KUALA LUMPUR: With the introduction of the agency model, the car and auto parts sectors are projected to suffer softer-than-expected orders and deliveries, as well as resurgent supply chain concerns in the next fiscal year ending in 2024.
Mercedes-Benz secured a deal in July with its Malaysian retail partners—Hap Seng Star and Cycle & Carriage—to deploy this strategy.
In Malaysia, Volvo is already selling its electric automobiles directly online.
Among the many brands in Malaysia, European marques BMW and Porsche are most likely to embrace the agency model in the coming years, as they have either already done so in other markets or aim to do so in the near future, according to RHB.
"Although dealerships will still have a role to play in the new model, their earnings may marginally decline.
"We think Sime Darby's motor business is most at risk (45 per cent of SIME's FY23 EBIT) as European marques are most likely to adopt it soon, said the research house in a note today.
Hap Seng Consolidated Bhd's subsidiary Hap Seng Star will start implementing the agency model with Mercedes-Benz Malaysia in September, it added.
The Japanese marques, on the other hand, have not been as aggressive in adopting the agency model.
In the agency model, original equipment manufacturers (OEMs) would deal directly with customers, who could either buy their cars from the OEMs' websites or place an order through a dealer.
The key differences lie in pricing, fee structure, and risk ownership. Dealers no longer set their own prices. Instead, cars must now be sold at prices set by the OEMs.
"Dealers do not earn a dealership margin anymore, as they no longer purchase the inventory from the OEM nor assume the inventory risk.
"The OEMs are increasingly adopting this model due to potentially higher pricing and as it prevents price competition among the dealers while providing customers access to the nationwide inventory," said the research house in a note today.
The new model, while potentially affecting dealership profits due to the substitution of the variable dealership margin with fixed commissions, is anticipated to bring about certain advantages.
These include consistent per-unit commissions and savings stemming from the elimination of inventory-holding expenses.
"While the profit margin from selling new cars is affected, the sale of spare parts and after-sales services continues to be a lucrative segment.
"Earnings impact depends primarily on the percentage of earnings previously derived from selling new cars. The greater the percentage, the greater the impact, said RHB research.