Mercedes dealers in U.S. could be overwhelmed by wave of off-lease vehicles, remarketing boss says

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NEW YORK -- Mercedes-Benz USA expects its dealership network to be overwhelmed by a tsunami of off-lease vehicles at some point, forcing the brand increasingly to sell those vehicles through non-Mercedes dealers.

“We’re going to be having something like 200,000 units coming back at some point,” Stephen Nicholson, the company’s remarketing manager, said during a panel discussion Monday at a conference here.

Mercedes’ off-lease “numbers are going to get pretty big down the road. We’ve been leasing at 40, 50, 60 percent for a long time,” he said.

Mercedes dealers have first dibs on off-lease units. Nicholson said the company already sells a lot of units to non-Mercedes-Benz dealers, but that proportion logically would increase as overall volumes increase.

He said “further engagement with non-Mercedes-Benz dealers” is a way to have “the appropriate number of eyeballs on the vehicles.”

‘Struggle’

“Matching the demand with the volume is everyone’s struggle,” Nicholson said. “We have 365 dealers. We don’t have plans to add 365 more.”

At one point, Nicholson said Mercedes-Benz USA’s annual U.S. sales could top 400,000 units by around 2020, about a 20 percent increase from record U.S. sales in 2013 of 334,344. But spokeswoman Donna Boland called that an “old number” in an email to Automotive News.

Citing comments by Mercedes-Benz USA CEO Steve Cannon, Boland wrote that the 400,000-units figure was an “orientation” number that the company had used, along with others, for some planning scenarios at least two years earlier. Cannon, she wrote, “noted that quite a bit has changed since then.”

Tom Webb, chief economist for Manheim Consulting, said at the conference that the increase in off-lease volume industrywide means several brands will need additional remarketing channels, including new-car dealers who sell other brands and independent used-car dealers.

‘Critical mass’

“We don’t usually comment on individual brands, but he [Nicholson] makes the case. Mercedes and others have a large volume coming back that they can’t totally absorb using their own dealers. They know it,” Webb told Automotive News.

That echoed comments earlier in the conference from another speaker, Robert Hollenshead, founder and president of wholesaler R. Hollenshead Auto Sales, Inc., of Manheim, Pa., who talked about the need for what he called “critical mass remarketing.”

The annual conference was sponsored by Automotive Resource Network, of Rio Rico, Ariz.

You can reach Jim Henry at autonews@crain.com.


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