[avira_tk]

Pretty certain this will flop in no time once the economy opens up. Mercedes might have had a good run for now, selling whatever they make, however it won't last. 25 years in India and Mercedes is making the sales experience closer to a ration shop. Imagine a buyer with around a crore to spend, being told by a smug salesman that he's free to take his business elsewhere if he doesn't pay sticker.

I can think of a few people who buy in this segment, the reason they can is because unlike me, they won't pay full price. Other than the E class, every Mercedes has a reasonable alternative in the market.

[Turbanator]

Originally Posted by PrideRed

one of the big draws for buying a German marquee is discount that is offered.

I will agree with comments from Reesnat

Heavy discounting is actually bad for the end customer as well. What people all over the world (India or not) really want is to pay a fair price and not feel like they have been short changed.

If I pay full amount upfront, who is responsible for damages while in transit or at dealer level?

Am sure, these things can be handled at the working level. Even now, the transit damages are very few as everyone uses dedicated trailers.

Originally Posted by Chetan_Rao

In a factory-to-customer 'zero idle inventory' model, will there be enough incentive/margin for a dealer to have a sales division to act as an intermediary/touchpoint, or are they better off just handling services in a franchise model and let the manufacturer deal with sales?

As of now, I won't know what margins MB is talking about, certainly much less than current. Dealers can downsize, open workshops in multiple places instead of keeping X, Y & Z variants and customers haggling that they need a Beta combination on the model X. My guess will be to pass enough depending on the model/ variant that they keep customers engaged. If they get too greedy and pass little, dealers may lose the interests.

Originally Posted by V.Narayan

The inventory carrying cost in India, at rates of interest that a mid-sized business can access, are so high that the dealer has to earn money through extras to keep his head above water.

Correct Sir, and it's the customer who loses or pays more. Any interests paid by the dealers on the cars in transit or at their yard gets added to all the sales. MB India will have access to finance at much lower rates.

Originally Posted by haisaikat

Zero Inventory or Just in Time production is something that Toyota has perfected over ages and they are known to make hefty profit not only as OEMs but also to dealers.

Yes, Toyota has been very good with this. We will hardly find their dealers sitting with an unsold inventory. They have real-time access to everything happening at the dealer. They also encourage inter-dealer sales for inventory that has not moved beyond a certain level. Another thing that helps them is the limited models/ variants/color-interior combos they produce based on the market size.

MB also excels in that, and lately BMW also. In the past, they will have a lot of interior/ exterior/ trim options but not any longer. Individual builds are now possible only on CBU models.

Originally Posted by kiku007

Mercedes Australia proposed the from 2022 for all models

Thanks for sharing this, it pretty much sums up everything that they will do here. This must be from HQ for all low volume markets to begin with.

Tesla has been extremely successful and I don't see why MB can't be. Dealers will always have some cars for display/ test drives besides the colour/ trim samples will be available. That's how Porsche has been working too and many Supercar manufacturers. MB may lose a tiny percentage of buyers who need same-day delivery but this number will be very small.

I personally would like to have the option to negotiate and I'm keen to see how the market responds.

I used to enjoy negotiate before, not any longer. I will instead pick up something that's sold at full price at all times. Like, when my son, bought the Tesla, there was nothing on offer. And it remains the same as today, I would have got pissed if Tesla was now offering discounts based on the negotiations you do. It's also a fact that even in India, Discount culture was started by BMW. I still recollect, paying full price for my 3 series in 2007/8. Then they had some Zero Interest offer on X5 next year which was being changed to the newer variant, so they are themselves to blame. If we compare with any Japanese manufacturers, the contrast is huge. The best discounts that one could get on a 1,5 Cr LC must be a couple of thousands or perhaps just free mats.

Is it really worth the trouble for Mercedes India to try this expensive experiment that may disturb their leadership position?

Yes, of late, MB dealers have been selling at losses. Things changed better after Covid but before that, it was all negative. MB is also partially to blame as they have got more dealers, like just in Delhi NCR, we may have 10 sales outlets. Such sales will also spoil prices at other places even fa roff. Like, we bought an E-Class for our Kolkata use from Delhi as the difference was over Rs 5 lac. Even some other members from other states have got the cars from Delhi as this used to be the cheapest.

Does this mean that a company like BBT cannot get a sweet deal out of Mercedes India in the future?

BBT does not get any deals. They don't sell any new cars. Maybe they picked some new unsold Volvo cars once but usually their business model is not to carry new cars.

Those who are shopping in the premium segments or those who have done so previously know the mark-up on the majority of these models is substantial.

Yes, it will be interesting to see if MB revises the price lists. Remember, we have 50% GST and RTO as high as 20% in some states. So, a drop of 1 lac ex-showroom can translate to 1,70 Lac on Road.

According to Mercedes, the change is designed to “improve the customer experience”.

Correct, they don't want to be seen like an Audi, at least here in India. This can happen if they keep the prices fair and don't inbuild the discounts while launching the cars, which seems to be happening in the recent past.

Originally Posted by Reesnat

If the manufacturer can price a product as low as possible from the get go and then promote its value and not offer any discount at all to all customers, this is actually a win for everyone.

agree with you completely.

[kiku007]

Originally Posted by Turbanator

This must be from HQ for all low volume markets to begin with.

Quite possible. Perhaps the dealer network in the USA is very influential to try anything like this.

Originally Posted by Turbanator

Yes, of late, MB dealers have been selling at losses. Things changed better after Covid but before that, it was all negative. MB is also partially to blame as they have got more dealers, like just in Delhi NCR, we may have 10 sales outlets. Such sales will also spoil prices at other places even faroff. Like, we bought an E-Class for our Kolkatta use from Delhi as the difference was over Rs 5 lac. Even some other members from other states have got the cars from Delhi as this used to be the cheapest.

Originally Posted by Turbanator

BBT does not get any deals. They don't sell any new cars. Maybe they picked some new unsold Volvo cars once but usually their business model is not to carry new cars.

Thanks for clarifying. I guess I misread the below part from the BBT interview. So they buy demo cars for example?

Q: Do you buy all the cars in your stock? Or are they also sold on a consignment basis, where the car is still the property of its owner?

A: All cars under our roof are bought by us. We have bought from practically all manufacturers in India and because of our bulk buying, we tend to get a price advantage which is passed on to our customers.

Originally Posted by Reesnat

Indians in the luxury segment have become accustomed to discounts because they have seen how a car they paid 1Cr for was sold for 90 to their friend 1 year later and that friend brags about it, this is a horrible feeling for the original owner. What I’m saying is sell it for 90 on Day 1 and don’t discount at all.

Mercedes themselves could change the pricing in 12 months right? It's not like the fixed-pricing is going to be valid for a certain period of time. The fixed pricing at that point in time is applicable across the country. It could very well change based on several factors.

Originally Posted by Turbanator

Tesla has been extremely successful and I don't see why MB can't be. Dealers will always have some cars for display/ test drives besides the colour/ trim samples will be available. That's how Porsche has been working too and many Supercar manufacturers. MB may lose a tiny percentage of buyers who need same-day delivery but this number will be very small.

I used to enjoy negotiate before, not any longer. I will instead pick up something that's sold at full price at all times. Like, when my son, bought the Tesla, there was nothing on offer. And it remains the same as today, I would have got pissed if Tesla was now offering discounts based on the negotiations you do.

I personally like how Tesla has structured their sales process. It's simple and transparent. However, you do notice that Elon Musk has dropped the price of the Tesla models at his whim with just a tweet. The notorious $69,420 one for example. Recently a friend got the Model 3 and Tesla AU dropped it's price by $3000 the next month. That's a 4% drop. I'm not saying such price drops shouldn't happen. I just feel that the fixed-pricing model wouldn't stop it from happening.

[dipen]

Originally Posted by V.Narayan

Contrary to what most Team BHP members may believe a car dealership is not an attractive business in terms of return on investment.

While I have no real data on the margins or the business model in terms of ROI; there is one thing that whenever there is an ask for a new dealer by any manufacturer, there is always good interest by the number of applications submitted for the same (many of them are already existing dealers or dealers of other brands so they are already in the trade). We can't always argue that all/most of them want to convert black to white. There has to be some rationale.

[Reesnat]

Originally Posted by kiku007

Mercedes themselves could change the pricing in 12 months right? It's not like the fixed-pricing is going to be valid for a certain period of time. The fixed pricing at that point in time is applicable across the country. It could very well change based on several factors.

Yes. Within 2-3 years of launching a car, some external factors may play a role like currency fluctuations, cost of raw materials etc. Usually, this is anywhere from 2-5%. This much variance can be justified to some extent. The pain point is when the price difference between one customer and another is 10-20%.

Customers in India have made it their 'right' to demand discounts because they have seen this play out. So they have 0 sympathies for the dealer/manufacturer and in the case of luxury cars, to some extent believe they are doing the dealer a huge favor by buying the car.

This can be addressed by 'honest pricing' in my opinion. By all means, manufacturers and dealers need to be profitable, if not, we don't get great cars or great service. All we actually want is price parity and for our purchases to hold value reasonably.

[speedmiester]

While it's a good move for MB, this may not be for the customers and also dealers.
Today I can shop around multiple dealers to get the best deal for my money, this may not be the case in this model.
For a dealer with good volumes, this may not work in their favour. Although it will help ease the capital burden and save on sales operations.

[androdev]

I believe MB is a company that is being run very well these days and I am sure they have thought through this. Getting rid of inventory should be a big relief to the dealers. Will save them from financial misadventures. This also makes it a level playing field for everyone so they can focus on the customer service. I am sure other manufacturers will also follow suit.

Customers who are good at hunting for deals would be disappointed but I would argue it would actually help the majority of the customers who don't like these elusive "mystery deals". It's like buying Apple products - I don't have to break my head about hunting for a deal or fear being tricked into paying more than my friend.

[srh]

Originally Posted by Turbanator

As per knowns in the trade, MB India is planning to do a major change to their sales operations. Originally planned for July, this has got pushed to September because of Covid.

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.

Dealers will work on Zero Inventory and all Cars will come from the factory against a firm order of the customer. Not aware if these will be invoiced directly from MB India to the customer or the dealer for onward billing but since they want to take off the complete burden/ expense of dealers on the finance, it's quite possible that they can do the direct billing too or ask full payment in advance.

At any point, the dealership will have only a few display/ test-drive vehicles but no cars for deliveries. Manufacturers have realized that it's very difficult to make money in capital heavy business. So, many dealers have to pass high discounts, this creates an imbalance in the market. Inventory light is the way to go.

It Will be good to hear the views of others, I fully support such a decision if it happens.

There is nothing called as 'inventory light'. Inventory either sits at the dealers end or at the OEM end. Some efficiency may be gained by holding inventory centrally at OEM end, but that will be marginal. But it does make sense to keep invetory with the entity which has the lowest cost of capital i.e. the OEM which has a much better credit rating.

[GTO]

Small discounts are okay, but h-u-g-e discounts of the type that Mercedes + BMW + Audi have gotten the market addicted to are terrible. IIRC, it was Audi that started this mad discounting practice (they became the no.1 in India that year) and everyone else had to follow. Discounting then becomes like a powerful drug that is hard to quit. Not impossible, but very hard to quit.

So happy to see Mercedes take the lead here, and I hope BMW follows (have no hope for Audi India). It's a joke to walk in and get 10-lakhs off a certain model on day 1 of negotiations. Why the heck can't you just price your car correctly then?

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.

Another reason = luxury car sales have largely remained the same over the last few years. Less risk.

Dealers will work on Zero Inventory and all Cars will come from the factory against a firm order of the customer

I don't think this proposal will fly. For one, manufacturers are best at building cars and shipping them out to dealerships. Dealerships are their customers. Second, manufacturers H-A-T-E holding inventory and count cars as "sold" the minute that they are dispatched to dealers. I can't think of any OEM who would want to hold onto inventory and ship only against firm orders.

[Turbanator]

Originally Posted by kiku007

We have bought from practically all manufacturers in India and because of our bulk buying, we tend to get a price advantage which is passed on to our customers.

An exaggeration, definitely. Few Volvo's (XC90 if I recollect) & Indian Motorcycle for sure and then they had some flood salvaged auction cars from BMW, perhaps. Manufacturers in India hate these independent dealers and will always give to their own dealers or will have auctions, like what BMW India does.

Originally Posted by GTO

Discounting then becomes like a powerful drug that is hard to quit. Not impossible, but very hard to quit.

Correct, they don't want to become an Audi, that's what they tell internally to their dealers

I can't think of any OEM who would want to hold onto inventory and ship only against firm orders.

It will surprise you; a lot of companies are actually no longer averse to holding inventories rather than selling at low prices. We know for sure as we have experienced firsthand. Manufacturers have got their profits at some of the historic levels, never seen before. Not only have they increased their own margins, but squeezed dealerships with no offers. It's take it or leave it, if we talk about the manufacturer to dealerships.

It does not bother them about inventories as the demand is strong and production/ availability is low due to varying reasons. All this sounds fancy and right in the circumstances but if demand dies, everything will come back.

Originally Posted by srh

There is nothing called as 'inventory light'. Inventory either sits at the dealers end or at the OEM end

If you compare your sales with inventory, you will find a manufacturer have a far leaner model. Imagine, 10 dealers holding a stock of 5 C- Class each against a monthly sale of say 2 or 4, in addition, MB India will also hold something for pipeline/ next schedule & then compare it with MB India holding just 40 cars for Pan-India dealers. They will produce next lot only when their stocks will fall below a certain level. It's far easier to have a leaner inventory when the factory itself works as a warehouse. Problem comes, when factories have to produce irrespective of actual sale. This can be because of production (lot size etc.) or to keep the labour/ machines occupied. But in the current situation, when demand is large, it's best time to experiment with such plans. They can go back to discounting model if they lose too many sales or can produce much more.

[PrideRed]

Originally Posted by Turbanator

I will agree with comments from Reesnat
Am sure, these things can be handled at the working level. Even now, the transit damages are very few as everyone uses dedicated trailers.

So will the new process lead to price correction or to be more apt, reduction in prices of CKD atleast? Newly launched GLA is almost 60L for diesel here in Karnataka. While some may pick these, in long run unless there are discounts, it will be hard to justify price tag in India where size of the car matters for the price you pay. Unless BMW/Audi follow this new process and MB alone does this, I am sure they are digging their own grave.

MB needs to treat each market differently. When selling our enterprise product, we sell hardly with any discounts in Europe but when it comes to India or China, discussion starts with how much discount will be offered .

Coming to transit, if there are few scratches/dents and if customer is not willing to take delivery of said piece, will MB send another one? I am sure repaint at dealer may not option for many even though the cost is borne by MB or insurance. How will this be handled?

I can somehow agree on pricing despite shortcomings but not having inventory at dealer is going to be a bummer that too after paying full price. Just see here in TBHP, majority will not recommend paying full amount unless a PDI is done.

[Turbanator]

Originally Posted by PrideRed

So will the new process lead to price correction or to be more apt, reduction in prices of CKD at least?

Will depend on what does MB India have in mind. As a leader in their segment, am sure they will consider everything. I am not privy to such information at this moment.

Coming to transit, if there are few scratches/dents and if customer is not willing to take delivery of said piece, will MB send another one?

Small things, it's not as if they are going to send thousands of cars every month. They will surely have some guidelines to adhere to. Once, the finer details are available, it will get clear. Even now, it's not as if these things are not happening. Some extensively damaged they probably sell on as is where is after taking transit Insurance claims whereas slight damages are corrected. Whether the customer is aware, not sure!

majority will not recommend paying full amount unless a PDI is done.

Yes, as I mentioned, we will have more details closer to the actual implementation. There can be scenarios where one does not like the car, so they have to figure out something for cancellation too.

[yd_gli]

There is always more to it than what meets the eye. I think most of us on this thread are reacting to this from purely from a supply chain/inventory management/discounting aspect. But in reality sales of luxury cars and their potential customers are very murky and convoluted.

As we all know very well, the majority of the luxury car buyers are not the common salaried class of people. Cash transactions, kick backs etc are common. There are several instances of a dealer loaning out a new car to a customer for short term use (2 months, 500kms) without registering it in the customers name. This way one can drive a new luxury car for peanuts (5-10L). The car comes back to the dealer and either it is loaned off to a new customer for the short term or then sold off to a gullible buyer as a new car. The cash strapped dealers will try and make the most of their inventory. They buy a car for 60L from the OEM and make a total income on it of 70-75L even after offering discounts. There are several other methods of maximizing returns (offer new cars for 1 day marriage processions, offer new cars for marriage proposals etc). You get the drift.

Eventually, someone in the OEM ethics, legal team is going to catch onto this. Offering to ship cars to the dealer only on confirmed order and payment is one way of circumventing this problem. The discounts will still continue but the dealer hack jobs will stop. My 2 cents. Dealer fraud is a pretty severe issue even in non-auto industries.

[sidharthg]

I wonder, if the new prices would be reduced if they are going for no discount policy? If they reduce the prices as much as the quantum of discounts they were offering in the first place then it might work, but if they stick to current prices then I think it is goodbye to the top 3 slot for Merc! IMHO.

Moreover, I think that in this day and age most of the cars are reliable enough in the long term. It boils down to service experience. If the price difference between Audi A6 and Merc E is significant, then I think it would be a boon for Audi!

Discount is inherent in our culture and society! and Amazon realizes it, so many products are priced lower in offline mode, but the way Amazon presents the discount on Online store, people end up buying it a bit more expensive on portal.

Similarly, it could be a game changer for Audi rather than for Merc..! IMHO..!

[a4_attitude]

I would like to take up an example of Merc E 200 which had a sticker price around 70-72 On road Delhi, a friend of mine bought it for 58 with Hp reg. My point here are they going to come down with new Sticker, which seems impossible

Second Perspective - Manufacturer, Mercedez Benz
If manufacturer want to ease dealers it means manufacture want to increase his own profit or increasing his control over how he want to run the business around

Third Perspective -Layman
Most German cars to layman looks for expensive as they never entered showroom, take an examples of S class which starts 1.5- 1.6 onwards but in table its a different scenario all together, So if they choose the bring down the sticker price they will loose that part of brand value as well

Forth perspective - Used car market
E class still sells in the range of 40-45, Even new model is out, because used car dealer is selling you by comparing with On road price today and if it crashes down, Second hand amulet will crash down to and second hand cars will also remain in the hands of dealer

This policy will work only if followed by all Germans