Mercedes-Benz victory impacts new-car buyers across other brands

author: FutureCar Staff    

The decision by Mercedes-Benz and Honda to adopt a non-negotiable, fixed-price business model in Australia has been deemed legal by the Federal Court. This change in approach has led to fixed prices for customers, regardless of which showroom they visit. Mercedes-Benz made the switch in January 2022, following Honda's decision in July 2021.

Supporters of the fixed-price model argue that it provides fairer prices and stock allocations for buyers who do not want to negotiate. However, detractors claim that prices have increased and customers are worse off because dealers can no longer offer better deals to clear stock. Dealers also argue that the new model discourages investment in staff and facilities due to uncertain contract terms.

On the other hand, some dealers have been overcharging excessive dealer delivery fees for certain in-demand vehicles during the pandemic, although these instances have mostly subsided. Both Mercedes-Benz and Honda now own the showroom stock, with dealers acting as "selling agents." This allows them to bypass anti-competitive consumer protection laws.

The Australian Competition and Consumer Commission (ACCC) is monitoring these changes by car manufacturers to ensure consumer protections against price fixing are maintained. The Federal Court case highlighted the need to review franchising laws in Australia, suggesting possible modifications.

The group of Mercedes-Benz dealers who initiated the legal action sought compensation for the goodwill they had built over several years. The new dealer agreements were implemented following changes to the Franchising Code in 2021.

It remains uncertain whether other car manufacturers will adopt a fixed-price structure in Australia. While companies like Tesla and Polestar already operate with fixed prices and no dealerships, established brands may not follow suit. The traditional dealer sales model allows dealers to start paying for vehicles as soon as they leave the car company's holding yard, incentivizing quick sales. Switching to a fixed-price model would delay payment for car companies and create logistical challenges.

Car manufacturers such as Toyota, Ford, and Volvo have indicated they have no plans to transition to non-negotiable, fixed prices. The Volvo Australia example demonstrates the financial burden and potential risks associated with carrying unsold stock for extended periods. While fixed pricing may work in the current high-demand and limited supply market, its viability during a downturn remains untested.

For consumers seeking the best deals, it may be beneficial to wait for demand to ease and supply to increase in the coming year. This could provide an opportunity to negotiate a better price when purchasing a new car.

Joshua Dowling, a seasoned motoring journalist, has been covering the automotive industry for over 20 years. He has worked for publications such as The Sydney Morning Herald and News Corp Australia. Dowling is also a World Car of the Year judge with extensive experience in the field.

FutureCar Staff