Desperate times call for desperate measures. And that is valid in the car industry as well. The crisis that hit the automotive world and the entire world itself is forcing carmakers to take measures for damage limitation. Mercedes is making such a move by dropping many of its dealerships.
Mercedes announced a shift in strategy trying to defy the chip shortage, the supply chain bottlenecks, the ever-skyrocketing gas prices and the crisis caused by Russia’s savage assault on Ukraine. The premium company is contemplating dropping the lower area of the lineup and intends to focus on the upper part of the portfolio instead. Figures from 2021 show that it is financially safe for the premium car company to sell fewer, but more expensive cars.
Now the Germans are on to the second step. They will be soon dropping part of the dealerships. Their plan is to steer the business towards direct and online sales. The target is to sell 80% of the cars on the European market through direct sales by 2025. This will help the company reduce distribution costs, but also have more control over distribution. The three-pointed star brand is doing this now in only five markets.
Customers are going digital, many Mercedes dealerships make no sense
Ten percent of the dealerships will simply vanish by then. Mercedes estimates that before 2025 comes, one in four customers will buy their next car with just a few mouse clicks. “Customers are getting younger, wealthier and more digital,” Bettina Fetzer, vice president of Communication and Marketing explains the move, for Automotive News.
Furthermore, the plan is to drop 20 percent of the dealerships by 2028, if everything works according to plan. In its home market Germany, Mercedes is currently operating approximately 1,000 dealerships. Ola Kallenius and the management board are hoping that online and direct sales will get traction rather sooner than later.