By on May 23, 2022

Following word that Mercedes-Benz wanted to refocus on producing high-end luxury vehicles with loftier profit margins, the German automaker has decided to eliminate dealerships in Europe so it can move on a direct-sales model similar to what’s offered by Tesla.

The company is reportedly eliminating up to 20 percent of its dealerships in its home country and roughly 10 percent globally (with a focus on Europe). This follows previous assertions by Mercedes that half of the brand’s domestic sales will be done via an “agency model” by 2023. Following an agreement with its own dealer network, the company said late in 2021 that it would begin eliminating the traditional scheme of dealers buying their vehicle stock based on market conditions with consumers coming in to haggle. The new plan puts more financial pressure on Mercedes and eliminates any chance of price negotiation. Meanwhile, dealers will get some cash for every vehicle sold and whatever after-sales services they can render.

The European Association of Mercedes-Benz Dealers has already signed onto the plan, with the assumption being they’ll have to assume lower financial risks despite still getting a cut of every sale made.

According to Automotive News, the automaker is already planning to expand the strategy and is now targeting 80 percent of European sales through the agency model by 2025. It also wants to expand the scheme to an additional fifteen markets, for a grand total of twenty, and to begin pivoting to online transactions wherever possible.

From AN:

“We want to have more proximity to the customer and therefore have better control over pricing,” CFO Harald Wilhelm said last week at Mercedes’ capital markets day. “That’s why we are moving from the current dealer role.”

The cuts in Mercedes’ global dealer footprint will take place by 2025, with the German dealership reduction in place by 2028, said Bettina Fetzer, vice president communications and marketing.

“We need fewer large showrooms in mature markets,” she said, while noting that Mercedes is adding showrooms in China. “We will move away from large showrooms, especially when we move to direct sales.”

That’s not the case in the U.S. market.

“We are committed to support our existing franchise model together with our dealer partners,” Robert Moran, director of corporate communications for Mercedes-Benz USA, said in an emailed statement on Monday. “Despite the growing number of changes in trends and direct sales in other markets (agent model; model D in Europe etc.), our franchised dealers will continue to play a central role in managing the transaction and sale of vehicles with our customers in offline and online transactions.”

Additional changes include expanding on extravagant storefronts in places like Dubai and Shanghai. Here, Mercedes will showcase some of its most expensive products (Maybach and AMG) in lounge-like showrooms for the kind of people that can afford them. It sounds extravagant but it also represents a coy bit of restructuring for the automaker. Mercedes-Benz head Ola Källenius announced numerous cost-cutting endeavors in 2020 and the business culled over two-dozen dealerships in Europe last year. It’s also been reducing overhead as part of its plan to consolidate control over numerous markets and restore its image as a purveyor of premium products.

“All of these efforts combined give us a competitive advantage, but the full leap comes when we combine that with direct sales,” Fetzer explained. “This gives us a direct management of the customer relationship, and we will know our customers even better.”

That’ll be made easier thanks to modern data collection. Rather than dealers targeting people locally, Mercedes can cast a much wider net by leveraging analytics to home in on potential ups. Er… customers. We’re actually seeing a lot of automakers testing the waters with direct sales in Europe right now — with the German brands appearing the most interested. However, other companies (e.g. Toyota) have stated they’ll probably never abandon the traditional dealer model, regardless of the market.

[Image: Pixfly/Shutterstock]

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21 Comments on “Mercedes Ending Dealer Sales Model in Europe...”

  • avatar

    Yeah. I’m sure their commitment to the us dealers has nothing to do with US law. Pure coincidence

    • 0 avatar

      My thoughts exactly.

    • 0 avatar

      What law?

    • 0 avatar

      Americans need to haggle with dealer or give tips to enjoy car buying experience in its full. Simply ordering car via AI on net for fixed price is not exiting.

      • 0 avatar

        It’s not about what customers find exciting. But rather about what allows connected, deadweight leeches the ability to do what they do: Leech.

        If customers’ wishes mattered, you’d have all 79 possible sales models running in parallel. Such that each customer could pick the one he found most “exciting.” But, in a dystopian leechocracy, ran for connected deadweights by ditto, freedom to simply route around the leeching trash, simply cannot be allowed. After all, very few are all that willing to waste time and money keeping useless leeches in unearned splendor, if allowed the option not to.

        • 0 avatar

          I will not shed a tear for the demise of the current system of auto sales. I’ve been looking for a truck for 2 months and it’s been extremely frustrating. You call a dealer or shoot them an email because their website lists dozens of units but it turns out they are all sold or have deposits. I’ve even enquired on units just to watch them jack up the price. I’ve been hit with “Bait and switch” or you gotta put some cash down and then we can get you exactly what you want. Another common one was “you have to get this one since we can’t get you what you want”.

          Just by luck I found a ZR2 diesel at a small dealer. It’s not the colour I want but it’s base trim. It will show up in 2 weeks. I put a deposit down and told the lot lizard, “NO desler undercoat, NO nitrogen in tires, ZERO dealer add-ons when it arrives.

          • 0 avatar

            I usually keep my tires inflated with 78.1% nitrogen (give or take). If your dealer has a way to fill tires with “-no- nitrogen” that would be pretty interesting. :-)

            Bonus: Based on my limited understanding, I would also strongly advise against filling your tires with nitric oxide (NO).

          • 0 avatar

            @ToolGuy LOL good one and 21% oxygen.

  • avatar

    You mean they can’t sell Tru-Kote anymore?

    It’s the end of civilization as we know it.

  • avatar

    Wait until the recession hits the EU. They won’t be getting too many calls for expensive, one price, no haggle new cars at corporate.

    • 0 avatar

      That’s the point: Mercedes, like the rest of the Germans, can no longer compete. They wont get many calls from anyone willing to pay them above cost regardless.

      So, like Swiss watchmakers, they’re stuck catering to _that_, much smaller yet still profitable, segment of the market. Flashy showrooms, “by invitation only”, “exclusive” blah, blah… (or just a website for those looking for the “entry level Rolex’). As long as that segment remain the ones who others are robbed through protect during every “recession”, it’s about the best the poor Krauts can do anymore. Giving up the Mark for the Euro, it was only a matter of time before the illiterate rabble at the ECB would do the same to once-competitive German industry, that The Fed did to the similarly once-competitive American one.

  • avatar
    Jeff S

    Mercedes is planning to go all EV in the near future so my guess is this is why they are going to direct sales. Tesla has set the standard for selling EVs direct.

    • 0 avatar

      @Jeff S,

      Do you think there is a link between direct sales and the method of propulsion which the vehicle uses? Why couldn’t any vehicle be sold directly to customers?

      • 0 avatar

        It’s not so much that any car couldn’t be sold direct, more that with the reduction in parts and service revenue afforded by EV’s reduced servicing and repair needs the big dealerships won’t be able to support themselves. Under the current model the back end pays for the dealership, the front end makes the cream.

  • avatar

    If people think eliminating dealers will mean lower prices I expect they will be dissapointed.

    • 0 avatar

      It will mean less money lost in translation to middlemen.

      Also less risk of “tent events” cheapening the supposed “brand.” It’s easier to pretend you are somehow different from, and “above,” the rest, when all potential customers see, are a few flashy “galleries” they don’t “qualify” to get into; and a similarly silly website; compared to them being accosted by full commission dudes in polyester suits; who permanently exist one lost sale away from homelessness; as soon as they set foot inside a showroom.

  • avatar

    Why does Europe get all of the good stuff?

    Now if we could only convince Hyundai/Kia to shut down their dealerships, the world, particularly the American Southeast, would be a much improved place.

    • 0 avatar

      “Why does Europe get all of the good stuff?”

      They’re freer countries that the US, by now. Over here, not feeding connected leeches, can well result in the death penalty.

  • avatar

    Nothing says luxury better than getting rid of service for luxury goods! Very strange times. I mean as a customer used to semi luxury goods, I think I expect someone to help me with the order process. May be massage my ego, call me boss, get me a glass of lemonade or at least a fresh bottle of water. Tell me what wheels come with what trim and what options I have.

    Instead, now I need to click or swipe and do all that myself. Great.

    Next airlines try to convince us that printing our own tickets out of ATM machines at airports is easier than some friendly agent printing it for us. Or instead of curbside service taking our suitcase and checking us in, we carry our own luggage onto plane. Wait, that already happens. It is called service!

    • 0 avatar

      They’ll have simple buttons to push for “The model Bond drove”, “the one in Robb Report,” the ones each Kardashian drives, the one Jeremy Clarkson “likes”, and the one Zelensky drives (Putin is not allowed to drive one for now..) Makes it easy. Covers 98% of the market they are now reduced to targeting.

  • avatar

    Mercedes benz Canada sold off all their corporate owned stores last year so this has probably been in the works awhile. Thing is, you use to be able to get 20K off a new S-class, are they going to price them accordingly in their non-negotiation price model? They better tread carefully.

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