Auto Retail Agenda: 25 October 2021
23 October 2021
- AUSSIE RETAILERS IN $650m MERCEDES AGENCY MODEL LAWSUIT
- COVID MOVES DEALER DIGITISATION ‘12 YEARS IN 12 MONTHS’
- PwC DENIES NEGLIGENCE OVER JD CLASSICS
- SSANGYONG: NEW OWNER WILL FOCUS ON EVS
- GUPTA, LUSCOMBE AND AUTO TRADER TO ANSWER YOUR QUESTIONS
- AUTONATION BEATS ESTIMATES AS PROFITS SURGE
- MERCEDES INDIA AGENCY MODEL ‘TO BOOST DEALER PROFITS’
- STOCKWATCH: MARSHALL UP 12.2% AFTER ACQUIRING 48 MOTORLINE RETAILERS FOR £64.5m
- COMING UP: AUTUMN BUDGET
- BOE ECONOMIST: INFLATION COULD TOP 5%
- SUB-1% MORTGAGES ‘TO DISAPPEAR SOON’
Aussie retailers in $650m Mercedes agency model lawsuit
Mercedes-Benz retailers in Australia have filed a $650m (£350m) lawsuit against the company for its planned switch to a fixed-price agency model. 80% of Australia’s 65 Mercedes-Benz retailers have joined forces in the Federal Court case, claiming they have been forced to accept new contracts “with a gun to their head”.
“Mercedes has forced its dealers to sign oppressive new agreements at short notice with the threat they could lose their businesses and without paying any compensation for the value built up in these businesses,” said James Voortman, CEO of the Australian Automotive Dealers Association.
In contrast, Tony Weber, CEO of the Federal Chamber of Automotive Industries (an SMMT equivalent) appeared to criticise the action. “Innovation and competition are kings across the retail landscape,” he said. “Despite this, some car dealers want to immune themselves from change, even when customers are crying out for new ways to do business.
“Efficient, effective markets rely on innovation, transparency and flexibility – the new car market is no different.”
The retailers believe Mercedes-Benz is exploiting a legal loophole: by making them sales agents, fixed vehicle prices are not deemed anti-competitive under Australian law. However, the same structure would be illegal if individual retailers representing one OEM colluded on prices.
In response to the legal action, Mercedes-Benz said it will be “defending our position vigorously” and the agency model will “better deliver to the demands of modern customers.
“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 (fixed price) agency model is compliant with all relevant Australian laws.”
Mercedes-Benz plans to introduce the agency model in Australia from 1 January 2022, after three years of discussions with retailers.
Also see our story on Mercedes-Benz India’s agency switch
Covid moves digitisation ‘12 years in 12 months’
Retailers have responded to Covid lockdowns by advancing their digital toolkit 12 years in 12 months – and will eventually require less showroom space as a result, with showrooms devoted to an improved customer experience rather than simply housing vehicles. This is among the findings of the latest APC report titled ‘The Digital Dealership’.
The introduction of EVs will further change change how retailer sites are used, with issues such as parking for on-charge EVs becoming a growing concern. “It will take longer to charge an EV than service it,” said one retailer.
Nearly two in three retailers are either considering or being asked to consider an agency model. Some are happy as it will reduce costs; others are “not convinced of the benefits”.
The report adds that only “modest’ retailer rationalisation is expected between now and 2025, with a decline in numbers of between 6% and 15% anticipated. To boost efficiencies, multi-franchising of sites will increase.
Download the full report here: https://bit.ly/3pxd8Qx
PwC denies negligence over JD Classics
PwC last week denied allegations it did not take all reasonable steps when conducting audits of collapsed classic car retailer JD Classics. The accounting giant said it “acted with reasonable care” and its job “was not to protect the company against losses caused by its leveraged takeover and subsequent decline”.
The £41.3m negligence claim by the administrators is being heard in the High Court. JD Classics overstated its revenue in 2016 by £63m and faked accounts for 2017.
SsangYong: new owner will focus on EVs
After entering court receivership in April, SsangYong Motor has named a group led by South Korean EV truck and bus maker Edison Motors as its preferred new owner. The company targets a turnaround in three to five years by turning SsangYong into an electric vehicle brand. India’s Mahindra & Mahindra bought SsangYong when it was near bankruptcy in 2010 but has struggled to turn it around.
Gupta, Luscombe and Auto Trader to answer your questions
Auto Trader sales director Rebecca Clark, Marshall CEO Daksh Gupta and Luscombe Motors’ Robin Luscombe will be sharing their expertise in new and used car sales, how to thrive online and how to end the year on a high in the next Auto Retail Live on Tuesday 9 November at 2pm. How to manage increasingly demanding customers, plus the switch to EVs, will also be discussed – and everyone who registers will be able to ask questions live. Even better, the briefing is free: register here
WORLD NEWS
AutoNation beats estimates as profits surge
AutoNation, the largest auto retailer in the US, has reported better than expected Q2 results. Revenue was up 18% to $6.4bn (£4.6bn) and net income was $361.7m (£262.8m), up from £182.6m (£132.7m) in 2020. Used vehicle revenue jumped 53% to $2.3bn (£1.6bn) and “pent-up demand is building,” said outgoing CEO Mike Jackson, who will be succeeded by former Jeep boss Mike Manley on 1 November. The company also announced an additional $1bn share buyback scheme.
Mercedes India agency model ‘to boost dealer profits’
Mercedes-Benz will grow in India by embracing an agency model rather than expanding its 100-strong retailer footprint. Almost £6m has been invested by the Indian luxury sector leader to turn retailers into ‘franchise partners’. The ‘out-of-the-box’, direct-to-consumer model, labelled Retail of the Future (ROTF), will see Indian retailers take responsibility for demonstrations, brand experience, vehicle delivery and aftersales.
Mercedes-Benz will set prices nationally: customers will be invoiced directly. Customer incentives will be managed by Mercedes-Benz, with retailers earning commission and incentives on the volumes they deliver. Mercedes-Benz is promising retailers better profitability by eliminating ‘price wars’ and inventory costs. The new retail programme has already been launched in Austria, Sweden and South Africa.
Also see how Mercedes-Benz retailers in Australia are fighting an agency move in the Federal Court
STOCKWATCH
Closing prices on 22 October 2021 and weekly change
Marshall up 12.2% after acquiring 48 Motorline retailers for £64.5m
Auto Trader Group 601.8p (+3.8p / +0.6%)
Caffyns 500.0p (n/c)
Cambria 82.5p (n/c)
Halfords 276.2p (-14.4p / -5.0%)
Inchcape 808.0p (-4.0p / +0.4%)
Lookers 64.6p (n/c)
Marshall Motor Holdings 282.0p (+32.0p / +12.2%)
Motorpoint 351.0p (+1.0p / +0.2%)
Pendragon 18.38p (+0.18p / +0.9%)
Vertu 61.8p (+1.0p / +1.6%)
COMING UP
Monday, expanded London ULEZ goes live
Wednesday, Budget and Spending Review
Wednesday, BRC Shop Price Index
Thursday, Group 1 Automotive Q2 results
Thursday, Inchcape trading announcement
MONEY MATTERS
BoE economist: inflation could top 5%
New Bank of England chief economist Huw Pill has warned inflation could top 5% in the months ahead. It is a “very uncomfortable place” given the central bank’s inflation target of 2% – although Mr Pill does expect inflation to come down in the second half of 2022.
Investors are now fully pricing in an interest rate hike to 0.25%, up from the current historic low of 0.1%, when the monetary policy committee next meets on 4 November – despite some economists warning about a premature interest rate rise.
Sub-1% mortgages ‘to disappear soon’
Mortgage lenders have started pulling their lowest rates in anticipation of a Bank of England interest rate hike in November. Analysts expect sub-1% deals were likely to disappear in the next month. “It is another unhelpful development for households already facing rising bills,” said Samuel Tombs of consultancy Pantheon Macroeconomics. Millions of households are currently on their lender’s standard variable rate.
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