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Volkswagen agrees to new relationship with dealers amid digital services drive

Volkswagen AG on Oct. 16 provisionally agreed to a new business model governing its relationship with its network of 5,400 European dealerships from April 2020, an overhaul it says is necessary to create new incentives for the brand's representatives to market its forthcoming range of digital services.

As part of the new strategy, the company is developing an internet platform for direct sales on which customers can select their car, sign a contract, work out financing and agree to the terms under which an existing vehicle will be traded in, Volkswagen said in a statement. Alternatively, for clients who prefer to deal face-to-face, five new showroom formats — described as city showrooms, pop-up stores, service factories, used car centers and scalable full-feature dealerships — will be available to visit.

"We have adopted this approach because our business environment is changing at a breathtaking pace in view of new technologies, changed customer expectations and new market players," said Jurgen Stackmann, board member for sales at the Volkswagen brand.

Matti Porho, president of the European Dealer Council, said dealers would play a key role as digitalization and electric mobility are rolled out, in particular with the launch in 2020 of "ID" branded electric cars — fully connected cars with digital capabilities, including automated scheduling of maintenance and over-the-air software updates.

"To shoulder these challenges, dealers need a firm foundation of profitability," Porho said in a statement. "We actively participated in shaping the business model right from the start."

Volkswagen intends to become a producer of "digital devices on wheels," as Stackmann recently described it, seeking acquisition targets in the information technology sector to gain the computing know-how it needs to deploy connectivity features in more of its cars and manage the reams of data they will generate.

Volkswagen scored slightly above average in a 2018 survey by the United Kingdom's National Franchised Dealers Association, a rating of dealers' satisfaction with the manufacturer they represent, ranking seventh in a list of 30 brands.