Legacy Brands Rework Global Sales Strategy Dramatically

The venerable automotive industry, long anchored by its established legacy brands, is undergoing a profound and irreversible transformation in how it designs, sells, and services vehicles globally. Faced with the existential threat posed by agile electric vehicle (EV) startups, the aggressive export surge of Chinese competitors, and the crushing costs associated with the transition to electrification, these incumbents are being forced to dramatically rework their entire global sales strategy. This strategic overhaul extends beyond minor adjustments to marketing campaigns; it encompasses a fundamental redesign of the relationship with the customer, the dismantling of the century-old franchised dealership model, and a complete reimagining of the vehicle as a Software-Defined Service Platform. The process is fraught with friction, particularly with powerful dealer networks, but it is essential for survival in an era where the vehicle’s value shifts from hardware to recurrent digital revenue. A comprehensive analysis of this monumental strategic pivot reveals the forces compelling the change, the specific elements of the new sales models, and the long-term consequences for global profitability and market structure.

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1. The Compelling Forces Mandating Strategic Rework

The decision by legacy brands to disrupt their own successful sales models is driven by a confluence of economic, technological, and regulatory pressures they can no longer ignore.

A. The Financial Imperative of Electrification

The staggering capital expenditure (CapEx) required for the EV transition demands an optimized sales model to ensure rapid cost recovery and margin control.

1. Amortization of EV Platforms: Legacy brands must amortize billions of dollars invested in new, dedicated EV architectures (skateboard platforms) over large volumes. The traditional, fragmented dealership model is inherently inefficient for achieving the speed and scale required for this amortization.
2. Margin Recovery Challenge: EVs, especially during the initial transition phase, often carry lower gross margins than equivalent Internal Combustion Engine (ICE) vehicles due to high battery costs. The new sales model must eliminate intermediate costs (like dealer markups and inventory holding costs) to recapture and protect these critical margins.
3. Inventory Holding Cost: The traditional model requires manufacturers to push inventory onto dealer lots, incurring massive financing and holding costs across the supply chain. The new strategy seeks to eliminate this intermediary inventory cost through build-to-order and centralized allocation.
4. Funding Software R&D: The shift to the Software-Defined Vehicle (SDV) requires continuous, high-cost investment in software engineers and data centers. The new sales strategy aims to generate high-margin, recurring software revenue (subscriptions and Features-as-a-Service or FaaS) to fund this perpetual digital R&D cycle.

B. Technological Disruption from Startups and Competitors

Agile competitors demonstrated the efficacy of a simpler, integrated sales model, forcing incumbents to follow suit.

1. Direct-to-Consumer (DTC) Proof of Concept: New EV entrants successfully established the DTC sales model, demonstrating its superiority in terms of pricing consistency, control over the customer experience, and direct data acquisition—forcing legacy brands to abandon the traditional three-tier system.
2. Pricing Transparency Demand: The DTC model set a market expectation for non-negotiable, transparent pricing. Legacy brands must eliminate the friction and consumer distrust associated with variable dealer markups and negotiation, especially on new, high-technology EV products.
3. Integrated Digital Experience: Competitors showed that the purchasing process (online ordering, financing, delivery scheduling) must be seamlessly integrated with the in-car digital experience, something the fragmented traditional dealership model cannot efficiently achieve.
4. Data Acquisition Control: The vehicle is now a data generator. Legacy brands must take direct control of the customer relationship to acquire and monetize valuable user data (driving habits, feature usage) for R&D, insurance, and service personalization, a process previously mediated by the dealership.

C. Regulatory Compliance and the Fleet Mandate

Regulatory pressure is rapidly accelerating the sales model shift by favoring centralized, high-volume fleet transactions.

1. Fleet ZEV Mandates: Policies forcing large corporate and rental fleets to electrify create massive, predictable demand for ZEVs. These high-volume transactions are inherently inefficient through a fragmented dealer system and require centralized, direct business-to-business (B2B) channels managed by the manufacturer.
2. Global Pricing Control for Compliance: To meet fleet-average CO2​ targets (e.g., in the EU), manufacturers must precisely control the volume and pricing of their ZEVs to maximize sales and avoid billions in fines. The traditional dealer model’s independent pricing authority fundamentally undermines this regulatory compliance strategy.
3. Cybersecurity and Data Liability: New global regulations on vehicle cybersecurity and data privacy (UNECE, GDPR) place the ultimate legal liability on the manufacturer. To manage this risk, manufacturers need direct, continuous communication channels (via software updates and direct customer data) that bypass the dealer middleman.

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2. The Core Elements of the New Global Sales Strategy

Legacy brands are converging on two primary models—the Agency Model and the True Direct Model—as replacements for the franchised dealer system.

A. The Agency Sales Model (The Primary Compromise)

The Agency Model is the most common transition strategy, maintaining the dealer’s existence while fundamentally altering their function.

1. Centralized Pricing and Inventory: The manufacturer (principal) sets a non-negotiable, fixed price for the vehicle across the region. The manufacturer retains ownership of the inventory until the point of sale, removing the dealer’s financial risk and working capital burden.
2. Dealer as Agent: The franchised dealer transforms into a non-financial “Agent” or “Customer Experience Center.” Their role shifts from sales negotiation and financial ownership to facilitating the customer handover, managing test drives, and, crucially, providing maintenance and service.
3. Fixed Commission Structure: The agent is paid a fixed, transparent commission for every vehicle handed over, regardless of negotiation, eliminating the incentive for high markups and ensuring price parity across all agents.
4. Full Online Integration: The entire purchasing journey—ordering, financing application, and customization—is moved to the manufacturer’s centralized online platform, with the agent facilitating the final physical touchpoints.

B. The True Direct-to-Consumer (DTC) Model

This strategy, used primarily by brands launching new EV sub-brands or in select markets, eliminates the traditional franchise relationship entirely.

1. Manufacturer-Owned Centers: The manufacturer operates wholly-owned, non-negotiating sales centers (often called “stores” or “galleries”) in high-traffic retail locations, focusing entirely on brand experience and product education.
2. Centralized Logistics: The manufacturer handles all logistics, inventory, financing, and delivery directly, managing the supply chain from the factory to the customer’s driveway.
3. No Negotiation: Pricing is strictly transparent and non-negotiable, ensuring a consistent and simplified purchase experience tailored to the digital consumer.

C. The Subscription and Service Revenue Pivot

The core long-term strategic goal is to shift a portion of revenue from a one-time transaction to ongoing services.

1. Features-as-a-Service (FaaS): The vehicle is engineered with hardware capabilities that can be activated or deactivated via software update. Customers subscribe to features like advanced driver assistance systems (ADAS) or enhanced performance (horsepower/torque boosts) on a monthly or annual basis.
2. Integrated Insurance and Financing: The manufacturer offers simplified, integrated financing and insurance products (often utilizing usage-based data from the vehicle) as part of a single monthly ownership bundle, increasing profitability and customer retention.
3. Data Monetization: By owning the customer relationship, the manufacturer gains the ability to securely and ethically monetize anonymized fleet data for urban planning, real-time traffic updates, and insurance risk assessment, creating a new, high-margin business line.

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3. Friction and Conflict in Strategic Implementation

The rework of the global sales strategy faces intense friction, primarily due to legal constraints and resistance from powerful, established dealer networks.

A. Dealer Network Resistance and Legal Battles

The existing franchise laws, designed to protect local businesses, are the single biggest barrier to the transition.

1. Franchise Law Protection: Many jurisdictions have strong franchise protection laws that prevent manufacturers from unilaterally canceling agreements or establishing competing DTC models in the dealer’s territory, forcing protracted legal battles and multi-million dollar buyouts.
2. Compensation Negotiation: The transition to the Agency Model requires manufacturers to negotiate complex compensation structures with dealers, often leading to temporary tension over commission levels, profit margins from service, and the devaluation of their real estate assets.
3. Service Revenue Protection: Dealers aggressively fight to maintain their near-monopoly on vehicle maintenance and service, the highest-margin component of their legacy business, often arguing that their expertise is essential for regulatory compliance and customer safety.

B. The Consumer Experience and Logistics Gap

The transition phase carries the risk of alienating consumers if the new digital experience is not perfected.

1. The “Last Mile” Challenge: While digital ordering is efficient, the final “last mile” experience—the vehicle handover, final questions, and personalized setup—requires skilled personnel, which is where the agent/dealer remains critical. Manufacturers must ensure this physical touchpoint is seamless.
2. The Test Drive Hurdle: Vehicle purchasing remains a high-involvement process. The new models must solve the logistics of test drives without requiring massive, expensive, centrally-held inventory, often relying on small, strategically located experience centers or mobile fleets.
3. Training and Technology Rollout: Successfully implementing the Agency Model requires massive training of dealer staff on new software systems, non-negotiating sales protocols, and EV technology, a rollout that is complex and costly across a global network.

C. Geographic and Regulatory Patchwork

The sales model rework cannot be a single, monolithic global rollout but must adapt to diverse regulatory environments.

1. China’s DTC Dominance: In China, the DTC model is already the norm, making the transition easier but requiring domestic brands to rapidly establish their own highly controlled physical presence for service and delivery.
2. U.S. State-by-State Struggle: In the U.S., the transition is a state-by-state legal battle, forcing manufacturers to operate a patchwork of true franchise, modified franchise, and agency models simultaneously, adding tremendous complexity.
3. European Agency Adoption: Europe is the most receptive market for the Agency Model, driven by the strong CO2​ compliance imperative and less restrictive franchise laws in many member states, allowing for a faster transition.

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4. Long-Term Consequences of the Sales Strategy Rework

The successful implementation of these new sales strategies will permanently alter the economics and competitive dynamics of the automotive sector.

A. Unlocking Massive Efficiency and Profitability

The new models promise to extract hundreds of millions, potentially billions, in savings and new revenue.

1. Reduction in Distribution Costs: By eliminating intermediary dealer margin and massive dealer-held inventory, the manufacturer can reduce overall distribution costs by several percentage points, recouping lost EV margins.
2. Increased Pricing Power and Stability: Centralized, fixed pricing eliminates the massive price variability caused by negotiation and market speculation, leading to greater brand loyalty, more predictable revenues, and reduced need for costly, reactive incentive spending.
3. Predictive Manufacturing: DTC and Agency models provide manufacturers with real-time, granular customer order data, allowing them to precisely align production schedules with demand, reducing waste, inventory risk, and manufacturing inefficiencies .
4. Lifetime Customer Value: Shifting the relationship from a one-time transaction to a recurring service ensures a higher lifetime customer value (LTV) through FaaS, insurance, financing, and maintenance contracts.

B. Defining the Future of Vehicle Servicing

The service component of the sales strategy becomes the primary point of physical interaction and dealer revenue.

1. Centralized Data for Predictive Maintenance: The manufacturer uses centralized data from the vehicle to offer predictive, proactive maintenance, scheduling service before a failure occurs, ensuring compliance with warranty and safety regulations.
2. High-Voltage Specialization: Dealers must invest heavily to become certified high-voltage repair and battery specialists, making the service division a high-tech center focused on power electronics and software diagnostics rather than mechanical repair.
3. Parts and Supply Chain Control: Manufacturers take tighter control over the supply and pricing of high-value EV repair components (like battery modules and power electronic units), managing these parts directly to the service agent to ensure quality and regulatory compliance.

C. Elevating the Customer Experience

The ultimate goal of the rework is to align the purchasing experience with modern digital retail standards.

1. Personalized Digital Retailing: The manufacturer uses direct customer data to personalize the entire digital journey, offering tailored financing, insurance products, and feature recommendations based on known customer behavior and needs.
2. Integrated Ecosystem: The vehicle becomes one component of a broader, manufacturer-controlled digital ecosystem (including charging networks, home energy management, and third-party apps), offering a superior, integrated mobility experience that competitors struggle to replicate.
3. Streamlined Trade-In and Remarketing: The manufacturer takes direct responsibility for the trade-in and remarketing of used EVs, using the central data and service records to provide accurate valuations, thus simplifying the next purchase cycle for the customer and maintaining brand control over the second-hand market.

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Final Thought

The dramatic rework of the global sales strategy by legacy automotive brands is an existential response to the combined pressures of electrification costs, technological disruption, and stringent regulation. The shift from the century-old franchised model to the Agency or True Direct model, though fraught with legal friction and conflict with established dealer networks, is non-negotiable. This pivot is the only way for incumbents to secure the necessary margin control, centralize critical data acquisition, and achieve the scale efficiency required to amortize colossal EV investment and fund the perpetual development of the Software-Defined Vehicle. Ultimately, the successful brands will be those that navigate this transition to establish a seamless, consistent, and profitable direct digital relationship with the consumer, transforming the vehicle from a sold hardware product into a subscription-based mobility platform.