Mercedes-Benz is preparing for perhaps the most important step in its transition to a direct sales to consumer “agency” retail model this year, when it begins the process in its home market, Germany.
Mercedes said in 2021 that it had reached agreements with its European dealers to move to the direct-sales model. Sales boss Britta Seeger said that the goal was to sell more than half of Mercedes cars in Europe through agency by the end of 2023.
Mercedes first tested the agency model in pilot projects in Austria, Sweden and South Africa. It went live with the new system in the UK on Jan. 1 -- with a splashy advertising campaign aimed at buyers. Germany will follow later this year.
"You turn yourself from a wholesaler into a retailer,” Mercedes-Benz Group CEO Ola Kallenius said Friday on the automaker’s 2022 earnings call. “It changes your whole attitude in how you run the business."
Selling directly to car buyers saves costs for the company and removes concerns for customers that they could get a better price at another dealer, he added.
In the current retail model, dealers buy their stock from automakers and assume costs of promotion as well as holding inventory. They make profits from the margin on vehicles sold, but that margin can vary depending on negotiations with individual customers.
The agency model transfers much of those costs to the automakers. Dealers would receive a fixed fee per vehicle sold, as well as revenue from after-sales. They would make less money per vehicle sold but make up the difference by not having to incur costly inventory and promotional expenses.