Following Mercedes-Benz’s recent announcement that they would be moving to an online agency model of selling cars from 2022, Australia’s new car industry body has warned that the introduction of new business models should not be done at the expense of existing dealers.

Australian Automotive Dealers Associations (AADA)’s chief executive James Voortman has told global manufacturers that they must work with their Australian dealers when introducing new agency sales models.

“There is undoubtedly a trend which is emerging, and a number of brands are either considering or have already moved to an agency model in markets like Australia, New Zealand and South Africa,” said Voortman.

“I have said before that I am concerned that Australia is seen as the ideal market for offshore manufacturers to experiment with new business models.

“There is nothing wrong with considering new business models, but it shouldn’t be done at the expense of dealers.”

Under the agency model proposed by Mercedes-Benz, the manufacturer will sell its range of vehicles through an online platform and at select dealerships at a fixed-price, with dealers to receive a fixed commission on sales.

The decision by Mercedes-Benz follows a similar move by Honda Australia, who will reduce its network of dealers in Australia as it moves to a new agency sales model from 1 July 2021.

Voortman’s message comes after he previously warned Mercedes-Benz to be upfront and transparent with their plan for dealers under this new model.

“With an agency model we are open-minded, but the devil is in the detail,” said Voortman earlier this month in response to Mercedes-Benz board member for global sales and marketing Britta Seeger, who confirmed Mercedes-Benz’s intentions to adopt the new model in Australia.

“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 also questioned the viability of a fixed-price sales model when so many sales included the buyer trading-in an old vehicle when making the purchase.

“I believe OEMs considering this option are confident in the legality of the model. There are other products which are sold via a similar model, such as appliances, so OEMs will point to those.

“However, the sale of a new car often includes the trade-in of the consumer’s current vehicle and in my view, this complicates the premise of a fixed price model in our industry.”

Source: Autotalk | Trade-ins complicate fixed-price model: AADA

28 July 2020