Mercedes-Benz Korea’s direct sales to reshape retail paradigm: experts

Mercedes-Benz Korea CEO Mathias Vaitl speaks during a press conference in Busan, April 4. Courtesy of Mercedes-Benz Korea

Mercedes-Benz Korea’s direct sales model will reshape the retail paradigm in the imported car market here, as more carmakers are expected to jump on the bandwagon once the system proves successful without any steep price hike, experts and industry officials said.

The local subsidiary of the German carmaker introduced Monday the “Retail of the Future” sales model under which its headquarters will directly control each vehicle’s pricing and sales.

The carmaker had so far partnered with a group of dealerships for its sales, but consumers will not be able to see any surprise discount campaigns offered at dealers’ discretion due to the reshaped sales model.

The core of the new system is a unified structure integrating pricing and inventory, which had previously varied by dealership. This will allow customers to purchase vehicles under the same conditions nationwide, regardless of location.

Mercedes-Benz Korea believes the new sales model will eliminate pricing opacity, as customers will be able to focus solely on the vehicle model and brand experience, rather than negotiating prices with dealers.

The automaker has already introduced the direct sales model in 12 countries, including Germany, the United Kingdom and Australia, and is now expanding it to Korea.

A retail facility for Han Sung Motor, the official dealer for Mercedes-Benz Korea, in Seoul / Courtesy of Han Sung Motor

Imported carmakers that have yet to adopt a direct sales model are taking a wait-and-see approach, closely monitoring initial market reactions to Mercedes-Benz Korea’s latest move.

The first imported car brand to introduce direct sales in Korea was Tesla Korea, which implemented a 100 percent online sales model without dealerships.

Polestar Korea also adopted a direct sales approach upon entering the Korean market in 2022, while Honda Korea transitioned to a manufacturer-led sales system in 2023.

Given that Tesla and Polestar — both relatively new players in Korea’s imported car market — have seen rapid sales growth, industry observers expect more automakers to adopt similar systems if Mercedes-Benz Korea maintains decent sales performance under its new system this year.

Stellantis Korea, which imports the Peugeot and Jeep brand, is already operating a consignment sales system similar to direct sales.

Meanwhile, BMW Korea, which ranked first in imported car sales in Korea last year, is not considering adopting the direct sale system here.

“We will not follow the same footstep of Mercedes-Benz Korea, as we empower dealers, so they can expand their interaction with customers more deeply either via promotional activities or other ways,” a BMW Korea official said.

BMW also adopts the headquarter-controlled sales system at some of its European markets, but the carmaker considers it unnecessary to introduce a similar policy in Korea for the time being, according to the official.

However, some critics argue the adoption of a fixed pricing system could reduce price competition among dealers, potentially limiting consumer choice and bargaining power.

In particular, consumers may no longer benefit from “unofficial additional discounts” or discretionary services previously offered by sales representatives, which could ultimately increase the overall cost of purchasing a vehicle.

Despite the downside, experts expect more carmakers to follow the same footsteps in their sales system from a long-term viewpoint.

Mercedes-Maybach S 680 luxury sedan / Courtesy of Mercedes-Benz Korea

“A growing number of consumers purchase vehicles online at ease, and the role of dealers will keep shrinking, which has become a new trend in the auto industry,” said Lee Ho-geun, an automotive engineering professor at Daeduk University.

“For luxury carmakers, such as Mercedes-Benz, keeping a predictable price level for their vehicles is very important to maintain their premium image,” he added.

Kim Pil-soo, a professor of automotive technology at Daelim University, urged Mercedes-Benz Korea to minimize any possible price increase for its customers.

“The new sales model by the carmaker is a step in the right direction for its brand value, but the company will have to minimize the price hike to win more trust from customers,” he said.

In response, Mercedes-Benz Korea emphasized that the direct sales policy and vehicle prices are separate issues.

The logo of Mercedes-Benz is seen during the press preview for the New York International Auto Show at the Jacob Javits Convention Center in New York City, April 1. AFP-Yonhap

“Rather than leaving discount policies to dealers, the headquarters will manage them and provide the most attractive pricing based on supply conditions,” an official from the carmaker said.

“We do not stop any promotional activities to customers even with the introduction of the new retail policy.”

With the shift to direct sales, authorized dealers are expected to focus more on their core roles, such as customer consultation and service, rather than price negotiations, according to the carmaker.

Industry officials also echoed a similar view with the auto experts.

“Maintaining consistent pricing helps preserve the premium brand image, but applying uniform prices nationwide could lead to higher prices overall,” an auto industry official said.

“The carmaker is tasked with proving that the new sales model will be of actual help to customers.”