How can it compete with Tesla’s rapid rise among luxury brands?
some things. I think Tesla had a first-mover advantage for a very long time because it was the first to enter the market. They have great battery technology and they brought it to market quickly. they made a good product. Doesn’t feel like a real luxury. At any level, buying or driving it doesn’t feel like a true luxury experience.
I think their success largely rested on the fact that nobody was playing in that space. Many early adopters only had one brand option.
Looking at the current state of electricity, I think Tesla faces some challenges. They didn’t have the burden of legacy costs and legacy vehicles that they had to worry about service and maintenance. They’re starting to sound more and more like they have to play the traditional manufacturing game.
The real downside I think they have is that they don’t have a dealer network behind them. I think Tesla is in big trouble when these cars come back at the end of their life cycle. These are all areas where I think Mercedes-Benz is really well positioned. We have a very well run dealership organization.
What are your top priorities as Council Chair?
It’s a bit of a balancing act when thinking about this position. The understood part of the job is that I have to be here to protect the dealer’s corporate value. This will not work unless these two components are balanced. You cannot have strong corporate values without a strong brand of equal value.
You want to be attracted to your brand and make the best money on the market. The best dealers want to invest in the best brands, and those brands want the best teams. It all becomes a self-fulfilling promise. If the dealer’s board of directors works with management to protect corporate and brand values, and the manufacturer’s management does the same, this works very well. At the highest level, that’s the thinking I want to establish.
From several initiatives, we would like to ensure effective communication and a rhythm of communication with our dealers. I think dealers need to be more informed about what topics we are working on as a dealer board, what we are accomplishing and why. We want dealers to be knowledgeable about the opportunities we see in the market and help them mitigate risk. I think if we do this well, we can help the Mercedes dealership body a lot in both areas.
Is a subscription service for features like performance boost or heated seats a good idea?
I think this will be one of those areas where you have to strike a very delicate balance. I think there are some services that show their true value. We can see that they are a clear fit for the subscription role. A perfect example would be the guard system when you think about some of the products Mercedes offers. They offer a subscription service to monitor vehicles, much like an alarm company. Such functionality is truly an added service. Things like car navigation updates. These are ongoing software programming that will add real value over time.
Vehicle hard features? I’m really having a hard time understanding how they add value to the customer. I think BMW got hit with this in Korea over seat heaters. It’s a tough idea to charge a subscription for that. What are good value-added services and which should be included in the price of the vehicle?
How are dealers reacting to the company’s decision to reorganize field support based on throughput? Do you think it’s a good idea?
Change always creates anxiety, especially when it comes to dealer support levels. We rely heavily on field support for our daily operations. Field teams can provide a lot of transactional support trying to get more information about individual vehicles or solve service issues. So whenever these things change, we have a lot of anxiety about it because we rely so much on it. We know what that looks like, but it hasn’t been enabled yet, so I think Mercedes is headed towards making sure the support levels are in place, but it’s a bit unclear at this point.
I understand the rationale for what they are doing. I’m sure there are dealers who are concerned about this. Some of the things we’re happy to see are that quotas aren’t tied to these performance groups. As such, it is tied to the performance of individual dealers. This puts it back in the hands of individual dealers. I think this is a reassuring fact for many dealers. Mercedes-Benz is doing very well with their quota program.
Dealers clearly state the individual level of support required. I think we need to let the manufacturers decide how best to reorganize to support us. What dealers always hate is when manufacturers tell us what they want us to do and how they want us to do it. You don’t have to make me a dealer if you do that.
What they need is to tell me what their goals are and make me understand how to get there. Give us the freedom to create new processes and use new technologies.
I think Mercedes-Benz has the best dealers. And if I tell them what I need, I need to give them the chance to put it together in a way that not only works for them, but provides me with that level of support. I think it’s as fair as you can be with Will they succeed? It hasn’t been released yet so I don’t know. But I’m sure they are trying to.
Do you think it’s a smart idea for AMG to go electric? Will Loyalists make that move?
I think the market will move to EVs no matter what holdouts there are in the market. I think in the future it will be a fully EV market. I don’t think it’s five years from now, but I think it’s beyond that. I’m a real horsepower junkie. I love the feeling over the V-8. I think we all have to accept that better technology for sustainability wins here. It’s just the nature of how this market has to go. Each manufacturer makes a statement. At some point, no matter what, you will not be able to use the internal combustion engine. On the performance side, EVs perform incredibly well and are a lot of fun to drive. The motor just moves. Exciting and fun.
How do you keep your profits strong in 2023?
There are some things and there are some things that manufacturers can help us with. There seems to be a drive and a desire to keep us from being backed up. If you can make it more profitable…that’s a very important factor in keeping your gross margin levels good.
I think the dealer association has done a great job of investing heavily in the used business by taking a heavy burden off the Mercedes-Benz system. It’s all benefits and extends to profitability. We know new car profit levels will continue to fall from their pandemic highs, but we want to find a balance there. Hopefully, with a manageable supply on the new car side and a strong used car business, we should be able to remain profitable as a dealer over the long term.