k for a current S90? No.

[kdst5]

I also wouldn't pay the current price either new or second hand.

My 2014 top spec (with additional options) V70 was bought at 2 years old with 20K mileage for just over 20K albeit from a Ford dealer.

The current V90 is to small and low to the ground for someone my height so the only Volvo I will consider would be a XC90. There is no way I am paying 40K+ for a 2 year old XC90. So I will keep my current car and when I do change it won't be a Volvo.

I also wonder now that the era of cheap money seems to be over what effect this will have on the PCP & PCH because if people can't afford them something will have to change.

[Ulrikas PA]

The majority of private buyers are financing their cars with the manufacturer, whether they are new or 'approved used', and the habit is now commonplace of refinancing again around the GFV. So customers are locked in to one manufacturer of another at change time.

All this stuff about 'mobility solution providers' rather than car makers is 90% about long term lock in rather than customer satisfaction.

[neilgorin]

Originally Posted by Philip Fisher

What stops the dealer refunding you some of their commission as a sweetener? That is really no different to them than offering you a discount under the current model. In both cases it just reduces their margin.

I would imagine that bulk discounts and promotions for shifting models (ie introducing most customers) will still exist to motivate the good dealers. So potentially they could be using some of this rebate to entice more customers with some sort of dealer refund/servicing/accessory deal. Or would this be specifically banned with their agreement with Volvo?

Terms of the agreement possibly (like how they now want to hold back the registration document on pre-registered for 90 days, when they never did in the past) but more likely because the payment will be a set amount rather than a percentage, so there's a lot less to play with.

[Frank Bullitt]

It gets better.

My dealership no longer sells new Volvo’s they are an authorised Volvo and Polestar service dealership; chatting to them, the dealership needed significant investment but Volvo had also told them by 2030 there will be no face to face sales, it will all be on-line so the dealer made the decision not to invest.

This matches the Polestar model and to be honest its great - test drives and discussion on the car are pressure free, you then select the deal that works for you; inflating prices to then give the consumer the opportunity to knock it down and paying people to support this futile exercise seems incredulous.

[sandys]

Except that in nearly every industry that goes direct sales the inflated price just becomes the price with no movement so a loss for the private buyer, which is I think the end goal, the manufacturer would much rather do cars as a subscription service.