New MB pricing

[st13phil]

Given that pretty much the whole of the motor industry is moving in this direction - and it has been much publicised - if the CMA and their equivalents had concerns then they will have already intervened.

Oh, don't mistake what my inference is. I don't think there's (necessarily, but I'm not an expert) anything illegal about what the car manufacturers are doing, but I do think it has the effect of putting the retail consumer in a worse position, which is counter to the intent of the price competition regulations.

What will be interesting to see is whether the rights of remedy for a failing product under consumer legislation can be exercised against the OEM in these agency sales models, rather than the dealer who hands over the vehicle as would have been the case previously.

 

[Dryce]

How is it complete control of the customer? The supplier is entitled to set the price of the products and services they sell.

Control:

- set and hold prices of new cars
- provide finance and lease services on new cars
- provide warranties and 'encourage' service plans on new cars.
- take back lease / finance cars and set and hold prices of approved used cars
- provide finance on approved used cars
- provide warranties and 'encourage' service plans on approved used cars.

Now add in a bit of online connectivity to get subscriptions on features.

One of the interesting aspects about UK pricing and consumer law is that traditionally as a seller you are not supposed to disadvantage a buyer who needs credit - but as the car sellers actually want buyers to 'buy' via PCPs then we end up with the perverse situation that the cash buyer is not protected from being dsiadvantaged by not using credit.

And then we have the service plans - yes I know there are members on the forum who just adore paying a monthly amount that they argue is good value and I'm the carmudgeon who thinks they are a rip off. Well I'm right and everybody else is wrong on this one. And MB just lurve selling an overpriced (overvalued service plan) to new car customers - and if they can to AU cistomers.

So yes - it's about complete control to maximise what they can extract per vehicle per customer. It's sort of evil but not evil because it's logical approach to maximising business yield.

 

[Bobby Dazzler]

Control:

- set and hold prices of new cars
- provide finance and lease services on new cars
- provide warranties and 'encourage' service plans on new cars.
- take back lease / finance cars and set and hold prices of approved used cars
- provide finance on approved used cars
- provide warranties and 'encourage' service plans on approved used cars.

Now add in a bit of online connectivity to get subscriptions on features.

One of the interesting aspects about UK pricing and consumer law is that traditionally as a seller you are not supposed to disadvantage a buyer who needs credit - but as the car sellers actually want buyers to 'buy' via PCPs then we end up with the perverse situation that the cash buyer is not protected from being dsiadvantaged by not using credit.

And then we have the service plans - yes I know there are members on the forum who just adore paying a monthly amount that they argue is good value and I'm the carmudgeon who thinks they are a rip off. Well I'm right and everybody else is wrong on this one. And MB just lurve selling an overpriced (overvalued service plan) to new car customers - and if they can to AU cistomers.

So yes - it's about complete control to maximise what they can extract per vehicle per customer. It's sort of evil but not evil because it's logical approach to maximising business yield.

Which of those things take away choice from the buyer/owner? I think the buyer/owner has a choice on all of them.

- set and hold prices of new cars
Seems fair for the manufacturer to determine the price they sell their products for, but if the buyer doesn’t like it, then they can buy new from another brand, or buy second hand.

- provide finance and lease services on new cars
The buyer can pay with “cash” from savings or other means such as unsecured loan. or by using a third party finance company.

- provide warranties and 'encourage' service plans on new cars.
The buyer/driver is not obliged to use the main dealer for servicing in order to make a claim against a new car warranty.

- take back lease / finance cars and set and hold prices of approved used cars
The owner can settle and keep the car or sell to anyone they choose at the end of the agreement. With a true lease. It will go back to the finance company as it was their car all along. If your assertion is correct and it improves residual values then buyers/owners will benefit indirectly.

- provide finance on approved used cars
They always have. Independent third party dealers and warranties will still be available.

- provide warranties and 'encourage' service plans on approved used cars.
For as long as manufacturers and main dealers have offered these things, buyers/owners/drivers have chosen not to.

I don’t really see much control there, the same choices are available to buyers, owners and drivers as they always have.

 

[st13phil]

Which of those things take away choice from the buyer/owner?

The thing to remember is that new car purchase is a zero-sum game. That the OEM's expect to be advantaged by the agency model in terms of improving their profitability by implication means that the consumer is disadvantaged.

The article I linked in post #77 lists as the primary benefit to OEM's "Full control over pricing" and "better margin". That sounds to me like the customer ends up paying more.

 

[Bobby Dazzler]

The article I linked in post #77 lists as the primary benefit to OEM's "Full control over pricing" and "better margin". That sounds to me like the customer ends up paying more.

Maybe. The obvious source of increased margin for the manufacturer is by tightly controlling the agents margin. Outside of the agency model the main dealer’s margin is as much or as little as the dealer wishes for it to be.

The agency mode also changes volume-based incentives which the manufacturers and distributors paid to main dealers in the traditional trading model, and was the real source of income on brand new cars for main dealers.

 

[Dryce]

Maybe. The obvious source of increased margin for the manufacturer is by tightly controlling the agents margin. O

The less obvious issue of margins involves the manufacturer's finance arm - which has its own incentives for managing prices.