BRESCIA, Italy – Smart dealers say they are happy with the brand’s change to a direct-sales agency model, which the joint Mercedes-Geely brand initiated last year by negotiating new contracts ahead of the launch of the #1 full-electric small SUV.
“We are happy about the commission structure we are getting for the #1; our only complaint is that we need more product, so we don’t have consumers waiting for too long,” Ossuama Kaddoura, a Paris-based dealer who is also president of ASP (Smart Partner Association) told Automotive News Europe last week on the sidelines of a dealer event in Brescia.
On the #1, Smart agents get on average a fixed 7 percent commission on prices that start at 41,490 euros in Germany. The #1 is invoiced to customers directly by Smart Europe, a 50-50 joint venture between Mercedes-Benz Cars and Zhejiang Geely Holding Group of China.
On the electric ForTwo EQ city car, dealers – who still sell this model under a franchise contract with Mercedes – get an average 15 percent gross margin on prices that start at 19,262 euros in Germany. The ForTwo, a holdover model from when the brand was fully owned by Mercedes, will continue to be sold until 2024.
The commission on the #1 and average margin on the ForTwo are about the same, but dealers earn more on the #1 because they do not have to bear marketing and inventory costs, which under the agency model are the automaker’s responsibility.
Under a franchise contract, dealers must absorb those costs.
“What we really need to be happier is more product, because we see a 20,000 to 25,000 units potential for the #1 in Europe, but only Germany is getting deliveries at the moment,” Kaddoura said.
More and more automakers are moving to the agency model in an effort to cut distribution costs and gain a closer relationship to their customers. Mercedes has already started using the model in the U.K.; Volkswagen Group is using a form of the scheme for its full-electric cars; and Stellantis is negotiating with its dealer network as it prepares to introduce its version of the sales model starting in the middle of this year.
Smart Europe CEO Dirk Adelmann told ANE that COVID-related lockdowns in Shanghai at the end of last year affected the ramp up of #1 production, and the company had to revise the timing of the model’s European launch.
Smart’s supplier base is in and around Shanghai, and the shutdowns in that area significantly affected production.
Smart opened orders in January but only in Germany; deliveries of the first 700 cars to arrive in Europe began in mid-March. To avoid even longer wait times, Smart has delayed the opening of orders in France, Italy and Spain until June from March.
Other selected European markets, including the U.K., will follow from September.
Kaddoura said that one advantage that Smart has over other electric brands coming from China is that it can rely on Mercedes’ existing network for service and parts distribution.
“A workshop would not survive if it had to service only small quantities of electric cars, while for Mercedes dealers Smart is added business,” he said.
Kaddoura said that Smart’s plan to have 100 percent of its sales completed online should not affect his members’ bottom lines. Dealers will receive a commission even on cars that are sold online.
“We expect 80 percent of customers to come to our premises to touch and feel the car they want to buy,” he said.
Smart dealers will deliver the car to all final customers, giving them another opportunity to create a relationship and also offer services to those who had bought the car entirely digitally, Kaddoura said.
Smart has about 160 dealer partners and 300 points of sale in Europe.