ONE of Australia’s leading auto business advisors, Wayne Pearson, is warning dealers not to become solely focussed on litigation over the move to an agency sales model. Instead he suggests they focus on the core business of selling cars; no matter where they come from.

Mr Pearson is a consultant at Pitcher Partners motor industry services division. He said that if the OEMs were going to increasingly take over significant elements of dealer revenues and profit centres, they should not be surprised to see their dealers move to importing cars from sources other than the OEMs themselves, including parallel imports.

Parallel imports are new or nearly new cars sourced from other right-hand drive markets where those dealers and distributors carrying excess stock in those markets are relieved to have dealers in other right-hand drive markets take them off their hands.

While parallel imports are presently banned in Australia, if dealers were able to get Canberra to free the grip foreign OEMs have over the import trade, it would place dealers as direct competitors with the OEMs.

Wayne Pearson

“This looks to be one of the unintended consequences the OEMs face by pushing further and further into the profit centres of the dealers while expecting increasing investments in representation,” Mr Pearson said.

Mr Pearson was commenting on last week’s article in GoAutoNews Premium which reported that court papers indicated that Mercedes-Benz Australia (MBA) was acting under orders from head office Stuttgart to get the agency sales model in place in Australia and that it was going to adopt the model with or without the agreement of dealers.

The article said that discussions with dealers about the agency model, and suggestions that MBA would listen to their concerns, were just window dressing.

Most Mercedes-Benz dealers in Australia are pursuing MBA in the Federal Court to recover $650 million which they claim is the combined value of their businesses which they say they have effectively been forced to transfer to Mercedes-Benz Australia under their agency sales model agreements.

Mr Pearson said that the position in which Mercedes-Benz dealers in Australia find themselves “is really just a reflection of the position all dealers are going to find themselves in as the world gears up for EVs.

“Dealers deserve their goodwill for building the businesses and basically being asked to hand their customer base over to the OEM. But the problem is occuring at a time when the OEM financial commitment is fully geared to developing EVs and associated infrastructure, not tidying up the past.

“This will play out with various OEMs, in multiple countries, for years to come. The dealers only bargaining chip is the customer through past service activities or by geographical positioning.

“My concern is that dealers will be so focussed on fighting city hall, they will not focus on their relativity going forward .

“Selling cars to their customers is still the main game and the dealer is now firmly in competition with the OEMs heading into agency.

“Parallel Imports , once the natural enemy of the new car dealer, is now the preferred partner. Dealers sell cars to their customers, the agency removes that core premise, that’s why they become agents not dealers.

“Dealers can obviously act as agents if that works for them financially, but the main business must remain the dealership business. Giving customers access to various high quality, new or near new imports keeps them delivering for their customers.

“It will also keep the dealer in the ICE end of the business much longer than the OEMs who globally are legislated towards EVs.

“I think the biggest risk dealers face is distraction. Whilst they play “look at the monkey“ with agency-based litigation, they will take their eye off the prize, parallel imports,” Mr Pearson said.

By John Mellor