Mercedes-Benz must be transparent, says dealer group

Mercedes-Benz must be transparent in its dealings with its Australian dealers as it makes the controversial switch from franchise to agency retailing.

That’s the call from the peak body representing motor vehicle dealers in Australia, the AADA (Australian Automotive Dealer Association).

“With an agency model we are open-minded, but the devil is in the detail,” AADA CEO James Voortman told carsales.

“All we ask of manufacturers who are entertaining an agency model is that they are 100 per cent transparent and up-front with their dealers and that they provide adequate compensation.”

Voortman was responding to comments made by Mercedes-Benz board member for global sales and marketing Britta Seeger, who confirmed to Australian media in a phone hook-up that the luxury market sales leader would shift to the agency model in Australia by 2022.

Under a franchise arrangement, dealers purchase cars from the manufacturer and then negotiate a sale price with the buyer.

But under the agency model Mercedes-Benz Australia will set a fixed price for all its vehicles and sell them both direct online and offline through dealerships.

Dealers will make a fixed commission price on cars sold, while retaining control of servicing and used vehicle sales.

But Voortman says much remains unresolved about the impending agency arrangements.

“Unfortunately when I speak to Mercedes, dealers there are concerns that much of the detail and many of their concerns have not been adequately addressed,” said Voortman.

“So it’s difficult to get them to sign up to a new model, which is a very different model to the one they invested a lot of money in, without having all the detail at hand.

“There are questions around how does the trade-in work, who will own the demonstrators, are there going to be sales targets, what are the margins going to be?

“All of these questions have either not been answered or only been partially answered.”

Negotiations between Mercedes-Benz and its dealers have stalled this year because of COVID-19.

Mercedes-Benz isn’t the only brand moving to the agency model in Australia, with Honda also set to make the move by mid-2021.

While there has been some dispute between dealers and Honda that has required mediation, it has been a calm process compared with Benz.

The initial agency push was overwhelmingly rejected by Benz dealers in Australia, but despite that the decision has been made at global level to go ahead.

Benz is pressing on with the move despite relatively recently getting out of factory-owned stores in Australia by selling its Brisbane, Sydney and Melbourne outlets to LSH Auto.

Voortman said an issue that had to be considered for dealers was compensation.

“If a dealer has invested in a massive showroom which is made to hold hundreds of cars and then a few years later they’re told ‘sorry we are changing the model to one where you are going to hold a handful of cars’, that investment was made in good faith and that dealer should be entitled to compensation.

“That isn’t just for the Mercedes model, it goes for any significant change in the business model.”

The Australian National Mercedes-Benz Dealer Council declined to comment for this story.