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Focus on ROI not volume

Mercedes-Benz UK is urging its dealers to make a final push this year as it looks to pull back a 8% shortfall in new car registrations in the year to October.

The carmaker is determined to end 2005 down just 5% on 2004.

Dermot Kelly, director of Mercedes-Benz passenger cars, blames the dip on the run out M-class, S-class and CLK, and a lack of new Euro 4 diesel engines. But with the new models now in showrooms, dealers should be seeing increased footfall and are expected to smash November and December 2004 figures. They should also be anticipating greater demand from non-retail, according to Kelly.

“We have switched our model production towards the corporate offer where the demand is higher this year, such as increasing supply of the 220 diesel engine,” he says. “We are also offering more cars below £30,000 so we can hit the fleet market on price.”

He concedes that pre-registrations have increased this year as dealers take on more demonstrators, and Mercedes has offered more ‘pack deals’ on bulk purchases in an attempt to kick-start the market. But he’s confident the brand will have a better 2006.

“At the end of the first half we were 9-10% down on 2004 – we expect to end the year down by 5%. That’s better than our forecasts, which were 7-8% down for the year,” says Kelly.

“Next year volumes will increase. But, selling fewer cars this year has not necessarily been a bad thing. We are not chasing volume – such as 100,000 or 120,000 cars a year – we are chasing an adequate return on investment. This is the focus.”

Dealer profitability has been stable, but there are big differences between the top and bottom performers. Most, however, are turning a profit, and Kelly claims earnings per unit has risen on last year due to the trading attitude of retailers creating a better balance of supply.

He does not rule out more changes in representation, claiming there are plenty of existing and new dealers that wish to add the franchise. HR Owen has already stated its intention to withdraw, and Kelly suspects there are other dealers similarly reviewing their position.

DCUK’s retail division has its own difficulties in London, where changes are likely. Brooklands opens next autumn and is equal the investment across the whole of the Mercedes retail network.

“There will be some rationalization as we get closer to opening Brooklands – some facilities will close, others may be shifted out of central London, where we face tough challenges,” Kelly says.

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