Saker: Constellation car retail acquisitions could speed-up agency model adoption

Could Constellation Automotive's move into franchised car retail be a 'catalyst' for the sector's accelerated shift to agency retail models?

Prof Jim Saker, AM contributor and director of the Centre for Automotive Management at Loughborough University’s Business School, believes that may be the case.

When there is a takeover of an OEM or a strategic alliance is set up, the business analysts invest a lot of time working through the implications.

There are normally some long-term issues about manufacturing locations being changed along with potential rationalisation and cuts in employment numbers as the new coalitions eliminate duplication and invest in new technology.

Marshall acquisition's 'long shadow'

Rarely does a merger in the retail side of the business provoke a similar level of analysis.

My opinion is that the majority share purchase of Marshall Motor Group (MMG) by Constellation has the potential to cast a long shadow over the retail automotive sector.

The fact that Constellation owns ‘webuyanycar.com,’ BCA and Cinch makes them one of the strongest vertically integrated car operations in Europe.

They have potentially a massively strong position in the used car online market space. Up until now the focus has been on used cars, the acquisition of MMG gives the organisation the opportunity to play in the new car market using their digital platforms.

Most of the car manufacturers talk about developing their brand through customer centric retailing whether it be face to face or online.

There is also the recognition that the value chain does not work for electric cars in the existing system unless the car is retained for more than the first trade cycle.

OEMs want ‘lifetime value’

The combination of these two factors have meant that people are looking at not only the customer lifetime value (CLV) but also the management of the vehicle lifetime value (VLV).

The ability to manage both of these factors requires a centralised control which would be difficult if intermediaries were able to sell new cars on any large scale.

The obvious way of doing this is through the agency model.

The news that a number of manufacturers are going down or considering this route makes logical sense.

By controlling the supply of new cars either through PCP, PCH or by any variety of subscription schemes the manufacturer gains all of the customer information and is often able to fund the proposition though its own finance operation.

With the embedded technology within the new cars there is access to how the car is being driven, which parts are performing well and the general health of the vehicle.

This gives the added advantage of being able to accurately value the vehicle as it moves through its trade cycles.

Keeping intermediaries out

The agency model also gives the manufacturer the power to keep the intermediaries out of the supply chain going forward.

As the industry reflects on the options for change going forward it would appear that the Constellation involvement with MMG may actually be a catalyst to speed up the process towards agency as manufacturers move to reclaim power within the value chain.

The challenge for those manufacturers not moving towards agency will be how they can keep both customer and vehicles within their franchise network.

As the story unfolds in 2022 it will be interesting to see who the winners will be and who start to lose out.