De Meo said agencies are particularly risky as volume increases. A company that sells about 100,000 cars a year typically has 30,000 cars, or he has three months’ worth of inventory. He said the invoice price of €25,000 equates to €750 million in capital.
But for a company like Renault, which sells two million cars a year, that number would be in the billions, he noted.
De Meo said a no-negotiate policy could also be problematic.
“We do agency because we want to control prices and reduce distribution costs,” he said. “So if you give the dealer he a 5% margin, there is no discount.
Renault has negotiated separate dealer deals for EVs such as the Megane E-Tech. De Meo said his base margin is above 5%, a typical level for agency contracts.
“Dealers need to make money because if they cut their margins, they won’t cut unnecessary costs by asking them to build showrooms like temples and cathedrals,” he said. rice field.
“You know what they’re going to do? They’ll say, thank you very much, I’m going to go with a brand that gives a higher margin,” DeMeo said. [to go to an agency model] You need to know how sales, marketing and distribution work in the automotive business. “