Despite a pandemic that roiled the industry, Mercedes-Benz dealers are coming off their best year of profitability in nearly a decade and have a slew of electric vehicles on the horizon.
Jeff Swickard is Mercedes-Benz Dealer Board chairman and CEO of Swickard Auto Group, which operates 19 stores in Alaska, California, Georgia, Oregon and Washington. Four of those locations are Mercedes-Benz dealerships. He said the brand's strong relationship with its retail network served it well during the early days of the coronavirus crisis and that dealers are generally upbeat about where things stand, despite losing the luxury sales crown for the second-straight year to BMW.
Swickard, 48, said the company had been receptive to dealers' input on pruning its vehicle lineup and has worked well with them on its electrification efforts, which should help them better compete against brands such as Tesla.
Swickard spoke with Staff Reporter Michael Martinez. Here are edited excerpts.
Q: How was 2020 for Mercedes-Benz dealers?
A: Overall, 2020 was a great year for Mercedes-Benz dealers. While we faced similar challenges that everyone in the industry faced, our partnership with [Mercedes-Benz USA] really made a difference. Outside of March and April, the remainder of the year demand was strong, and profitability increased significantly throughout the dealer network in 2020.
Were you pleased with the company's response when the pandemic hit?
Absolutely. Mercedes-Benz was decisive in their actions and made changes that really impacted our business in a positive way. The communication was outstanding, and they really worked with the dealer board to come up with solutions that helped the dealer body. The best example of this is the quick actions they took to guarantee dealer bonus performance monies, which were really critical to our success. Mercedes-Benz Financial Services played a huge role in this as well with their swift decision to allow deferments of payments for all types of wholesale and real estate accounts; it really gave the dealers breathing room as things like the PPP were being instituted.
How did the pandemic affect Mercedes-Benz dealers' digital retail plans?
I'm sure it accelerated the process for many dealers. At the start of 2020, dealers were in varying stages of having digital retailing, but all dealers made big movements forward, many out of necessity. The reality is our customers want to be able to interact with us in physical showrooms and in the digital environment, and we need to be able to meet them wherever they want to shop.
Has Mercedes-Benz been flexible with physical facility requirements in light of the pandemic?
I think Mercedes is being really smart in how they are adjusting their requirements to reflect the new environment we're all in. But this just continues a trend that started several years ago where they've partnered with dealers to work together on facility solutions. As a luxury brand, our dealers still need to have a level of fit and finish that reflects the type of products we are selling; I think we all understand that.
What Mercedes has been good with is engaging in individual solutions to say, maybe we don't need quite as many cars in the showroom as we used to, more of the shopping can be done with digital tools.
I think M-B has been ahead of the curve with their current generation of facility requirements, and the events of 2020 have just reinforced this. We still need to provide convenience for our guests with a luxury feel, and MBUSA is working with the dealers to ensure this happens.
How are profitability levels at this point in the pandemic? How sustainable are current vehicle margin and profitability levels as inventory levels improve?
Looking at the network as a whole, profitability is as strong as it's been in the last eight or 10 years. Margins are better simply as a result of supply and demand on the new-vehicle side. Dealers also really had to look at the expense side of the business and make some tough but necessary decisions that helped to drive bottom-line results in 2020.
When it comes to sustainability, I think there are several factors that come into play. From the OEM side, ensuring we don't have too much inventory is critical, but it's also important that we maintain strong levels of inventory, especially in SUVs. It's a balancing act, and so far MBUSA really has done a good job.
On the dealer side, it's important that we remain diligent about expense control. As the business evolves into more digital areas, we must constantly look at our processes and see if we are delivering the level of service our guests want. In some cases, we may have to spend more in certain areas but might be able to offset that in other ways.
Is Mercedes-Benz doing enough to promote certified pre-owned sales?
I believe they are. CPO and the pre-owned business overall have always been a big focus for MBUSA and the dealers. The reality in the luxury business with the levels of leasing we have is, you have to think about how you are going to sell that vehicle again three years later when you are leasing it the first time.
This has meant a big focus on CPO for the last 15 to 20 years. When the market shifted this year and pre-owned became a bigger focus for everyone, I think the M-B dealers were well positioned to take advantage of that shift. M-B didn't really have to make any changes in programs, as they were set up well.
Are inventory levels in line with what dealers need?
Overall, yes. Of course, at the model level there are always things we could use a little more of or a little less of, but at the macro level things have gotten better in Q4. The U.S. market is so focused on SUVs that as long as we maintain good levels of SUV inventory, we'll be in good shape overall.
What was the most important product for Mercedes-Benz dealers in 2020?
That's a tough question; I think they're all critical to our success. Certainly the 2021 E-Class being named MotorTrend Car of the Year for 2021 is a nice accolade, but the most important products in today's market are SUVs. We have such a great product range now, from the all-new GLA, which debuted in 2020 and such a big step up from its predecessor, to the GLB, which was a huge hit in its first full year, to the GLC and GLE, the real core of the business, to the GLS at the top end of the lineup. And of course, the iconic G-Class.
So it's really about the lineup as a whole more than one single product, in my mind. We have an SUV for every buyer, which is really important these days.
Do you agree the lineup needs to be simplified?
The dealer board did ask for Mercedes to work on our product simplification initiative to reduce the amount of model variants imported to the United States. I feel like they took us really seriously, and they made a lot of changes we'll see in 2021 and 2022. I think we'll continue to see them simplify their product lineup.
Which model lines do you think need to be trimmed?
I'll leave that to the experts to decide. The dealer board has been in close contact with MBUSA over the last several years providing input on where we think there is redundancy within the model lineup. To their credit, they've listened and made changes that make sense. Consumer preference changes over time, and we've adjusted, and are continuing to adjust, to meet those demands.
What challenges will Mercedes-Benz dealers face in 2021?
I think 2021 will continue to see some of the challenges of 2020 evolve. It's not easy doing business daily in a pandemic. It takes a lot of discipline on the part of each individual in our organizations to ensure we are following all safety protocols on a daily basis. If you let your guard down for even a few moments, it can have real consequences for your staff and guests. So keeping everyone focused on following the safety processes that are in place and not getting complacent is key. Beyond that, we just need to continue to stay focused on how our customers want to engage, especially as regulations change in different states and local municipalities.
Are incentives in line with what dealers need?
I believe they are. Again, at the micro level there are always things that could be slightly tweaked, but at the macro level I feel like the support has been there throughout 2020 to stay competitive.
Is Mercedes-Benz adequately advising its dealers on how to prepare for such changes as new mobility services, the advancement of autonomous vehicles and more vehicle electrification?
At the global level, Mercedes-Benz and Daimler have made massive investments in the future of business, in electrification, autonomous driving and mobility. MBUSA has been talking with dealers about these topics for years. I think Mercedes made a really smart decision to hold off on introducing the new electric vehicles until the EQS was ready. Launching with a flagship vehicle is really going to make a statement that Mercedes-Benz is a player in the full-electric space and can provide a real alternative for customers to Tesla.
Almost every brand, including Mercedes-Benz, has big electrification plans. Do you actually see U.S. consumer demand for all these EVs?
Overall consumer preference is changing slowly over time. Like many shifts in buying habits, things don't just adjust overnight; progress is made incrementally. It's safe to say many consumers are considering EVs that wouldn't have in the past, and that number continues to grow. Just as importantly, consumers really seem to like the flexibility and additional efficiency that PHEVs provide. Not everyone is ready to give up the ability to drive as far as needed at any given time, and PHEVs provide many of the benefits of full BEV with the option of a traditional internal combustion engine as needed.
What are your thoughts on Mercedes-Benz's decision to launch the EQ brand in the U.S. with a high-end sedan instead of a crossover?
I think it's a great decision, and the [dealer board] was strongly in favor of this strategy. Tesla has established an incredibly strong grasp of the overall BEV market, and to really make an impact on consumer consideration, you must have a product that makes people sit up and take notice.
The S-Class has been the flagship of the Mercedes-Benz brand for decades and is the pinnacle of luxury sedans. Why not launch into the space with our best foot forward and show potential customers what the brand is capable of when it comes to electric performance? Of course, SUVs and crossovers are a strong majority of sales today, and ultimately, we need strong products in these segments as well to meet volume targets.
Mercedes had major production issues around the GLE unrelated to COVID. How did that affect sales, especially since BMW again topped Mercedes-Benz in the luxury sales race?
It hurt to not have as much GLE production as we anticipated; you can't argue that. I think Mercedes-Benz did a great job of managing the allocation they did have available to try to get it where consumers needed it the most. As for the sales race, I think that's something the OEMs and media put way more focus on than dealers or customers do. I've never had a guest come into one of our dealerships and say they wanted to purchase a vehicle because we won the luxury sales crown.
How are dealers reacting to the eSprinter coming to the U.S.?
I think they're excited, I know we are within my organization. The Sprinter is a clear leader in quality and performance at the top of the commercial van segment, and to have the flexibility of having this in a full-electric model is something we're looking forward to.
Ford Motor Co. and General Motors have made news about their own electric vans. Do you think Mercedes-Benz has a chance to really compete in the commercial EV space?
Absolutely. Daimler, the parent company of Mercedes-Benz, is the global leader in commercial vehicle production by a strong margin. This a real core competency of the company, and this is reflected in the commercial vans that we produce.
I might flip the question and ask if Ford or GM really have a chance to compete with Mercedes-Benz.