German giant company’s new business model turns ugly, as the car dealers have launched a $650 million legal action against the new car sale.
Franchise owners claim huge compensation for not including them in the new car sale process. The legal action challenges by the manufacturers to change the way it sells cars in Australia.
Why is Mercedes cutting dealers out of new-car sales?
The brand believes that it will give buyers more choices of vehicle models. It will make the sale process less worrying and more transparent.
The brand is taking ownership of the stock by itself introducing the ‘’no-haggle’’ price across its network.
However, dealers are not happy about it. They claim that the new plan will destroy the local industry. The local industry has more than 60,000 people.
This action will lead to the unemployment of many and can harm the industry goodwill as well. The dealers have signed up for legal action.
According to different sources, more than 80 percent of Mercedes dealers participated in the legal action. They are accusing the company of using bullying tactics.
Dealers are worry about the company not offering them compensation for their hard work and the goodwill they’ve created for the brand.
Moreover, the four-year agreements they have been offer don’t have a renewal clause, which left them vulnerable to takeover by LSH.
Meanwhile, Mercedes-Benz says the brand has worked with the employees for three years ahead of the launch of the new sale model in collaboration.
It is said the new model would ‘’ better deliver to the demands of modern consumers’’.
The statement says, ‘’ 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. ‘’
Dealer Association opinions
Meanwhile, Chief executive of the Australian Automotive Dealers Association, James Voortman says,
‘’ 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.’’
Meanwhile it will be unfair to cut out dealers who have poured decades of hard work into establishing their business.
Mercedes is the second major brand to move forward with the ‘’ no-haggle ‘’ model. Previously, Honda had introduced a similar model in July taking over the sale process ownership.
