As a number of automotive companies experiment with non-negotiable fixed prices for new cars Australia, a special investigation by Drive has found the Top 12 mainstream brands have ruled it out.
EXCLUSIVE
In a major win for new-car buyers in Australia, the ability to drive a bargain is set to continue for the foreseeable future after the Top 12 mainstream automotive brands said “no” to a possible switch to non-negotiable fixed prices.
A special investigation by Drive – which surveyed the Top 12 mainstream car companies in Australia which sell 80 per cent of new vehicles – found none are about to move to the fixed-price business model adopted by Japanese company Honda and German giant Mercedes-Benz.
A number of other car companies were reportedly considering dipping into the dealer’s profit margin to offset the rising costs of vehicle technology, development, and manufacturing.
However, plans for a more widespread adoption of fixed prices for new cars in Australia appear to have been scrapped before they had a chance to gain momentum.
The majority of car dealers have rallied against the fixed-price showroom structure, and analysts say the non-negotiable business model in other countries has led to higher transaction prices for consumers.
The car industry refers to the fixed-price scheme as an “agency model” – because dealers are merely selling agents who are paid a set fee to handle the handover of each car, rather than owning the showroom stock and having flexibility on price.
However, “agency model” is in fact an industry byword for “fixed pricing”.
Honda switched to non-negotiable fixed prices from July 2021 and sales have since halved; the company says it needs about a year for customers and the business to adjust to the new structure.
Mercedes-Benz is poised to follow with fixed prices across all Australian showrooms from January 2022, despite legal challenges from some of its dealers.
US electric-car specialist Tesla has sold vehicles directly at non-negotiable fixed prices from day one in Australia, though it does not operate a traditional dealer network here or overseas.
Supporters of the fixed-price business model say it is fairer for new-car buyers – because prices are the same at every dealer – but automotive retail experts in the US have repeatedly warned the process leads to customers paying higher transaction prices.
The Australian Automotive Dealers’ Association (AADA) has welcomed the news that most mainstream car companies in Australia are not considering a switch to fixed prices locally, and says the decision is a win for new-car buyers.
“The current dealer business model has served consumers, car companies, and dealers well for a long time,” said James Voortman, the CEO of the AADA.
“It remains a solid approach which allows car companies to focus on what they do best – which is manufacturing state-of-the-art vehicles – while dealers focus on ever-changing customer needs.”
The AADA added: “Although we accept that new approaches to vehicle sales will emerge, we ask that car companies work closely with their dealer partners and, when appropriate, compensate them for the massive capital investments, time, and effort they have dedicated to their customers, their showrooms, and their service centres.”
The results of the Drive survey of the Top 12 mainstream automotive brands in Australia delivered a unanimous response, with one exception on one future model.
Korean car giant Hyundai is dabbling with fixed pricing for its upcoming Ioniq 5 electric car – and its luxury offshoot Genesis – however Hyundai is among the long list of mainstream automotive brands with no plans to make a permanent switch to non-negotiable fixed prices.
Market leader Toyota – which has non-negotiable fixed prices in neighbouring New Zealand – says it has no plans to adopt such a business structure in Australia.
“Toyota Australia’s relationship with our franchised dealers is characterised by mutual trust and respect,” said a statement issued to Drive from Toyota Australia.
“This has been instrumental in our shared success over an extended period in Australia. We have no plans to change our retail model in Australia. We will continue to work closely with our dealers as we address the changing landscape of the automotive industry.”
Japanese company Mazda – the second biggest-selling car brand in Australia – told Drive “the answer is no” when asked if a switch to fixed pricing was being considered for the local market.
The boss of Kia Australia, Damien Meredith, who has helped drive record growth locally – including overtaking sister brand Hyundai on a number of occasions – responded with an emphatic “no” when asked by Drive about a possible switch to fixed prices for new cars.
“You go into a partnership with your dealers,” Mr Meredith told Drive. “The whole idea of the partnership is for both sides to grow. We’ll continue with the current arrangements. There are no plans (to adopt a fixed-price business model) whatsoever.”
A statement from Ford Australia said: “We have no plans to move to a (fixed-price) business model, and see our dealers as vital to the success of the Ford brand, and an important touchpoint for customers to experience our brand.”
Ford learned its lesson the hard way, having invested hundreds of millions of dollars 20 years ago buying Ford showrooms across Australia, only to sell them back to dealers at a fraction of the purchase price five years later (2000 to 2005).
A Mitsubishi spokesperson said the fixed price sales model “isn’t on the table,” while affiliate Nissan said there are “no plans for a fixed price or agency model for Nissan in Australia.”
Chinese brand MG – which has surged into the Top 10 for the first time this year – said: “MG Motor has no plans to implement a fixed price/agency sales model” in Australia.
The distributor of Subaru cars in Australia – Inchcape – owns seven Subaru showrooms in Melbourne, six in Sydney, and two in Brisbane, but says it has no plans to introduce fixed prices across its national network.
A statement issued to Drive said: “Subaru Australia does not have plans to introduce an agency model and the physical (dealer) network remains a vital part of our business.”
The boss of Suzuki Cars Australia responded with a flat “no” when asked if fixed pricing was being considered.
A statement from Isuzu Ute Australia said: “The fixed-price … sales model is not something that Isuzu Ute Australia and the … dealer network is considering.”
Volkswagen Australia said there is “no discussion about Volkswagen or Skoda moving to a (fixed price) business model” – even though the VW-owned Cupra brand will initially launch with online fixed-price sales when the first cars arrive early next year.
While some luxury car brands are considering fixed prices for selected models, the good news is the 12 car companies that sell 80 per cent of new vehicles in Australia are, for now, committed to giving buyers the opportunity to drive a bargain.
The post Win for new-car buyers as Top 12 brands vote against fixed prices appeared first on Drive.
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