Mercedes Commits to a Broad Line-up, Despite Fixed-Price Strategy

March 24th, 2021

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Hot on the heels of Japanese rival Honda, Mercedes-Benz is set to restructure its business as it moves towards an agency-style structure in the new car market down under. The move is pencilled in for January 1, 2022, although the luxury auto-maker is still working to put the finishing touches on all the details before then.

Explaining the changes

Like Honda, it is expected that Mercedes-Benz dealers will take on a role whereby they act as an agent for the parent company. With this, prices will also be fixed, the parent company will dictate terms of business, and headquarters will also hold all vehicle stock, thereby limiting the potential for customers to negotiate directly with the dealer.

Unlike its rival, however, Mercedes-Benz has suggested that it will look to differentiate itself in one key area from what Honda is currently doing – that is, by committing to retain the breadth of its model line-up and not cut any entry-level variants.

In supporting this plan, the company points to the fact that it is seeing success in the luxury component of every segment, where it is “winning” in most of these areas. So while Honda might have plans to deliberately streamline its line-up and cut total sales volumes in order to generate higher margins, Mercedes-Benz is going about things differently.

Why there still might be less ‘choice’

Mercedes-Benz will also focus on customer service and satisfaction by addressing core areas that it has identified as important. This includes improving the accessibility to purchase any vehicle from its range online, and also embracing transparent pricing.

Although Mercedes-Benz has committed to its broad line-up, there is still an expectation that each model range will be simplified so as to improve the buying experience for customers by minimising confusion. After all, sometimes too many choices for something largely similar can be problematic for customers who are not yet ‘over the line’.

There is one potential drawback with this. If Mercedes-Benz does opt to simplify each of its model ranges, there is a possibility that optional extras may be ‘built’ into the existing models that are currently more affordable in each range. The risk here is that prices could very well increase, although at this stage details remain to be seen, even if the company has just increased prices across the board for the third time in just over a year.

The good news sees the breadth of Mercedes-Benz’s line-up set to remain, unaffected by the move towards an agency model. What is found in each range, however, will make for interesting consideration.