Horst von Sanden

YOU know the industry is hurting when the Australian boss of luxury brand Mercedes-Benz and president of the OEMs’ peak representative body, the Federal Chamber of Automotive Industries (FCAI), predicts the market will remain flat for up to another 18 months as dealers face further near-negative returns.

Mercedes-Benz Australia/Pacific CEO and managing director of Mercedes-Benz Cars Australia, Horst von Sanden, told GoAutoNews Premium that this is the first time the industry has been this depressed.

“We are now in our 18th month of consecutive falls,” he said, just prior to the release of October figures which have brought the 19th month of continuous decline. “This is on the back of 27 years of uninterrupted growth. For our dealers, it’s new territory and they are, naturally, all complaining.”

As previously reported, consultancy firm Deloitte found earlier this year that dealer profitability had slid from 2.2 per cent in 2015 to 0.9 per cent in 2018. And in the second half of 2018, the study, which is based on data from Deloitte’s research of 800 dealerships around Australia, showed an average dealer profitability of 0.4 per cent.

“That’s lower than any time in the past 27 years,” Mr von Sanden said.

“When I talk to my Mercedes-Benz counterparts from other markets, they don’t see Australia as having a problem.

“To me, it’s a crisis but when I talked recently to my counterpart from Turkey, he said they were going through a crisis every two years.”

He said the reasons for the sliding new-car sales in Australia were highlighted by poor consumer confidence caused by external factors – such as US-China trade relationships, Brexit and conflict in Syria, Hong Kong and South America – and domestic factors led by plunging property values.

GLC

“When consumers see the value of their house fall, they are reluctant to spend,” he said.

“But despite these issues, Mercedes-Benz’s market share is unchanged. We have strengths through new product, including the upgrade to the GLC which is one of our best sellers, and we are optimistic about the future.

“I think the market has bottomed out. I’m optimistic about the future and we will continue to focus on our customers and ensure they are being looked after.”

Mr von Sanden said a lot of individuals and businesses look at Mercedes-Benz and gauge how it is handling the market.

“If we show optimism about the industry, others will follow us,” he said.

“But we don’t know exactly what the economy is going to do. The drop in the official cash rates was designed to stimulate the economy and I hope that happens, but I fear many people will use the lower interest rate to pay back more of their home loan.”

Mr von Sanden said OEMs must continue to innovate as the market falls and other new challenges, such as changing attitudes towards vehicle ownership and usage, take hold.

“We are going through a huge transformation – the biggest since the car was invented – and we have to ensure we are well placed for the challenge,” he said.

“We have to innovate and we have to look at additional businesses to maintain our revenue. It’s about taking opportunities.

“The priority is about where you can invest funds and where you can save on funds.”

At the launch of the new GLC SUV in Melbourne, Mr von Sanden said this model was one of the most popular in the Mercedes-Benz range and that half of the GLC customers were new to the brand.

“The remainder are either moving up from other models – predominantly the C-Class – or down from the E-Class and GLE. The trend more and more is to downsizing,” he said.

“We are also unusual in the market by having more sales in passenger cars with the current ratio about 60:40 passenger cars to SUVs.”

By Neil Dowling