Mercedes aims to triple dealer profits

Best dealers will earn more under new program

Jason Stein | | Automotive News Europe / November 13, 2006 - 1:00 am Like many other carmakers, Mercedes-Benz has realized that happy and profitable dealers are essential to a successful business. That’s why it aims to triple its European dealers’ profitability.

Starting January 1, the German carmaker will launch a new system to unify dealer margins in its European network of directly owned and franchised dealers.

As a result, net dealer profitability for Mercedes’s largest retail outlets should increase to 3 percent. Dealerships in some markets now have a negative margin of 1 percent.

Mercedes will offer higher margin bonuses to dealers that improve their customer satisfaction scores. The carmaker also aims to increase efficiency at dealerships by finding common synergies.

“We want to improve the margins for our dealers,” said Klaus Maier, Mercedes Car Group executive vice president of sales and marketing. “It is a clear part of our retail strategy to benchmark against the best.”

Mercedes does not specify its benchmarks in Europe, but a Mercedes spokeswoman said “big independent dealer groups” are an example.

Mercedes wants the margins in its own retail outlets to be comparable with those in big European dealer groups. It measures dealer profitability in terms of earnings before interest and taxation as a percentage of net revenues.

Mercedes owns 40 percent of its 519 dealerships in Germany, its largest market. In other western European countries, the share of ownership is generally between 7 percent and 40 percent.

Mercedes CEO Dieter Zetsche wants to improve the retail network and improve customer satisfaction scores, which are only just above average in Germany and elsewhere.

Mercedes has just started a three-year €50 million retraining of its global dealer network