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Mercedes-Benz to axe 10% of car dealerships as part of 2025 agency model switch

CGI image: Mercedes-Benz Retail Group's redeveloped West London showroom

Mercedes-Benz has revealed a plan to axe up to 20% of its German franchised dealerships and 10% of its global network by 2025 as part of its shift to a direct, agency model retail model.

Included in strategic announcements made in the German premium brand’s recent Capital Markets Day announcement was news that it aims to transact 80% of European car sales via an agency model and 25% online within three years.

In December Mercedes-Benz reached an agency model agreement with its European retailers which will lead to the new retail framework's introduction in the UK from 2023.

News of its accompanying network reduction plan comes alongside Mercedes’ assertion that it will refocus its model line-up in high-profit luxury segments, dropping cheaper models, suggesting an end to its more recent pursuit of market share alongside rival brands Audi and BMW.

Bettina Fetzer, Mercedes’ vice-president communications and marketing told the Markets Day event: “We need fewer large showrooms in mature markets.

"We will move away from large showrooms, especially when we move to direct sales."

Chief financial officer Harald Wilhelm said: “We want to have more proximity to the customer and therefore have better control over pricing.

“That's why we are moving from the current dealer role."

Back in 2019 AM attended a Mercedes-Benz future of retail event in the Hague at which the brand revealed that 25% of its new car sales transactions would be completed online by 2025 as it developed a “single log-in” digital strategy offering lifestyle, mobility and shopping solutions to owners and non-owners alike.

A statement issued to AM by Mercedes-Benz UK today (May 24) revealed that plans to reduce the group’s franchised retail footprint would be accompanied by a more diverse retail strategy.

However, no mention was made with regards to the scale of network cuts in the UK.

The spokesperson said: “With the new Mercedes-Benz strategy, the company has set itself the goal of building the most desirable vehicles in the world. We also want to further reduce our cost base and improve our industrial footprint.

“In this context, our markets are continuously reviewing their existing and future local sales setups.

“The wishes and requirements of our customers are changing and digitsation is a key driver of this. Especially in mature markets, we need fewer large showrooms. The golden rule is to have the right formats in the right places.

“Globally, this means that we will gradually reduce our sales locations by an average of 10% by 2025.”

The statement added: “As we reduce the sheer number and size of retail locations, new, exciting formats and iconic store concepts are being introduced that optimally express the diversity of our portfolio.

“Consolidation always takes place in close cooperation with our trading partners.”

Mercedes-Benz’s evolution of its retail footprint in the UK has so far included its divestment from its own AM100 car retail group.

In May last year it announced that it was “assessing a potential divestment of Mercedes-Benz Retail Group in the UK”.

The brand confirmed the plan eleven months after a spokesperson insisted that it had no plans to divest of its dealerships in an interview with AM following the closure of dealerships in Bromley, Caterham and Chelsea.

In July 2021 L&L Automotive acquired Mercedes-Benz Retail Group’s Hemel Hempstead dealership.

Four months later it continued to sell-off its UK car retail sites with the sale of Mercedes-Benz Retail Group’s Epsom dealership to Sandown Motors.

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