Polestar, INEOS or Mercedes, Who’s Right?

A lot of talk at the moment about Agency Models and Retailing Models in general, as the automotive sector continues to adapt to evolving new and used car markets.

?

Now as much as every manufacturer has to build its own retailing model around the trading demands of the new and used car markets it is operating within, I think two things are going to be important to everyone moving forward; access to the professionals required in order to deliver on the objectives and never losing sight of the symbiotic relationship that exists between successful used car retailing and new car success.

?

Now I want to quickly further expand upon the professionals required because this is important, and an issue I covered in last week’s article written for my Used Car Business Development Blog;

??????????????????????????????????????????

The Major Flaw In UK Used Car Markets?

?

Anyone wishing to read the article can follow the link above but in brevity; identifying the skills required, and the professionals needing to be employed in order to deliver on your new and used car sales objectives, will be paramount to your success; why? Well because this is inextricably linked to the retailing model manufacturers and their franchise partners choose to operate under moving forward.

?

With this in mind let’s first look at Mercedes Benz in the UK, who are currently rolling out their Agency Model for new car sales in the UK. By all accounts it is going well but I fear there will be a problems looming in the near future, and one shared with others (BMW and Audi to name just a few); those associated with operating in many different new and used car markets (all operating very differently from each other) with a “One Size Fits All” retailing model.

?

The differences (in retailing, staffing, operational and delivery terms) between retailing a bottom of the range A Class and a specialist high performance AMG model, could not be starker. One can be sold via a retail model where tech and digital campaigns are doing the heavy lifting and via a monthly rental payment basis, and one can’t; why? The expectations of the customers involved; and this may be difficult to cater for under a “One Size Fits All” Agency Retailing Model.

?

One can operate via (relatively inexpensive) polo shirt wearing “Product Geniuses” who complete demonstrations and go on to hand over the car, but one can’t; and this may present Mercedes Benz with some challenges when it comes to the purchasing experience enjoyed (and expected) by customers; and therefore the professionals required in order to deliver. Why? Money; namely the costs associated with the consultative selling sales professionals that will be required!

?

In the main manufacturers don’t understand the art of professional selling, the skills and the professionals required. Unfortunately the professionals required to deliver on both these models are poles apart, in terms of their expertise and therefore what they expect to earn. I wish Mercedes Benz well with these changes; I have a suspicion though that they may need to split their retailing models, in order to ensure that they have the right shaped professionals in the right shaped roles. Especially when it comes to used car retailing.

??

A relatively new entrant to the market though (@Polestar) appear to be operating under a totally different new car retailing model and personally (having picked apart their retailing model in the UK) I’m not convinced this will work long term.

?

Those new to my articles may wonder why I carry out this in depth analysis of the new and used car retailing models of manufacturers and their franchise partners. Well as an independent sales and used car business development professional, I continually look for opportunity to disrupt markets and/or align myself with the retailing models of manufacturers, their networks and independent specialist businesses. Aiming to work with a select group of businesses during the year, on a success based basis. So this process is paramount, in terms of identifying opportunity within the automotive sector.

?

And Polestar has left me baffled! Whilst I fully respect the right of Polestar to run the business they want (bearing in mind the ownership of the company), I am surprised at their retailing model in the UK. Far removed from traditional automotive retailing models and more akin to selling smart phones than specialist high performance EVs.

?

They are relatively new to the market in the UK and I appreciate that some further retail partners are coming on board, but currently the foundations appear at odds with successful new and used car retailing.

?

Now having registered 7,345 cars in the UK last year (SMMT figures) Polestar could understandably say that their retailing model is a work genius, and that they are achieving and/or overachieving on the retail objectives; I have no sight on what they are and they could well be right.

?

So why do I worry for Polestar moving forward? And in worrying also see the trading flaws that mean there could also be a tremendous opportunity for those with the experience and expertise required in used car acquisitions, retailing and business development, to totally disrupt their entire used car retailing model? In the process excluding Polestar themselves (the manufacturer remember), from the most lucrative market and profit opportunity of all.

?

Well, as much as I cannot be privy to the future plans of the company (an important point to remember – in all fairness to Polestar), at the moment they don’t appear to have a used car retailing model, or what looks like a plan. I have mystery shopped both their retail outlet at Battersea Power Station and the Customer help Centre three times and each time I have been advised by their representatives of the following.

?

·??????Polestar don’t sell used cars.

·??????Polestar don’t purchase customers cars back for their used car retailing programme, therefore supporting customers and residual values.

·??????Resale values (and I quote) are so high that it is recommended that I try to sell my Polestar privately, should I have found (like many of those trying an EV for the first time) that it is not practical and/or suitable.

?

When I went on to query the twenty something used Polestars on their website there was confusion as to what they were and where they came from; although I was advised that they were probably cars returning from fleet and leasing companies/partners?

?

And it didn’t get any better when I picked apart the new car retailing proposition. During which I was advised that I could not part exchange any car when purchasing my Polestar? Aghast, I queried this but the person I spoke to confirmed this point; stating that company policy was to advise those interested in purchasing a Polestar to sell their current vehicle themselves!

?

Now this is a “Ballsy” retailing model, that’s for sure and part of me respects them for trying to be different, but I think it’s doomed to fail; why? Well the point of this article is not to give Polestar all the answers for free, but in brevity.

?

The market within which Polestar are operating in the UK will bring them into contact with a certain socio-demographic of customer; a cash rich – time poor customer. As much as they are obviously targeting the fleet market at the moment (although they appear to be undermining their own position within this market – more on this in a second), when this market runs dry and you are dealing with customers spending their own money?

?

Sorry but telling this profile of customer (or any customer for that matter) that they have no ability to part exchange and must therefore retail any existing car they own privately; really people? Then there is the sales staff I spoke to; again I fear for Polestar in this regard because in my opinion (although only from my experience) they have done things on the cheap, and when it comes to the challenging trading conditions of 2023 and beyond?

?

I’m sorry (and again from my experience) Polestar appear to be going into battle with the wrong people. At no time did I feel like I was dealing with the sales professional required of purchasing an expensive car in a relatively new market segment.

?

Lastly and most worryingly there appears to be a lack of genuine used car retailing expertise within the business in the UK. If there was any (I could find no such professionals listed on the company LinkedIn page) they would understand the symbiotic relationship that exists between successful used car retailing and success in the new car market; and that they are inextricably linked.

?

By having (at the moment – there may be plans afoot) no fit for purpose used car operation and/or acquisitions, retailing and business development focus and/or expertise, Polestar will find it impossible to control the market trading and pricing narrative; effectively leaving the profits to be made and future residual values in the hands of “The Market!”?As Tesla (who’s trading model Polestar appear to be copying) are finding out, this never ends well.

?

With prices of specialist high performance EV’s collapsing in their associated used car market in the UK, this brings costs of ownership under threat, therefore the competitive position enjoyed by the manufacturer in the new car market. In effect, Polestar are in danger of being the “Architects of their own Downfall” in terms of their new car business!

?

Other new entrants to the market though appear to have complete clarity on the retailing model required and how to set that up for success; INEOS Automotive. For a company with little prior experience of specialist vehicle manufacturing, what they achieved is remarkable.

?

They appear to have complete clarity on what will be required to sell the yearly production allocation, along with the experience and service required of their target customer base, so therefore the professional retailing partnerships required.

?

As much as they are yet to start deliveries in the UK the omens are very good. I am genuinely interested in purchasing one and (on a professional level) very interested in disrupting and aligning my business with the associated used car market opportunity. So with this in mind I decided to “Deep Dive” into their retailing model, the results of which left me very impressed. In fact (and as much as I only spoke to one of their designated retail partners) I would say it was the most impressive and professional sales experience I have experienced in a long time.

?

Why does this matter? Well the benefits are endless; firstly the customer experience is excellent, I was dealing with a well-trained and fully up to speed consultative selling sales professional. One that knew their target audience and how to operate within the associated socio-demographic. By building partnerships with existing automotive businesses INEOS have also ensured that the full range of required facilities are available; they appear to be serious about running a professional sales operation staffed with the right calibre of professionals.

?

And this changes the trading narrative from how much money will this cost me, to how much money will it NOT cost me? This important as it directly effects future residuals and what we have here is one manufacturer doing everything possible (on the face of it) to undermine them (Polestar) and one doing everything to protect them, and the financial investment of their customers; INEOS.

?

Now this doesn’t change the opportunity for professionals like me running businesses like mine. But it changes how products are viewed within the industry, and thus with Polestar there can be no confidence. If Polestar don’t invest in their own product for used car retailing then why should I? At the moment!

?

As it has with Tesla, this will (no doubt) lead to oversupply in the associated used car market, a lack of investment liquidity for used Polestar stock and collapsing prices. In reality, what then happens is that the independent (investing for profit) element of the automotive sector will cause a run on the product (akin to the shorting of share prices or commodities), in order to test the market and see where prices bottom out. Only returning to the market when prices have collapsed to a level where it encourages independent investment for used car retailing. ?So yes, like the rest of the sector, I will be watching Polestar in the used car market, but for all the wrong (and negative) reasons.

?

As for INEOS and the Grenadier? Well despite being a similar sized new entrant to the UK market (in terms of volume aspirations) the trading narrative could not be more different. The retailing model is perfectly aligned to the job in hand and I have no doubt that this product will be selling for a premium at inception; even in the challenging market conditions we are likely to see this year.

?

So I also have my eye on the INEOS Grenadier, but for totally different and more positive reasons. In reality the retailing foundations put in place by INEOS Automotive will control the trading narrative, protect residual values and keep the cost of ownership for customers very competitive; this is how you keep retention levels and demand for the product high.

?

So there you have it! Challenging times ahead in all new and used car markets in the UK (especially specialist and high performance used car markets), and a time when the professionals you invest in and/or have access to, will be pivotal in determining outcomes. As ever, some will get it right and some won’t; either way it will be a fascinating period to be operating within the associated used car markets.

?

The next 5 years will be a fascinating trading period, a period where genuinely successful used car professionals will have their pick of opportunities. Anyone sensing synergy and the potential to collaborate (and/or wishing to explore how to become part this journey), can feel free to contact me directly to arrange an exploratory discussion.

?

Whether you are an owner of a business looking for the right expertise or a successful used car professional looking for the right opportunity in the coming market conditions.

?

?Andrew.

?

?