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Mercedes dealers: EQ subbrand launch delay was smart

Mercedes dealers: EQ subbrand launch delay was smart
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Mercedes-Benz had planned to introduce its EQ subbrand of electric vehicles to US consumers nearly two years ago. But it ended up waiting until an electric version of the S-Class sedan was ready before launching EQ here late last year.

Jeff Swickard, chairman of the Mercedes-Benz Dealer Board, says that was a smart move because the vehicle originally planned to mark the subbrand’s debut, the EQC, “didn’t have the range to be competitive in the US market.” The EQS has a range of about 100 miles more than the EQC, which went on sale in China in fall 2019.

“Although they have been a little slower to launch volume models relative to their luxury competitors, I think they have a fantastic suite of vehicles coming,” Swickard said. “Waiting to launch with the EQS was absolutely the right decision.”

Swickard, 49, is CEO of Swickard Auto Group, which operates four Mercedes-Benz stores and 16 other dealerships in Alaska, California, Georgia, Oregon and Washington.

He spoke this month with Staff Reporter Vince Bond Jr. about the brand’s EV strategy, the A-Class being discontinued, the importance of used vehicles and the ongoing chip shortage that has cut into inventories. Here are edited excerpts.

Q: How do you feel about Mercedes dropping the A-Class in the US?

AT: Every company is continuously evaluating their industry and the competitive landscape and that’s exactly what MBUSA did. The A-Class was a great vehicle. But the reality is that it launched in a market that was heavily focused on SUVs. As a dealer, I certainly don’t fault Mercedes Benz. Their product life cycles are developed years before they’re launched and, in this case, probably just missed the market by a couple years.

The CLA did very well. Expectations were the A-Class would be as well. Realistically, between the appetite for SUVs and the shift to small cars becoming PHEV and BEV, it just didn’t have good long-term future prospects. It certainly played its part bringing new customers into the brand. And we have a lot of other great vehicles we can sell them.

Are there any holes in the Mercedes-Benz product lineup? If so, what would you like to see added?

I think the US lineup is great. Between what’s available now and what’s coming out of the BEV side over the next a couple years. I think MB has a strong lineup as anyone. It’s actually the opposite of holes.

Mercedes did a great job eliminating some of the model and product complexity that plagued the brand for a few years, when it was difficult to keep every one of those models in stock, so we feel very comfortable with what’s available and what’s coming. The new SL is beautiful.

The new generation of electric vehicles, of which EQS is the first to arrive, it’s going to be great for customers and dealers. Dealers requested that Mercedes reduce the model complexity.

AUTOMOTIVE NEWS How will EVs affect dealer margins?

JEFF SWICKARD: We don’t see any negative impact at this point. If we do the right things to take care of the customers and give them the products and services they’re looking for, we’ll just be fine from a margin perspective. What is unknown is fixed operations. What do electric vehicles pose in terms of a threat to fixed operations?

How are you and other Mercedes dealers coping with the inventory problems that have plagued the industry?

As dealers, we try to focus on controlling what we can, right? Of course, it’s definitely hard to have customers needs that we can’t fill, but we do the best we can in finding something that fits what they’re looking for. Used cars are a big portion of our business and continue to get even more important now.

What we’re not doing is overcharging or gouging our customers with huge markups. We don’t see that as a sustainable business practice.

What are your thoughts on the Mercedes EV strategy? What type of vehicles does Mercedes need to compete in that space?

They’ve been a little slower to launch their volume models relative to their luxury competitors. I think we have a fantastic suite of vehicles coming. Waiting to launch the EQS was absolutely the right decision. Previous models such as the EQC are great vehicles but simply didn’t have the range to compete in the US market.

So what you’ll see over the next 18 to 24 months is a great lineup of vehicles across multiple price points in the market that have the range consumers are looking for, especially those who are buying an EV for the first time.

Will Mercedes-Benz be able to establish itself quickly in the EV segment?

Obviously it remains to be seen, but I believe they will. As the inventor of the automobile, MBUSA has always been a manufacturer that focuses on quality and ensuring they are providing nothing but the best in the market, and it’s no different with EVs.

While it’s the buzzword of the industry right now, I think the OEMs that will fare the best are those that provide customers everything they want with an EV, and none of the downsides.

I think MB will be a major player in this space for years to come. It’s certainly their focus.

V-8s weren’t available for a while last year. What was the impact on dealers, and what was the cause?

It’s always tough when you don’t have as many cars as customers want, right? With that said, there’s a global supply chain problem, a challenge that everyone knows about, especially with chips, as it relates to supply chain issues. So, unfortunately, the V-8s were a victim of some of those macro factors, and we’ve just done the best we can with limited supply.

Are there any plans to just get rid of the V-8?

No. I’ve heard that rumor before outside of the business, but, not to my knowledge. That’s a very important segment for us.

How are Mercedes dealerships performing from a profitability standpoint? How sustainable are the current vehicle margins and profitability levels as inventory levels improve?

Dealers are very happy with current levels of profitability. Our hope as dealers is that as supply chain challenges improve and there is more inventory that MB continues to build a level of vehicles that is in line with customer demands in the market — not too few and not too many. If that happens, margins and profitability should say consistent.

How are the skills needed for sales employees at Mercedes dealerships changing in an increasingly digital sales environment? Is Mercedes helping dealers navigate these changes?

It’s all about the guest experience and being able to provide the customer exactly what they want in the sales experience. For some customers, they’re very hands on and don’t do any of the process digitally.

But for others, it’s entirely digital, with limited interaction with our team members face to face. For most, it’s a combination of those two. And we need people who are comfortable working in both environments, both in person and digital. Mercedes certainly helps dealers prepare with professional training.

How is your service department performing? Has revenue returned to pre-COVID-19 levels?

The service business has been very strong the last couple years. Very early in the pandemic, customers realized they needed reliable means of transportation. In many cases, more now than ever. We helped fill that void. As new inventory became a concern over the last 12 to 18 months, many customers decided that they can keep their current vehicle a little longer, and that gave us more fixed operations opportunities.

Finally, the growth in the US car segment over the last two years has been a boon to the service department as well, so it’s really been a lot of things working together to make a very positive climate for the service business.

Has Mercedes offered guidance or assistance with the hiring and retention of a diverse work force?

Mercedes has always encouraged us to have an employee base that reflects our communities, and that really hasn’t changed. We personally see diversity as a strength within our organization. I think many other dealers feel this as well.

Did you see Mercedes try to improve its diversity efforts after the George Floyd movement a couple of years ago?

Mercedes-Benz USA and its dealers both see [diversity] as a competitive advantage. I don’t think it’s necessarily reactionary. I think it’s good business to have a diverse work force and a diverse perspective. And I think MBUSA feels like that and the good dealers do as well.

How has salesperson productivity at your dealerships changed during the pandemic and through the microchip shortage? How many vehicles per sales rep per month are now typical?

I think it probably depends on each store, but in general we’ve seen the production go up a little.

We’ve put a lot of tools in place for a better experience for customers, and for our employees, and that has helped productivity. With that said, I think there is still an opportunity to improve, but it’s ultimately about giving customers the type of experience they are looking for.

What is your forecast for 2022? Do you think it is going to be a strong year for Mercedes?

There [are] many macro level headwinds. Mercedes is a global company with supply chain risks throughout the world, so that’s hard to predict. But I think that Mercedes-Benz is manufacturing products that meet and exceed customer demands. The products really resonate with premium customers. I think the majority of 2022 should be very positive.

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