[nkrishnap]

Aparantly, the pricing of these luxury cars have gone through the roof. Cars costing 35 to 40 lakhs on road have gone to 55 to 60 lakhs with the sticker prices. However, the discounts to the tune of 8-10 lakhs was a norm.

For this kind of model to work, the price rationalisation needs to happen. If it doesn't BMW would be the beneficiary here in India to a certain extent. On an another note, when the Tigor was picked up for our office, TATA had something similar with all dealers having the same price, barring a 1000 here and there. Not sure it was successful.

But Mercedes surely would have thought about this before implementing it.

[AKSarkar1]

I find this really hard to believe, kudos to Mercedes if they actually pull this off and if this isn't a PR stunt. I'm sure Mercedes is aware of the landscape they are operating in, Indians are pro-negotiators and it is almost second nature to us. The sales staff as well at Mercedes know very well how to capitalize on the discounts (at least from my personal experience). The people who buy these cars are generally extremely financially savvy and this won't fly with them.

We even bargain for smaller cars like our humble Alto and Swift and I can assure you that there will definitely be bargaining for luxury cars with HUGE margins e.g. Mercs. I would say that if I walk into the showroom and the sales rep straight-up tells me that "no discounts and negotiation", I would most definitely walk out feeling almost insulted. I don't remember a single car that I have purchased without a discount in India.

Zero inventory is also a myth for luxury manufacturers in India. Just finished reading an article on our forum about the new GLA and if Mercedes India starts pricing all their future cars as badly as they have priced the GLA, I'm sure they will have to offer much more than just discounts to get it off their hands.

[veedub89]

Seems like a step in the right direction.

Discount or no discount, hardly makes a difference. What is more important is the value proposition. If this practice brings an end to exorbitantly priced cars just so that they can be discounted later then, I am all in agreement.

I don't want to buy GLA at 40ish lacs. That's ridiculous.
But yes, if the price is non-negotiable and fixed at say 33ish, then maybe I can consider. This kind of sales model will also eliminate the differences in the offer that a regular buyer gets in comparison to another offer to a another buyer who had better negotiation skills or happened to walk into the showroom at a time when inventory was more or when the dealership really wanted to move some cars (end of the CY/FY).

We all know that offers from bigger dealers in bigger cities are better than the relatively smaller ones in Tier 2 cities. A pan-India price puts everyone on the same level. Eliminates inter-dealer competition and makes the life of a buyer much more convenient.

As far as dealer margins are concerned, I think that can be easily addressed by ORCs.
Which is a fancy way of saying sales commissions. The more you sell, the more you will get from the OEM. ORCs can be, and often are, straight bank transfers into the dealers accounts.

At the end of the day, if this practice makes luxury cars more attainable then, it has my approval.

[armaan_singh]

Hope they alter their ex showroom prices accordingly to reflect some kind of discount in the net price.

Overall though I don't see this model being very effective in a price sensitive market like ours, here people genuinely aren't happy until they've got what they perceive as a good deal. It doesn't matter if they're in the market for an Alto or an Audi.

While this may work for people who step out knowing they want a S class or an E class, but these kinds of customers are far and few between. For the entry level luxury segment, Mercedes will end up at the short end of the stick.

[RJK]

Originally Posted by AKSarkar1

I would say that if I walk into the showroom and the sales rep straight-up tells me that "no discounts and negotiation", I would most definitely walk out feeling almost insulted. I don't remember a single car that I have purchased without a discount in India.

I am curious to know why would you take it personally & feel insulted. If the product is priced correctly, would you still want the manufacturer to give a discount to make you feel not insulted? Using similar logic, would you negotiate in a high end restaurant as well (not talking credit card discounts) - say Zodiac grill? Admittedly, that restaurant was on the priciest end but both luxury purchases difference being product & service.

Toyota consistently follows this strategy with the Innova & Fortuner and gets away with it. I don't see people taking it so personally with Toyota, instead more and more people line up to pay for their exorbitantly priced products (that includes me with the Camry). So then why this differentiation for luxury marques?

Back to the topic at hand, if Mercedes can execute it successfully & other two Germans follow it, it will be very good! Standardise the sales process, eliminate the room for person's negotiation skills, so the person who bought the product in the beginning doesn't feel like a loser.

[ike]

It does ease up working capital for the dealer but won't there be operational problems? If the shipments are against firm orders only, does it mean that the customer has to pay the full (or at least a substantial) amount up front and be ready to be penalized if he/she decides to cancel it later on? Booking a car and cancelling it happens all the time in car dealerships.

[Pancham]

I have a few doubts here: what happens if I book and make the payment and then cancel the car or say, for some unforeseen reason I cannot take delivery? What will the dealer do with the car that’s already arrived at the showroom? Or am I not allowed to cancel after full payment?

Is Mercedes taking that extent of freedom away from me? If yes, will it not hamper the sales a bit?

[carthick1000]

If they price and position the product correctly in the market, it is a very good move by MB.

The very obvious advantages I see are

1. No time wasted in negotiations and hassles related to pricing
2. Fair pricing for everyone buying an MB.

I like if businesses don't waste customer's time or have unfair advantages to certain customers over others.

[CalmConquests]

I completely understand why Mercedes Benz would want to adopt such a model. It would make everyone’s lives, especially the dealers’ lives, much easier.

That said however, I struggle to understand how this would work for a volume driven brand like MB. Let us not kid ourselves; Mercedes Benz is very much a volume driven brand in india. The launch of less expensive models like an A-Class, CLA-Class & GLA-Class are not by accident. If we look at a regular year like 2019, a Google search reveals that MB sold about 13,786 cars.

If they are really particular about this model, they must be willing to scale down their production & behave a little like a Bentley or RR.

For those of us who have been fortunate to own more than one MB or more than one BMW or more than one Audi, know that there is absolutely nothing special or rare about these cars. Especially if we are looking at the ones powered by the 2.0 litre 4 cylinder engines (which are a majority of them). I would Never buy one at full price. Not because I am used to getting a discount, but because they are absolutely not worth the money. I mean a C-Class at 62lakhs On-Road here in Chennai? No way.

Also, if MB only wants to manufacture & dispatch based on “firm” orders, they better allow a ton of customisation & personalisation like they do in western countries. I am curious to see how this unfolds.

I have also feeling that if this model were to go ahead & production is slowed down, it would be more due to the global semi-conductor shortage. MB could be just taking an advantage of this shortage & repackaging the situation in a more positive light.

[Sran]

Originally Posted by Turbanator

Under this alternative model, MB India will fix the net prices (Ex-showroom) all across India and there will be no negotiations. Periodic offers if any will be available clearly.

JCPenney moment for MB India incoming. Discount sells. There has been hundreds of studies after the failure of JCPenney and each stated that the pricing strategy led to it's failure. JCPenney was ultimately sold for 800 million dollars when a decade ago it was valued at over 8 billion dollars.

[AKSarkar1]

Originally Posted by RJK

I am curious to know why would you take it personally & feel insulted. If the product is priced correctly, would you still want the manufacturer to give a discount to make you feel not insulted?

This seems to be your personal understanding on the issue. Nowhere in my comment have I stated that I would legitimate to negotiate for a car that is priced correctly. Of course, if I walk into a Mercedes showroom or any other showroom for that matter and I'm presented with a ridiculously priced car with the salesperson saying no discounts, yes I would feel insulted and it is not a question about ego. It's about simple cost-benefit analysis and a psychological aspect e.g. psychological pricing.

I can also assure you that German car manufacturers in India don't hike prices just to give discounts and feed the customer's ego, haven't ever heard of such a business strategy. Also, I hate to break it to you, but given the way basic economics works, there is always going to be a loser over time. Hopefully, this clears up your misinterpretation of my comment.

[himanshugoswami]

unless this is accompanied by price correction across the board, good luck to Mercedes India to move cars off the showroom/godown floor. Buyers in this segment may be aspirational, but they ar Eno fools.

Imagine a scenario- a GLA buyer is quoted 50.xx lakhs take it or leave it price. He says that BMW X1 with MORE power is available for a cool 10 lakhs less. what repartee would the Mercedes sales exec give I wonder? Floating touch screen? better FE?

[m8002?]

I am all for fixed reasonable prices rather than marked up and discount prices based on negotiation. Everytime I see marked up prices, it reminds me of the Standard Fireworks where you always find them at 80-90% discount. I didnt know that the luxury car makers also resorted to this.

I see that some people get a kick on negotiating and bringing down the price - but thats only till they find someone who managed a better discount.

The success of this scheme depends on what the new fixed will be.

[thechinmay]

This is just Mercedes being greedy. As it is, segment to segment, Mercedes models are significantly higher priced than their competition (the C Class, which is already at the end of its life, starts at 50L vs 43L for a newer, more powerful 330i. The A4, with a comparable powertrain is <40L OTR with discounts).

I highly doubt they have any plan of rationalizing prices - they have already announced a price hike on the GLA which was launched just a couple of days ago!
This strategy will backfire and push people into the waiting arms of the competition. Hope Audi launches the new A3 and Q3 in time to capitalize on the fallout of this decision. Their downfall had more to do with disastrous product planning than pricing.

[sampadroy]

Found another insightful article online which can shed more clarity and perspective on this revamp which Mercedes is planning to go with...Interesting read!

https://www.caradvice.com.au/867403/...-fixed-prices/

Points to be noted here:

• No clear mentions or clarity on bringing down prices or having a new justified pricing of all their models. (Maybe we're expecting too much??...lol).
  
• Mercedes Franchised dealerships all across the country would become kinda agents now. ("Agency Model" as coined in the article).
  
• Dealers would be now paid a "simple" handling fee (or commission) for taking care of inquiries and delivering the car to the customer. (Would it be equal to the current high Dealer Profit margins? I guess NO.)
  
• This is a worldwide change that Mercedes is planning to implement. Already being practiced in South Africa and Sweden. (Personal opinion, not going to work in India at all without havoc price reductions and corrections, the reasons best known to all of us).
  
• Such an "Agency Model" cannot be implemented in the US due to specific stringent Franchise Laws. (Protection to the dealers and such businesses from the manufacturers, maybe?). Don't think India has any such Franchise Laws to be specific.
  
• Mercedes conceded there has been a widespread dealer backlash to the switch to an “agency model”, as showroom operators expressed concern about how it will impact their overall sales and profitability. (A very big question indeed!)
  
• Industry insiders believe Mercedes will lose sales to rival brands whose dealers are prepared to negotiate. (Congratulations to BMW and Audi. Maybe, it's your time to shine like a "STAR").

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The Article:

Mercedes-Benz says it will proceed with its plan to offer fixed prices across its entire line-up in Australia from 2022 unless the Federal Government introduces laws to stop it.

The German carmaker has already started offering fixed prices on the Mercedes EQC electric SUV since December 2019. Now the company plans to ramp up its fixed pricing model with subsequent electric cars before the entire Mercedes range will be non-negotiable from 2022. The company says the change is designed to “improve the customer experience”, however, it means all buyers will be quoted identical prices on any new Mercedes – regardless of which showroom they visit.

As part of the changes, Mercedes will switch from franchised dealers to an “agency model”. This, too, will likely restrict any potential negotiating power of customers, as Mercedes will hold and allocate all vehicle stock. Under current franchise arrangements widely used across the new-car industry, dealers buy in stock, pay for that stock, and they are responsible for selling that stock. This can lead to discounted prices if dealers end up with too much stock, or if they need to hit a monthly sales target.

Under the new arrangements, there will be no room for negotiation on price as the dealer is not holding the stock. It means buyers not only lose the ability to negotiate, but they will likely pay more for a new car because Mercedes will control the supply by metering out each model. Under the proposed changes, dealers will simply be paid a handling fee (or commission) for taking care of inquiries and delivering the car to the customer.

In an interview with Australian media, the global boss of sales and marketing for Mercedes, Britta Seeger, says the fixed price “agency model” will go ahead unless changes to Federal Government regulations prevent it. “As soon as a regulator (or) government is changing legal circumstances, we need to assess this again,” said Britta Seeger, member of the board of management of Daimler, Mercedes-Benz Cars, marketing, and sales. “If this would be the case in any of the markets, we would need to reassess.”

While Mercedes has begun rolling out its fixed-price “agency model” in South Africa and Sweden “after some intense discussion” with dealers – and it plans to switch to the new scheme in other countries in the coming years – US law does not allow such an arrangement. “The US has very special franchise laws, so some of the logic that we can apply in some (countries) will not apply to the US,” said Ms. Seeger. “So currently we are investigating what would be the right future business setup.”

A statement from the Australian Competition and Consumer Commission (ACCC) said it is “aware of announcements by some vehicle manufacturers to restructure how motor vehicles are sold to Australian consumers. In other industries, manufacturers have used an agency model to market and sell products.” The peak consumer and business watchdog said it will “continue to monitor these changes, particularly any impact on consumers and small business motor vehicle dealers.”

The Australian Automotive Dealer Association (AADA) says it has reservations about the Mercedes fixed-price plan and questioned whether it would deliver a better outcome for customers. “There are customers who really value the ability to negotiate on price with their dealer, particularly at the luxury end of the market,” said the CEO of the AADA, James Voortman. “I think there is a real risk ... customers will simply go to the competition where they will still be able to negotiate,” said Mr. Voortman. “In other countries where this has been rolled out, we have seen examples where poor execution of process has led to adverse customer experiences, such as vehicle delivery times blowing out or the dealer not being able to give the consumer a price.”

The global Mercedes executive conceded there has been a widespread dealer backlash to the switch to an “agency model”, as showroom operators expressed concern about how it will impact their overall sales and profitability. Industry insiders believe Mercedes will lose sales to rival brands whose dealers are prepared to negotiate. They also say Mercedes is aiming to take a slice of the retail profit margin to make up for revenue shortfalls across other parts of the business.

Mercedes says the fixed price “agency model” will “take the business risk away from our dealers” because they will not be required to hold millions of dollars worth of inventory. Against the backdrop of rising costs associated with autonomous and electric cars – and new safety and emissions standards – Mercedes argues it needs to make the next step to survive and to “safeguard our business for the future”.

Mercedes also believes other automotive brands will follow. Japanese carmaker Honda has already announced it will switch to a fixed price “agency model” from July 2021. “In order to be ready for the future, we need to transform our business model,” said Ms. Seeger. “I truly believe this is the future model of doing business in automotive … and not only for Mercedes.”
Ms. Seeger said the fixed price “agency model” would enable dealers to focus on delivering an “even deeper relationship” with customers and to “provide the best luxury experience”. “The more digital the world is getting, the more important we need to provide the right personal experience,” she said.
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I firmly believe that this model is better suited for already Developed economies such as the US or the European countries where MB has a greater market share and also has high volume sales. The pricing of the models should be well justified too and not exorbitantly high like in India where every quarter we see a 50K jump in the price, minimum with or without any real justification.

India and Indians do value the snob effect and the brand name but we must not forget that we buyers value the price and the money we're paying the MOST. Price it well and offer a good value, we'll buy or else tata, bye-bye, as simple as that.

To sum it up, in my frank opinion, the real point of the exercise is to maximize profits for MB. The brave words about customer satisfaction and dealer profits are hollow.
We all know that if this Model is implemented in India (though MB has chosen the wrong year and the wrong country), the sales numbers are going to be significantly down if MB India doesn't bring about a substantial price reduction, thereby benefiting competitors BMW and Audi.

Now, how can MB ensure a better income (commission or whatever) with lesser sales numbers for the dealers?

Lastly, for the customer, supposedly for whose satisfaction MB is bringing such a huge operational change, Is MB starting with the firm belief that their products are being offered at an optimum price point because so far the clear understanding from the customer point of view has been that MB products are priced 20-25% over their perceived actual value and MB has not given any hint even at International level to bring a substantial price correction in their product portfolio.

Our market is one of the most complicated and price-sensitive markets. Here, many automakers who are international giants have failed to garner a respectable MS because of flawed pricing strategy among other things.

The Million dollar question for MB India would be to convince its buyers to agree to pay ever-increasing prices (without justification) for its portfolio. I am sure either way we'll find an answer to this, soon.