Big changes for Mercedes-Benz retailing in 2022

Despite significant opposition from among its national dealer network, Australia’s luxury car sales leader Mercedes-Benz is planning a move from franchise-based retailing to an agency-based set-price new-car retail model as soon as January 1, 2022.

Mercedes-Benz is the second major local brand to push for an agency model, following on from Honda, which is in the process of making the transition by July 2021.

As we’ve reported, Honda’s shift to agency sales has also struck some dramas among its dealer network.

The agency model means dealers no longer buy new cars from the factory distributor and on-sell them to the public for a profit. Instead, they are the delivery conduit, taking a fixed percentage commission for each car they sell.

In this case it is understood Mercedes-Benz dealers would retain control of used car operations and parts and servicing.

Benz has experimented with the agency model for the EQC electric SUV that launched here in late 2019, offering it online at a set price.

Initially, nine EQC outlets were appointed from among the 64 Australian Benz retailers. That program is set to more than double with more dealers already appointed, although they have yet to be announced publicly.

A December 2019 press release from Mercedes-Benz extolled the advantages of the EQC agency model: “Mercedes-Benz Cars Australia retains ownership of vehicles throughout the sales process and picks up many of the administrative functions typically handled at the retailer level.

“This will enable EQ agents to focus on delivering optimal service, including creating a highly personalised handover experience for the customer.”

The Mercedes-Benz dealer body overwhelmingly voted against a shift to the agency model for all new-vehicle retailing when it was put to them by the factory-owned Australian distributor in 2019.

However, since then Mercedes-Benz Australia has pressed on with the plan, writing to dealers inviting them to apply for agency positions and setting a January 1, 2022 date for its introduction.

The crux of the issue now boils down to money. Those dealers who want to stay are pushing for better returns on the new cars they process. Those who want to depart will be looking to negotiate a compensation package.

These consultations and negotiations have been interrupted by the COVID-19 pandemic.

It is understood the push to go to the agency model is coming from Mercedes-Benz headquarters in Germany, rather than being a local initiative. Sweden and South Africa have already adopted variations on this theme.

Relations between Australian Mercedes-Benz dealers and the distributor have been damaged by the push to agency, according to sources contacted by carsales.

One NSW dealer described relations as “nearly toxic”.

But in written responses to questions, both Mercedes-Benz Australia and the Mercedes-Benz National Dealer Council struck a more co-operative tone.

“The implementation of the agency model remains an objective that Mercedes-Benz Australia is pursuing with its dealer network,” MBNDC chairman Tony Jennett noted.

“A target date has been set, however, until all aspects of the model are finalised this remains a target. Mercedes-Benz Australia has previously indicated that it would extend an invitation to all dealers in the network to move to an Agency model and new Agency Agreement.

“It will be up to each individual dealer to assess whether they accept this invitation.”

Mercedes-Benz A/P declined to respond in detail to questions supplied by carsales, instead supplying a cover-all statement.

“Mercedes-Benz Australia is working closely with the Mercedes-Benz retail network to develop a plan that ensures we continue to deliver the best customer experience and address customers’ present and future expectations,” it read in-part.

“Please understand for competitive reasons we are unable to comment on any yet to be announced future sales and marketing plans.”

Both statements are reproduced in full below.

Mercedes-Benz Australia/Pacific:

“Mercedes-Benz Australia is working closely with the Mercedes-Benz retail network to develop a plan that ensures we continue to deliver the best customer experience and address customers’ present and future expectations. Please understand for competitive reasons we are unable to comment on any yet to be announced future sales and marketing plans.

“As already announced in December 2019, nine Mercedes-Benz retailers were confirmed as the first EQ Agents in Australia. In the coming months we will more than double the number of EQ Agents to coincide with the arrival of EQC stock for the remainder of the year.

Mercedes-Benz National Dealer Council:

“Over the last 2 and a half years or so, Mercedes-Benz Australia has raised with its dealer network its desire to look at a range of different sales and distribution models in the Australian market in response to changing retailing and consumer behaviour evident here and in other major markets around the world.

“After considering a few different models, the model with the most relevance and potential appeal was an Agency model whereby Mercedes-Benz Australia would be the sole retailing entity and dealers become Agents for sale and delivery of the vehicles. The Agency model would change the promotion and sale of new vehicles.

“The operation of Used Car Departments and Aftersales Departments would remain essentially unchanged. The remuneration model for dealers would change from today’s arrangements, but so would responsibilities for certain functions, promotion, and the distribution of certain costs.

“Mercedes-Benz Australia has conducted widespread consultation with the dealer network, the National Dealer Council and the Dealer Advisory Committee [composed of representatives of most large automotive groups working on strategic issues].

“A version of the model was presented to the dealer network in late November 2019. At that time, a vote was conducted and the vast majority of the dealer network did not support the model as it was presented.

“Since that time, Mercedes-Benz Australia has continued to consult with the dealer network and further discussions will continue with the National Dealer Council and/or the Dealer Advisory Committee with the objective of addressing the major concerns raised by dealers for the Agency model.

“As a result of the dealer feedback and recent disruptions to business with Covid 19 restrictions, there are key elements of the model that are not yet defined or finalised.

“The implementation of the Agency model remains an objective that Mercedes-Benz Australia is pursuing with its dealer network. A target date has been set, however, until all aspects of the model are finalised this remains a target.

“Mercedes-Benz Australia has previously indicated that it would extend an invitation to all dealers in the network to move to an Agency model and new Agency Agreement. It will be up to each individual dealer to assess whether they accept this invitation.”