10:30 am, February 21, 2023
Mercedes is gearing up to bring agency sales to its home market of Germany.
It follows the launch of the sales model in the UK at the beginning of this year – a move that got a mixed reaction from the public but was hailed by the manufacturer.
Automotive News Europe says that on Friday (Feb 17), Mercedes-Benz Group chief executive Ola Kallenius told people on its 2022 earnings call: ‘You turn yourself from a wholesaler into a retailer. It changes your whole attitude in how you run the business.’
In December 2021, Mercedes sealed a deal with European car retailers – including the UK – to move to an agency model by 2023.
It wants to sell more than half of its cars that way by the end of this year.
Mercedes did a trial run of the agency model – which sees cars sold directly to customers at a fixed price, with dealerships taking care of the the handover for a fixed fee – in Austria, Sweden and South Africa.
However, some dealers in Austria are reportedly unhappy about it.
The agency model will still see dealers make money via aftersales but they’ll earn less per vehicle than via the retail model.
However, manufacturers say dealers can make up the difference because they won’t be saddled with pricy promotional and inventory costs.
Kallenius added that direct sales saved on distribution costs for the company, which would help it achieve profit targets, and that they took away people’s fears about being able to get a better price elsewhere.
As the price is fixed, there is a ‘move away from selling the price to selling the car, which should be the case in the premium market’, said Kallenius.
Mercedes says that agency sales will also provide a basis for raising average selling prices.
Finance boss Harald Wilhelm was quoted as saying: ‘The switchover to a direct sales model should be a good enabler of managing discounts.
‘It’s already gone beyond expectations in markets where we’ve already switched.’
Franchise laws in the USA have pretty much ruled out Mercedes bringing in the agency model there, but Kallenius was reported as saying that the manufacturer had agreed with retailers on payments for updates over the air.
These would be bought from Mercedes ‘in partnership’ with dealerships.
A growing number of car manufacturers are planning agency sales models of their own.
Stellantis has said it will move to an agency sales model in 2024 but has delayed it, and Ford is planning a similar move soon.
Others though, including Mazda, Suzuki and Renault, have all ruled it out for now.
Publicly, dealers facing agency sales models say they back the idea, but privately it’s a different story.
Car Dealer hasn’t spoken to a single group boss yet who thinks it’s a good idea. One gave agency sales plans just ‘six months’ and another said they thought it would be a ‘total disaster’.
In Australia, dealers have brought a class action against Mercedes in a bid to win hundreds of millions of dollars in compensation because of its move across to agency sales.
Pictured is the Mercedes star sign atop the main tower at Stuttgart train station
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