Buyers turn 'conservative' in nervous market: Benz

The state of the automotive market in Australia is a patchwork quilt of growth and stagnation. It's the automotive embodiment of what's happening out there in the country's two-speed economy. There are highlights and dark spots wherever one turns.

Some of those dark spots are due to lack of supply rather than lack of demand, says David McCarthy, the Senior Manager for Corporate Communications at Mercedes-Benz — and the prestige importer is not immune.

"We're capacity-constrained," he told motoring.com.au, "because the company doesn't want to get in the [same] situation as in the GFC, where you had huge over-capacity. And that costs..."

Mercedes-Benz won't ramp up production while markets in Europe and the rest of the world remain in recession. For markets not in recession — and particularly with specific needs (right-hand drive, wheel/tyre combinations for rough roads, high-sulphur fuel, et cetera) — it can mean supply constraints for vehicles in demand. It has left Mercedes-Benz in Australia only marginally ahead of its total sales volumes for the first five months of 2011, but in fact the importer could sell a lot more cars if it had them to sell.

According to the Benz spokesman, supply constraints are already delaying delivery of the new B-Class and the new M-Class SUV by months. Furthermore, demand for the company's AMG models is expected to overtake supply before the end of the year, although the company still expects to sell over a thousand of the high-performance sedans, wagons and two-doors.

"The problem we have is we could actually sell more — at a profit. We can't get as many as we could actually sell. B-Class and M-Class, we are more than 500 units short for the year. That's the challenge...

"We also have an AMG log jam near the end of the year. It would be fantastic if the factory existed just to make cars for Australia, but it doesn't."

But the AMG demand is increasingly atypical of the brand's buyers, Mr McCarthy says. As he tells it, changes to the Luxury Car Tax (LCT) by the Rudd/Gillard government have guided prestige buyers in the direction of large cars that use less fuel and don't incur the LCT. The burgeoning demand for such cars has been felt not only by MB, but also at BMW, Audi, Lexus and Jaguar. Benz's recently released E 200 BlueEfficiency is already adding significant sales numbers to the E-Class total.

"A huge part of the increase in E-Class sales was E 200 — and it's incremental, it didn't affect the other [E-Class] models," claimed Mr McCarthy. E 200 is a 'conservative' choice in two ways. It saves finite fossil fuel resources, but provides buyers traditional design Benz traits. The E 200 is perceived to be a safe purchasing decision, based on what people know of the brand. And it works too for the other prestige importers, who are also exploiting the same sub-7.0L/100km LCT dispensation to their advantage.

"I don't believe that [the Lexus] GS 250 was part of the plan initially, to be honest..." Mr McCarthy says. "We all saw that there was demand for this... It shows that we're all in touch with our buyers.

"People want a prestige car that size, that's economical and responsible. But they don't want to sacrifice performance and space and luxury and safety. It's purely there in response to the market.

"[And] You know what the really lovely thing about this is? A lot of these increased sales; the government's getting virtually no luxury car tax..."

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