VW to shrink dealer network and launch online sales

Volkswagen Group has announced plans to reduce the size of its European dealer network and to introduce online sales as the company wants to adjust to changing habits.

The iconic VW Beetle was one of the vehicles involved in this EPA investigation. Image courtesy of Volkswagen AG
VW has reported to cut costs across all of its 12 brands in the wake of the emissions scandal – image courtesy of Volkswagen AG

The car maker has reported to cut costs across all of its 12 brands in the wake of the emissions scandal and launch online sales as it faces having to invest heavily in the shift toward electric cars.

As a consequence of the emissions scandal, US federal judge ordered Volkswagen ‘to pay $2.8bn criminal fine for rigging diesel-powered vehicles to cheat on government emissions tests’ in April this year.

In the latest move of cutting costs by launching online sales, VW aims to increase profitability and efficiency at its 3,000-dealer European distribution network by an average of 10%.

VW wants to trim the costs of the network to help double the average return per distributor to 2% from 1%.

Reuters reported that Juergen Stackmann, VW brand sales chief, said: “We have for years been in consolidation mode in all world markets. This will surely accelerate somewhat in the next one, two years, also in Germany.”

According to Reuters, the executive gave no detail on the planned cost reductions and the number of dealerships due to be axed under VW’s new future sales model. Stackmann only revealed that VW and dealers are now developing a joint online portal.

According to VW, reduced costs will also come from greater use of new IT, enabling dealerships to cut the time needed for servicing cars by as much as 70%.

A VW distributor in Europe on average employs 35 staff and that workforce can be cut by about four over time or the staff affected can be assigned elsewhere, Stackmann said.

Under the terms of the carmaker’s new contracts with dealers, to be concluded early next year, VW wants to forego its right to dictate workforce sizes, he said, allowing dealers to trim staff.

Customers of other mass-market car brands are already making greater use of online shopping, allowing them to better compare rival offerings.

Korean car maker Hyundai had announced only recently to make online car shopping ‘more convenient and less painful for car buyers’.

The company launched its ‘Shopper Assurance’ program allowing car buyers to visit dealership websites and see more straightforward prices that factor in whatever company discounts and incentives may be applicable.