One of the biggest Mercedes dealers in the UK, Penske, has said profits on new car sales have increased after the German car maker rolled out the new ‘agency’ sales model at the start of the year.
“Overall, we’ve been quite satisfied with it at the moment,” CEO Roger Penske said on an earnings call to analysts on Wednesday.
Dealers across all brands have been fearful that a switch to the agency model – whereby the car maker takes control of sales and pays the dealer a delivery fee – will reduce their profits.
Penske, which owns the Sytner dealer group, said Mercedes pays it a 5% commission on each sale while leaving the dealer in control of F&I (finance and insurance) add-ons. The group made an average gross profit per car of $3900 (£3125) including F&I on Mercedes new car agency sales in March. “If I go back to 2019, it’s actually higher than it was then. That was pre-pandemic,” Roger Penske said on the call. “Because back then, we were chasing volume, targets and plans.” Penske no longer has any volume targets from Mercedes.
Penske dealers accounted for 20% of Mercedes' retail sales in March from a total of 21 dealers. US-based Penske derived 34% of its revenue in the first three months of the year from the UK, it said. The dealer group is Europe’s second largest, according to figures from dealer analyst ICDP, which looked at 2021 revenues.
Mercedes has been an early mover in the switch to agency, starting in European markets such as Sweden and Austria. The advantage to the car company of selling directly is a closer relationship with the customer, which helps post-sale when it wants market subscriptions and other add-ons. Online customers are assigned their nearest dealer.
Direct sales also eliminate discounting, which gives car companies more control over pricing and ends the practice of shopping around for better deals – for example, via brokers. Customers, however, have found that part difficult to adjust to. “I guess the only thing negative you’d say that the customer still wants to negotiate,” Roger Penkse said.
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