September 2025 – The automotive industry is entering a new era – not only in terms of technology and electromobility but also in terms of how vehicles are sold. Certain manufacturers are shifting away from the traditional dealership model towards alternative sales models, such as agency system, while many others remain wary about the viability of such alternatives.
Traditionally, manufacturers would sell cars through dealerships, who acted both as buyers and as agents. Dealers would typically purchase vehicles, hold inventory, and then sell cars to customers, earning profits from sales margins and commissions. Under the new agency model, dealers will act as sales agents directly for manufacturers. They will thus no longer purchase stock; instead, cars will remain the property of the manufacturer until sold to the end customer. Dealers will earn a commission for facilitating sales rather than marking up vehicle prices.
This new model promises uniform pricing, a direct relationship with customers, and greater control over the respective brands. However, the transition brings significant legal risks:
- One of the most critical pitfalls is the so-called "non-genuine agency model" when an agent appears to be acting on behalf of a manufacturer, but in reality assumes certain commercial or financial risks, such as investing in marketing, storing vehicles, or bearing liability for any incurred damage. Hitherto, it has not been possible for agents to bear more than negligible commercial or financial risks in this respect. Recently, these rules were relaxed: agents may bear the initial costs, which are subsequently compensated; furthermore, the requirement for vehicle ownership by manufacturers has become less strict. Consequently, the current competition rules allow for a greater use of the agency model.
- Another high-risk area is dual distribution, where a manufacturer sells vehicles both through agents and via its own channels. This setup raises several competition law concerns, as it can involve the sharing of sensitive business information between the manufacturer and its agents. Furthermore, if the manufacturer gives preferential treatment to its own channels - for example, better pricing or faster availability – it may be deemed as discriminatory conduct toward its own partners.
- The transition from dealership to agency models represents a complex legal challenge. Existing dealer contracts are often long-term and exclusive. Unilaterally terminating or replacing them with agency agreements could theoretically lead to disputes, demands for compensation, and even litigation.
- Customer relationships will also change significantly. In the agency model, the manufacturer will become the direct seller, and not just a supplier. This makes the manufacturer directly responsible for any defects, warranty claims, and customer complaints. They must also comply with all consumer protection regulations at both the EU and national levels – such as the customer's right to withdraw from an online purchase, mandatory information disclosures, and GDPR-compliant handling of personal data.
Accordingly, transitioning to an agency model represents far more than a shift in business strategies for those concerned. Rather, it also represents a transformation of the entire applicable vehicle sales legal framework – from the structuring of partner relationships to liability toward end customers. This will require careful planning, transparently communicated and legally justified to avoid fines, lawsuits, and reputational damage.
Kinstellar's experienced Automotive & Industrial sector team, covering the whole CEE region, recently worked on several multijurisdictional assignments for major car manufactures analysing both the apparent and hidden legal risks associated with the implementation of alternative sales models. In a series of three upcoming newsletters, we will summarise the key similarities and differences in legal regulations across the CEE.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
