Mercedes-Benz: Dealer board chair says more clarity needed on EV adoption rates

Mercedes-Benz continues to push toward an all-electric future, but that path included some speed bumps for dealers in 2023.

While EVs accounted for 15 percent of the automaker's sales last year, Edmunds data shows Mercedes dealers took an average of 64 days to sell EVs — nearly double the amount of time it took for BMW retailers.

Joseph Agresta Jr., chairman of the Mercedes-Benz Dealer Board, believes the company is on the right path, but says the industry needs to get a better handle on demand and adoption rates throughout the country.

Agresta, president of Benzel-Busch Motor Car Corp., which has Benzel-Busch Mercedes-Benz in Englewood, N.J., and Mercedes-Benz of Orange County in Harriman, N.Y., said figuring out the EV market and how to maximize sales will be among his top priorities this year.

Agresta, 57, spoke with Staff Reporter Michael Martinez about the EV transition, digital retailing and the brand's biggest challenges. Here are edited excerpts.

Q: How was 2023 for Mercedes dealers?

A: Because we're in this industry transition to EVs, the year definitely presented some challenges. I think adoption rates maybe didn't fall into some of the numbers we would have hoped for, which would have made this transition a little bit easier, given all the planning that's gone into it. But I think that the market overall has been favorable for car dealerships. Especially if you look at what Mercedes was able to do at the high end, in the top-end vehicle segment, they really did extraordinarily well with the AMG models, with the Maybach models. So overall, I think challenges existed that made it difficult for dealers but by the same token, if you look at the year and what we were able to accomplish, a lot of those things were very positive.

Last year, you said some of your priorities were to improve communication and protect value for both dealers and the brand. How do you think you did?

From a communications standpoint, I think the dealer board did a much better job overall. It's been an ongoing process for the last couple years and I think we've continued to evolve that.

We held dealer-only calls and webcasts for the full dealer body where it was just the dealer board speaking out directly, conveying our priorities and trying to get feedback directly. We also used that feedback to help shape our national priorities.

Mercedes did a really good job presenting monthly dealer casts. They did a series of meetings talking about planning, new programs. Towards the latter part of the year, they did what they called dealer dialogues. There were seven in a couple different cities around the country. They had a group of dealers at each session, an executive team there, and had the executive team walk through a lot of what they've been working on and give dealers an opportunity to ask questions. I think the combination of improved communication by the manufacturer, improved communication by the dealer board, I'd say it was a successful effort overall.

What are your priorities this year?

In '24, we're looking to try to improve the relationship between the manufacturer and dealers. I think we've got a lot of work there that needs to be done. We're trying to make this as collaborative as possible. I think we're getting there. We finished the year with some really good conversations at our final dealer board meeting. I think we'll continue down that path.

Our biggest priorities are to work with MBUSA and the sales ops team to provide feedback on what's working and not working from a sales aspect. We want to help shape their sales programs in this world where EV adoption rates aren't equal across the country. That's a real challenge for every manufacturer. How do you deal with a California that's at 40 percent or 50 percent EV adoption rate and maybe a New York that's at 15 percent, and others that are at 5 percent. It's very difficult to plan that way and set your programs up accordingly. I think we're doing a pretty good job as a dealer board providing that feedback, and I think Mercedes is starting to create an environment where dealers in each of those categories can find success.

What will be the top challenges for Mercedes dealers in 2024?

Figuring out EV adoption is going to be one of the biggest challenges. Vehicle affordability is an industry issue, and interest rates haven't helped. If we do get some relief on interest rates this year that's certainly going to have a positive impact on the entire industry.

For Mercedes specifically, we're heavy in EVs. We've got six models out there and growing. It's going to represent a bigger percentage of what we do. We're really going to push hard to make this a successful strategy. Given that adoption rates have flattened a little bit, it's going to be on all of us to make this successful.

What do inventories look like? Are you running low on any models?

It probably varies a little bit depending on what part of the country you're in. In the northeast here, we're always looking for more four-wheel-drive SUV product. It's more heavily skewed ICE than EVs. We're always looking for more of our core GLE and GLC product. That's probably the tightest part right now. We've got a lot of great product still in the ICE world and I think there's still a very large pool of our customers that still want an ICE vehicle and are still looking for performance ICE vehicles.

We're seeing a little bit more of an interest in hybrids, and more will be coming from Mercedes-Benz. That's the nice part of this flexible strategy they've taken is that there's a bit of a balance between EV, ICE and hybrid, and they're able to shift over some production to hybrid, so that's good news on our side.

Do you expect leasing rates to rise in 2024?

I do think we'll see more leasing. It's an important part of what we do as a brand. There's an understanding of what leasing can do for brand loyalty. I think we're all hopeful to continue to drive lease penetrations higher wherever possible. It will be an important part of what we're doing with EVs because of the additional tax benefit.

Has Mercedes updated its facility requirements?

There's nothing major from a requirement standpoint. In fact, there may be a little bit of easing of some of our facility inspection requirements. We've had some good conversations. The last few years, both the dealers and manufacturer learned a lot from the current inspection program and kind of set a baseline. Hopefully it will ease a bit of the burden on the dealers and ease a bit of the cost for Mercedes.

I don't have specific details of what it might look like yet. There will be some form of facility inspection out there, but not to the degree we've seen. The past few years, every dealer went through a pretty comprehensive inspection process. Some of that was playing catch-up because of years of not really understanding the baseline of each store. The last two years, Mercedes has done a pretty good job of knowing where every dealer is in the cycle, sending notifications out so we all know where we are in the facility spectrum and when our next renovation requirement would come due. It was a little bit of a reset and now because we have that baseline, it allows us to take some of the pressure out of that system.

Any updates to your digital retail efforts?

I'm super, super excited about where we were able to collaborate and come up with a solution for digital retailing that I truly believe is best-in-class.

It starts with a data-sharing agreement that I also think is best-in-class. We've got guardrails around consumer data and a willingness on the part of the dealers to share information with the manufacturer freely without concerns, because we've identified what we can share and what would be problematic to share. With those guardrails in place, it allowed us to move to a digital retailing solution that really keeps the dealer in control of the transaction and using the tool that best fits our store.

To create a process for the customer, you want it to be a true end-to-end omnichannel solution. You want whatever's working online to also work in the dealership; otherwise what you end up with is a lead provider. And digital retailing shouldn't be that. It should be built to actually make a seamless transaction and take friction out of the system.

We've created a system that's frictionless for the customer, where the dealer can stay in control of the pricing and use the tool that best fits their dealership. I think we've hit the sweet spot. It's live right now. Any vehicle you pick is tied into a dealer's digital retail tool of choice, or the manufacturer's built-in tool. It's up to the dealer to pick which one they want, so it could look like a Roadster solution or a Mercedes solution.

Mercedes in 2022 radically restructured its sales organization and how it interacts with retailers. How has that worked out?

We've taken a position from the beginning of the restructuring that our responsibility was to provide that feedback from the dealers to the manufacturer of what levels of support are working and what aren't. But we need to leave it to them to figure out how to support us best. We're not in a position to tell them how to run their company or structure their teams.

We've done a lot of work with them on providing that feedback. There are some changes that are coming. We had some really good discussions in December, and I think Mercedes is fairly close to announcing a few changes they believe will significantly help the support network to the dealers through the support teams. It will definitely be a topic at NADA.

How can Mercedes improve quality, and what can dealers do to help?

The dealers have a role to play. We're the face to the customer. It's our obligation to make sure we're fulfilling the brand promise through service as best as possible, even when there are fluctuations in quality. We do need to step up our efforts to make sure we're addressing consumer needs as quickly as possible. We obviously require support from the manufacturer in order to do that. I think there's a lot of focus on making sure that happens. Seems like a real willingness from the executive team to make sure we have what we need to take care of customers.

Mercedes has lost significant market share from pre-pandemic years. What's the plan to increase throughput and defend against BMW, Tesla and others?

It depends on the strategy. Mercedes has moved to a little more of a premium strategy, not necessarily as concerned about being No. 1 or No. 2 in every market, which was the case maybe five years ago. Then, the strategy was to dominate the luxury space and be in the top two brands within each space. Now it's about profitable growth and making sure there's sustainability with those efforts.

If you look at our AMG segment, Maybach segment, we're actually growing wildly there and we've done a good job the past couple years of picking up volume at the high end. A lot of that is intended to try and shore up that EV transition as well. Profitable growth is a long-term strategy that requires less of a focus on where are we day-to-day on sales versus some of our competitors.

I do think with evening out of production levels we'll be able to stem the tide of some of those market share losses on some of our core segments. There's still enough ICE product that we can do that properly and profitably. But if mandates stay where they are, we're all going to have to sell a lot more EVs, and that changes the dynamic. Because segments where you're leading now you might not be leading tomorrow unless you're attacking it today. That's going to take time to even out and see where it goes.