Multi-brand Dealer Sites – Good or Bad?
As everyone in the European motor industry must be aware, last week Stellantis held dealer meetings across Europe to announce that they were terminating all existing dealer contracts, some of which have only been in place for a couple years, and would enter into discussions with a reduced number of partners about new contracts. This captured the headlines in a lot of trade media, and it is easy to link this to the formation of Stellantis from the former PSA and FCA groups, and the influence of Carlos Tavares as a man who gets things done fast – a trait very successfully demonstrated with the turnaround of the former loss-making GM Europe operations when they were acquired by PSA in 2017 and turned a decent profit just 18 months later.
However, without the benefit of any inside information, I think the reality is somewhat different, and reflects the challenges facing all manufacturers, not just Stellantis. The Block Exemption Regulations (BER) that affect all manufacturer-dealer relationships are in the process of being reviewed and will come into effect from 2022 (mainly sales-related) and 2023 (mainly aftersales related). Every BER review has been accompanied by a slew of contract terminations and renegotiations as manufacturers seek to remain compliant and take advantage of any new freedoms and opportunities that might be available through the changes. I am sure that this round will be no different, and that more announcements will follow in the coming months. In that respect, it is ‘business as usual’.
The Stellantis announcement also refers to the effect of the ever-tighter CO2 measures that affect product mix and through that the sales and aftersales profitability for both manufacturers and dealers, and the trends towards omni-channel buying behaviour by customers. Both of these trends put distribution cost under the spotlight as new investment is needed, margin is squeezed and improved collaboration is needed between manufacturers and dealers to comply with the emissions targets with minimum dependency on costly incentives, and to provide a seamless omni-channel customer journey. Again, these pressures are not unique to Stellantis, and all brands will need to find solutions that work for them and their partners. It is also worth noting that although changing from a franchise contract to an agency relationship where dealers transact sales on behalf of the manufacturer on the terms that the manufacturer sets, from stock that they hold, is not (according to responses from dealer questions) part of the Stellantis plan, they have said they are open to discussions.
What is interesting and specific to Stellantis is that they do want to follow a multi-brand approach, with fewer investors holding the franchise for all or most of the Stellantis brands in an area, and co-locating them under the same physical rooftop. This is a continuation of a process that was already underway in both PSA and FCA, but is clearly more challenging with the broader brand portfolio. Whilst there will definitely be some overlap of investors across the brands, in some areas the enlarged group will need to pick between investors, where in some cases there will be two worthy winners from the existing pool, and in others none, requiring a new investor to be attracted in by the proposition.
The multi-brand rooftop proposition is potentially interesting. Our consumer research has shown that of various future propositions, this is the one that new car buyers would like to see, and the Stellantis portfolio does offer some real choice. In 2014, we highlighted the AutoCity development in Bolzano, Italy by the Barchetti Group, at the time hosting 13 new car franchises, 15 aftersales franchises and a multi-brand used car floor. This allows more flexible use of the space, with brand differentiated areas and no direct access between each sales space, but with a multi-brand workshop and parts facility, and shared back office. Stellantis have referred to ‘softened standards and outlet optimisation’ indicating that they want to reduce the structural cost in networks – though most of the multi-brand facilities are surely going to require new investments over time, with a question mark about the reusability or saleability of the former single brand dealerships. Normally in any multi-brand rooftop, there is also an issue if the investor wants to sell, and needs to get the approval of all the OEMs for the prospective buyer. This should not apply to Stellantis as a single group covering all the brands, but there will be pressure to include brands that may not be viable, even under a shared rooftop, unless the standards on those marginal brands are very ‘soft’ to use the Stellantis terminology.
The timeframe is challenging for Stellantis – they are hoping to issue letters of intent to their proposed new partners by mid-July, following a consultation during the intervening period on the shape of the future scheme. That’s not impossible if there is a shared view of the future needs, but as always, the devil will be in the detail. Reaching a consensus across a huge and very diverse investor base owning almost a quarter of all European dealer franchise points and across the Stellantis brand networks, managers might make the 18 month turnaround at Opel look like a walk in the park.