Volkswagen seeks to introduce new dealer contracts by the end of Q1 2018

10 October 2017

Volkswagen seeks to introduce new dealer contracts by the end of Q1 2018

10 October 2017

Sales Director Jürgen Stackmann has announced that Volkswagen (VW) plans to cancel its existing dealer contracts and have new ones signed by the end of the first quarter of 2018. These would then come into effect two years later. This news comes in the wake of a disagreement between VW and its dealer partnership group over the manufacturer’s handling of the diesel scandal and is some five months after a statement issued by the Volkswagen and Audi Dealers’ Association (VAPV) revealed that the manufacturer wants to make big cuts across its dealer business and remove key areas from the trade while also planning to tighten standards. This in itself followed the news in January 2017 that VW wanted to introduce new dealership and service contracts to its existing network.

According to German trade journal Automobilwoche, as was feared by the dealers' association, the contracts have parallels with those planned by Audi, whereby the manufacturer reserves the right to conduct dealer business with large customers directly in the future or could directly handle the sale of equipment which can be ordered online. VW, however, argues that it wants to give dealers more commercial freedom. Stackmann commented that: ‘We see in many places that we have squeezed trading very tightly through our regulations’ and the intention now is to ‘let the entrepreneurs be entrepreneurs again.’

In addition, Stackmann announced that he wanted to change the bonus system. In this respect, the role of customer satisfaction surveys should be diminished. Instead, the focus should be more on the end result, i.e. customer loyalty. VW also wants to reduce the dealer margin - the discount that the dealer receives on the cars to be sold - by one percent across Europe but the dealers’ return on trade is expected to rise from one percent currently to two percent, achieved through cost savings. ‘In terms of profitability and efficiency, we have set the common goal of removing ten percent of the costs from the system, at all stages - at our stage, at the importer stage and at the trading stage,’ says Stackmann. ‘This is a process that will take several years, but we will deal with it consistently.’

New IT systems are also expected to help. The head of international trade organisation and development at VW, Stephan Kollebach, said: ‘We are still sitting in the Stone Age with our systems and have to break into a modern new world.’ Stackmann spoke of a ‘disturbed IT infrastructure in Germany". The manufacturer’s proprietary systems Cross and Elsa have recently faced massive criticism in the trade for having stability problems.

Stackmann also announced that he wants to promote online sales in order to be able to fight off the digital competition: ‘We are working on a joint online sales channel with the trade,’ he said. ‘This is something, we believe, Amazon will do in the next few months and years and that Mobile.de will do. So, as an organisation, we need to be in a position to set this up too - as a joint initiative for manufacturer, importer and dealer.’