Automotive Industry and Markets

Sales

Selective sales are the preferred business model in the automotive industry

Current development in sales and service

The automotive industry in Germany primarily uses a network of dealers for selling motor vehicles (cars and commercials). In large urban areas, some individual brands even have local plant offices that handle sales directly for manufacturers. To date, no new sales channels have managed to become established in new sales forms outside the existing system. The Internet has also not advanced to become a relevant transaction medium for new vehicle business. It is still mainly used as a source of information for customers. In terms of the technical competition between the brands, selective sales continues to be the system of choice to sell customers new drive unit forms such as electric cars.

Selective sales are still the preferred business model for the automotive industry in Germany and the EU for selling new vehicles. The various brands in the EU attempt to achieve maximum territory coverage and customer proximity with a selected number of independent car dealerships, which generally have a connected workshop business. At the same time, the selective sales system is regarded as efficient, profitable and good for competition.

For car sales, a nationwide network of dealerships means an opportunity to maintain regular customer contact and therefore to communicate the values of the brand concerned. The communication of the emotional elements of a brand to private customers is one of the major duties of the dealership. The dealerships in the sales network compete with each other in terms of price and service and thus enhance what they offer to customers.

In contrast to car business, sales of commercial vehicles are mainly aimed at business customers. These customers are now interested in purchasing complete packages, which may include the vehicle, the body, the finance and other aftersales services. Commercial vehicle customers have three main demands on sales, namely detailed sales support, the availability of demonstrators and easy access to the sales staff for the needs of the commercial vehicle company. The sales staff are expected to have relevant experience in the customers’ sectors. This means dealers must continually invest in training their staff. Commercial vehicle customers demand a complete “full-range” service network from the brand, which can provide efficient support for running a commercial vehicle fleet – for example by ensuring low downtimes for servicing and repair work.

The EU’s Vertical Block Exemption Regulation (No. 330/2010) dated 20 April 2010 provides a reliable legal basis for the industry and trade for continuing selective sales systems. The planning and investment security that the regulation brings is a decisive factor that will allow businesses to remain viable in the competition among the brands, especially for medium-sized dealer businesses. The more flexible provisions in the Vertical Block Exemption Regulation enable manufacturers and dealers to reduce costs and increase the efficiency of the sales network. In view of the sustained competitive pressure on the industry and motor trade, production and sales costs are under great adjustment pressure. The Vertical Block Exemption Regulation will enable the players in the motor industry to adjust to changing conditions more easily. The various brands can adjust their business models to this. However, there is no need for a standard route for the design of the vertical sales structure.

The Internet has now become established as a trading and information platform in the automotive industry. It has become an essential source of information for the buying process. In the used car trade it has been more important than all other sources of information for many years, and for some years it has also produced new usage forms such as social networks, forums and blogs. Before buying a new car, the Internet also plays a major role as an information source. However, there is still no particular demand for buying portals for new cars. The status of an online portal for new cars as a transaction location is therefore still in its infancy, particularly since the delivery of the vehicle is still mainly handled by dealerships.

Dr. Ralf Scheibach
Dr. Ralf Scheibach Head of Department Law and Insurance

Tel: +49 30 897842-260 Fax: +49 30 897842-600
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