Mercedes Benz dealers sue the brand over new sales model

The legal action challenges a move by the manufacturer to revolutionise the way it sells cars in Australia.

Mercedes is effectively taking ownership of its stock, cutting dealers out of the new-car sales process and introducing a “no haggle” price across its network.

The brand argues the move will give buyers more choice of vehicle models and make the sales process more transparent and less stressful.

But dealers claim the plan will decimate the local industry, which employs more than 60,000 people.

More than 80 per cent of Mercedes dealers have signed up to the legal action, accusing the German giant of bullying tactic.

Of the dealerships that didn’t sign up to the legal action, three are owned by the LSH Group, which is in turn 15 per cent owned by Mercedes’ parent Daimler AG.

Dealers are upset that Mercedes isn’t offering them compensation for the goodwill they’ve created for the brand.

They are also concerned that the four-year agreements they have been offered don’t have a renewal clause, which they believe leaves them vulnerable to takeover by LSH.

Mercedes-Benz said in a statement the brand had worked collaboratively with its dealer network over the past three years ahead of the launch of the new sales model.

It said the new model would “better deliver to the demands of modern consumers”.

“It will provide greater price transparency, better choice and a larger model availability for all customers. It is disappointing that some dealers have taken this action, but we believe the Mercedes-Benz agency model is compliant with all relevant Australian laws, and we will be defending our position vigorously,” the statement said.

The chief executive of the Australian Automotive Dealers Association, James Voortman, said some dealers had poured decades of hard work into establishing their businesses.

“At the heart of this industry are Australian family businesses who have built up their businesses in some cases over generations with Australian ingenuity and plain hard work. The dealer network has invested hundreds of millions in growing their businesses only to have that value taken from them with the stroke of a pen in Stuttgart,” he says.

He said the company’s consultations with dealers had been “with a gun to the head”.

Dealers were forced to sign “oppressive” agreements at short notice with the threat they could lose their businesses if they did not sign.

“This is nothing short of bully boy tactics by a $140 billion German colossus which according to recent filings took more than $4 billion in sales out of Australia while paying only $36 million in tax.

He disputed claims by Mercedes that the new system would be better for consumers.

“This is also bad news for Australian consumers who will pay more for cars, see less competition and will no longer be able to shop around for the best deal,” he said.

Mercedes is the second major brand to move towards the “no haggle” model.

Honda introduced a similar model in July, cutting back on the number of dealer outlets and taking ownership of the sales process.

The brand, which has also increased its prices and cut its model line-up, has struggled to attract buyers since.

Honda sales were down by 45 per cent last month. The brand’s local director, Stephen Collins, said it had expected soft sales initially but said the consumer response was positive.

“We’re really pleased with the progress thus far and the feedback we’re getting from the customers who are transacting through the new sales process is very much around ‘it’s smooth, it’s transparent and it’s easy’,” he said.

“On the positive side, the customers are enjoying the transparency of it and the no haggle, that’s the key. On the flip side – and we knew this from day one – it’s not for everyone. So there are customers who just want to haggle. It’s a relatively small percentage, though.”

Other brands have dipped their toe in the water with the direct sales model. Hyundai’s luxury offshoot Genesis sells direct, as does Tesla.