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Home Business News Banning dealers from bargaining with customers, Mercedes-Benz was sued by its own...

Banning dealers from bargaining with customers, Mercedes-Benz was sued by its own dealership.

In an extremely rare move, Mercedes-Benz is being sued by its own dealership in Australia with a claim of up to $486 million.

Mercedes-Benz is being sued in an AUD650 million legal action ($486 million) from their own dealerships. This extremely rare move was brought on by a new change in pricing for Mercedes-Benz’s Australian division that eliminates any and all forms of bargaining, haggling, or negotiating.

Direction from Mercedes headquarters in Stuttgart said that the ban would help improve the user experience at the dealership in particular and with this brand in general.

Meanwhile, Australian dealers believe that Mercedes-Benz’s elites in Germany have not set foot here and do not understand the domestic dealer culture, so the imposition based on the standards they offer is useless and unreasonable.

Mercedes plans to sell cars direct to customers with a “no-haggle” price policy.

More than 80% of all Australian Mercedes-Benz dealerships have signed onto legal demands insisting Mercedes-Benz higher-ups come to the negotiating table or face very serious legal consequences. These could include, but are not limited to, substantial monetary compensation to Australian dealerships if Mercedes-Benz loses the lawsuit.

Dealerships are also worried that the new four-year contracts offered to them by the higher-ups in Germany don’t come with a formal renewal clause. This missing piece of the contract is leaving doubt about the terms of the deal in the future.

Dealers say they have invested millions in creating goodwill for the brand in Australia. Picture: Supplied.

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.

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.

Meanwhile, the same sales tactic is being used by Honda of Australia as well. 

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

Honda introduced a similar sales model in July this year. Picture: Supplied.

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.

 

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