Evolution of Distribution Models in the Automotive Industry: Leveraging Technology to Improve Profit and Enhance CX

These business models shifts and innovations in automotive value chain are driven by:

• Internal Factors: need to optimize costs of distribution, need for pricing control across sales channels, data ownership and its further monetization, and better management of customer experience;
• External Factors: changing customer behavior, increasing competition from digital players and Chinese newcomers, and last but not least, regulatory pressure.

1) Direct Sales Model

• Manufacturer to Consumer: This model allows car manufacturers to sell vehicles directly to consumers, eliminating the traditional dealership middleman.
• Online and Manufacturer-Owned Stores: Sales are conducted through online platforms or showrooms owned by the manufacturer, enhancing convenience for customers.
• Control Over Pricing and Customer Experience: By managing pricing, branding, and customer interactions, manufacturers can ensure a consistent and cohesive customer experience over the time.
• Cons: Usually, after-sales support is lower quality, since OEMs try to keep it low-cost and automated as much as possible. It might be that customers can only chat with support via app since there is no call centre in specific market.

2) Agency Model

• Dealer Partnerships: In this model, current dealers of specific OEM brand operate as agents representing the manufacturer rather than operating as independent retailers.
• Fixed Pricing: The manufacturer sets the vehicle price, and agents receive a fixed fee for each sale, which reduces the emphasis on profit from markups. Agents are incentivized by fixed commission for after-sale support too.
• Unified Customer Experience: This model ensures standardized pricing and customer experience across all agents, enhancing brand uniformity.
• Manufacturer Retains Inventory: Unlike traditional dealerships, where dealers purchase and own inventory, in the agency model, the manufacturer, or the wholesaler in specific markets, retains ownership until the sale is completed.

Industry Examples

• Tesla is a prominent example, utilizing direct sales through its website and company-owned stores to maintain a streamlined purchasing process. Lately, newcomers expanding to European markets are utilizing this approach too, for instance Nio in Germany or BYD in Netherlands.
• Genesis (part of Hyundai): As it expands across Europe, it usually enters selected market via OEM operated store(s). It is efficient market entry strategy, but has limitation on car volume that could be sold through this model. It is the case of UK, where Genesis lately uses agency model to scale and to gain market share.
• BMW Group: Introduced a direct sales model across Europe, starting with MINI, and plans to expand this approach to other markets and brands by 2026. Pieter Nota, a member of BMW's Board of Management, highlighted the importance of direct customer interaction and communication.
• Mercedes-Benz: Implemented an agency model in the UK, which has been praised for its transparent pricing and high customer satisfaction. Sally Dennis, Sales and Marketing Director, emphasized the positive response from customers buying directly from the network of agents.
• Volkswagen Group: Pursuing a 'Direct to Customer' model with a Full Agency approach, focusing on fleet and all drivetrain vehicles. Marco Schubert noted the need to reassess the agency model for all-electric vehicles to ensure optimal customer experiences.

‍

Technology Foundations for Enabling Direct Sales and Agency Models

As the automotive industry explores new distribution models, selecting the right enabling technologies is crucial. The shift toward direct sales and agency models requires modernized applications, seamless system integrations, advanced data analytics, and robust cybersecurity.

Based on decades of experience in the automotive sector, Trask provides expertise across these key areas, helping organizations navigate the complexities of digital transformation.

1) Application Modernization

Modernizing applications is essential for staying competitive in the evolving automotive market. This includes transitioning from legacy systems to cloud environments, adopting microservices architectures, and implementing DevOps methodologies. A streamlined IT landscape enhances speed, agility, security, and cost-effectiveness—whether for online sales platforms, AI-driven decision-making, or dealership management.

2) System Integration

Effective integration of various IT systems ensures smooth operations across dealerships, agents, importers, and manufacturers. Key areas of integration include:

• Dealer Management Systems (DMS) – Managing sales, inventory, and customer interactions.
• Manufacturer Systems – Connecting dealerships with OEMs for orders, stock updates, and warranty claims.
• Financial & Banking Systems – Handling financing, leasing, and payments.
• CRM & Marketing Platforms – Supporting lead management, online sales, and test drive scheduling.
• After-Sales & Service Systems – Managing maintenance, spare parts, and warranties.

A well-integrated ecosystem enables efficient data flow, reducing manual work and improving decision-making across the entire sales network.

3) Data & Analytics

Data-driven insights are critical for optimizing sales strategies, inventory management, and customer engagement. Key applications include:

• Descriptive Analytics – Understanding past sales performance and customer behavior.
• Predictive Analytics – Forecasting demand, pricing trends, and market shifts.
• Prescriptive Analytics – Recommending optimal stock levels, promotions, and pricing strategies.

AI further enhances these capabilities, from personalized customer engagement to predictive maintenance and inventory optimization. A tailored data strategyensures that insights align with the specific needs of manufacturers,importers, and dealers.

4) Cybersecurity

With the growing reliance on digital platforms, secure handling of customer and transactional data is a top priority. Key focus areas include:

• Protecting Customer Data – Ensuring compliance with GDPR, CCPA, and other regulations.
• Securing Online Transactions – Implementing fraud detection and secure payment gateways.
• Defending Against Cyberattacks – Preventing ransomware and unauthorized access to dealership IT systems.
• Safeguarding Connected Vehicles – Enhancing security for smart car features and IoT integrations.

As distribution models evolve, robust cybersecurity measures help maintain trust, regulatory compliance, and operational resilience.

Conclusion

The transition to direct sales and agency models depends on a strong technological foundation. As different distribution models coexist—ranging from traditional dealership networks to fully digital direct sales—the ability to ensure transparency, process efficiency, and customer satisfaction will be key to success. Strategic digital investments can enhance sales performance, improve customer experience, and future-proof automotive businesses in a rapidly changing market.

Authors

Jan Burian, Head of Industry Insights at Trask
‍Lukáš Turišin, Automotive Business Consultant at Trask