Luxury car deal revs up sellers
MERCEDES-BENZ dealers across Australia are in discussions with lawyers over a legal challenge over the German auto giant’s move to sell cars to consumers at a fixed price, saying they were not offered compensation for the impact on their bottom line.
The prospect of a legal challenge coincides with a big transformation of the car retailing scene in Australia, including the scrapping of the Holden brand by General Motors, a change to the franchise code and a move by Japanese brand Honda to a fixed price model in July.
Starting January, MercedesBenz will ditch the traditional franchise-based way of selling cars to dealers and adopt an agency model, selling cars at a fixed price through dealers, who receive a fixed commission.
The car brand has trumpeted the move as one that will increase transparency in pricing while killing the practice of haggling over a new car, but dealers say they were pressured into signing to a less profitable new arrangement. It could also help consumers overcome a global shortage of new cars caused by Covid-19 interruptions to microchip manufacturing, with customers able to pick a vehicle from a nationwide stock selection.
But Australian Automotive Dealer Association chief executive James Voortman said although the nation’s 52 Mercedes dealers signed to the deal by the September 17 deadline, most did so under duress, with a failure to sign meaning they would lose their status as a dealer.
“They feel like MercedesBenz Australia has applied intense pressure on them to sign this agreement and have demonstrated very little willingness to negotiate on the terms of this agreement,” Mr Voortman said.
“These dealers have invested so much capital, time and skill in their businesses over a long period and they feel like all that goodwill is essentially being taken by Mercedes-benz free of charge.”
He said the vast majority of dealers were considering a legal challenge.
“While these dealers have signed, they have done so under protest and are reserving their rights. They are currently considering their options,” Mr Voortman said.
A regional Mercedes dealer speaking on the condition of anonymity said the profitability of their business would take a hit under the new model.
“The margin, or commission, available to dealers is substantially reduced,” he said.
A spokesman for Mercedes said the company had been working in close collaboration with its dealers for years, and extended the final signing date for some dealers.
“We are pleased that all existing Mercedes-benz Cars retail partners in Australia have reconfirmed their commitment to the brand under the new agency model,” he said.