Mercedes-Benz Australia: New Pricing Model Results In Poor Sales

The German luxury car brand's move to a 'no haggle' fixed price model seems to be hurting their sales Down Under.

The pandemic has been a mixed bag for car brands, especially in Australia.

Unprecedented demand combined with severe supply shortages for both new and used cars has seen cars vanish from dealer lots, and waiting lists for some in-demand vehicles like the Suzuki Jimny, Toyota GR Yaris and the new Land Cruiser LC300 fill up quicker than a P-plater doing mainies in a clapped-out Subaru WRX.

Things were particularly good for premium brands. In lieu of international travel, Aussies splurged on high-end vehicles in a big way, with marques such as Lamborghini, Porsche and Tesla recording record sales years in 2021 – with strong sales continuing into 2022.

One premium car brand that seems to be struggling somewhat, however, is Mercedes-Benz… Could’ve fooled us, seeing as how many G-Wagens patrol Sydney’s streets these days. But no, Mercedes has just recorded its weakest February sales in Australia in over a decade.

This is particularly embarrassing for the giant German brand as it coincides with their controversial decision to move to a non-negotiable fixed pricing model from the start of the year… Seems as if Aussies aren’t keen.

Mercedes-Benz’s main Sydney dealership. Image: The Luxury Network

Hang on, what do you mean by ‘non-negotiable fixed pricing’? Well, it’s exactly what it says on the tin. Rather than haggling with the dealer on a price for your car, there’s a consistent fixed price for every Mercedes model across the country. Mercedes calls it a move from a “dealership model” to an “agency model”.

In theory, it’s a good thing for consumers. Buying a new car can be a stressful and opaque system process – having a consistent, predictable, transparent pricing model takes a lot of the stress out of car shopping, especially for younger buyers (who Mercedes are definitely trying to court). It should make things fairer.

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But as Drive reported last year, detractors of the fixed-price sales structure suggest it actually leads to higher prices, because buyers lose their negotiating power regardless of which dealer they visit. Furthermore, because dealers no longer own the cars on the showroom floor, there is less incentive for them to get cars out the door, leading to slower sales.

Mercedes’ decision to move to ‘no haggle’ pricing has been very controversial. Mercedes-Benz Australia is actually staring down a $650 million lawsuit filed by a collection of their dealers (over 80% of all their dealers, actually) who claim this move to an agency model will slash their bottom lines and “piggyback[s] on the goodwill and hard work” of local car dealers, AFR relates.

The Mercedes-Benz G-Class, better known as the G-Wagen. Image: Elias Hajjar

Now let’s be clear: Mercedes isn’t the only car brand that’s doing this ‘no haggle’ price model in Australia. Other premium brands like Genesis, Polestar and Tesla do something similar, as does Honda, a more mainstream player. Honda made the switch in July last year… But Honda sales have been significantly down Down Under, too.

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It could also be too early to tell whether Mercedes and Honda’s sluggish sales are because of their new sales model, or because of other extenuating circumstances like the global computer chip shortage.

Let’s not lionise the current dealer system either. We don’t want Australia to become like America, where some cars like the new Ford Bronco see ridiculous 200% markups by dealers trying to price gouge and capitalise on stock shortages. ‘No haggle’ fixed prices are probably the future of cars: sure, dealers might get a raw deal and we might end up paying more for cars, but it’s an undeniably simpler and more transparent system.

In the meantime, Aussies who love a good haggle will just need to suck it up if they want a new Benz.

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