No need to fear non-negotiable car sales, Toyota dealers say

A senate inquiry is considering a proposal to introduce set pricing across the auto industry and Toyota says there's nothing to fear.

A senate inquiry is considering a proposal to introduce set pricing across the auto industry. Picture: Supplied

A car dealer group representing Australia’s top-selling brand, Toyota, says there is nothing to fear from vehicle manufacturers introducing a set pricing model to eliminate haggling when buying a new car.

A senate inquiry is considering a proposal to introduce set pricing across the auto industry — a plan Labor opposes, fearing it will lead to consumers paying higher prices and hinder entrepreneurship among car dealers.

It is a model Toyota had introduced in New Zealand, and Honda and Mercedes-Benz had started rolling out in Australia. ASX-listed dealer group AP Eagers has a fixed-price model for used cars under its Easyauto123 brand.

But Labor Senator Deb O’Neill asked National Toyota Dealer Association chairman David Hayes “what would be lost to the Australian people” if the auto industry made all car sales non-negotiable?

“In terms of running a business, things do change. Innovation happens,” Senator O’Neill said.

“One of the arguments that have been put to us is that ‘this is the way of the future, it’s inevitable. This franchise model as it exists is going to fall over and you just need to get used to the new normal where it’s just one fixed price for a car, it’s sent out of the city and too bad, so sad that was an era — it’s gone’.

“If that emerges as a reality, Mr Hayes, what will be lost to the Australian people as consumers and as workers and business owners?”

Mr Hayes said there was no need to fear the changes, citing Toyota’s introduction of a similar model in New Zealand two years ago as an example.

He said that if there were “lots of bad things happening over there”, Australian dealers would know about it.

“Toyota played out this very model in the New Zealand market recently. They put in a 10-year plan for this to be rolled out, so they gave the dealers a lot of time and made them aware of it,” Mr Hayes said.

“They were involved heavily in the changes. Look, it had some rocks on it when it was rolled out as well but because it was a well-planned process, I believe most of the dealers over there are adapting to the changing environment.

“I don’t fear the changes, I think we have to embrace the change that is inevitably coming.”

AP Eagers’ set pricing on used cars via its Easyauto123 brand offers “no haggle” and a “best price guarantee”

In an investor presentation, the company said Easyauto123 model was successful, with the division swinging from an $11m loss in 2018 to a $2.2m profit in the calendar year to date.

Honda and Mercedes-Benz have began introducing set pricing for new cars. Mercedes-Benz Australia/Pacific chief executive Horst von Sanden said 24 dealerships had signed up to the agency model — similar to German white goods maker Miele — for its EQC electric SUV.

Mr von Sanden told The Australian that Mercedes-Benz had begun trialling the model, which it offered to dealers via an expression of interest, after a survey of its customers found 60 per cent preferred a haggle-free experience, while 65 per cent found the process of buying a new car lacking trust and transparency.

When asked if consumers would end up paying higher prices, given an agency model would strip dealers of bargaining power, Mr von Sanden said there would still be deals and Mercedes-Benz still needed to ensure is pricing was competitive.

“It’s a set price and also the best price because we will of course have to price our vehicles ongoing competitively as there is massive competition in the marketplace, so we will set a price that we believe is reasonable,” he said.

Mr von Sanden added that the focus on the upfront price of a new car was also a false economy, given the initial purchase price accounted for about 30 per cent of a dealer’s profit, with after-sales service comprising the remainder.

Australian Automotive Dealer Association chief executive James Voortman said dealers understood “manufacturers have the right to distribute vehicles in any way they deem appropriate”. But, like in New Zealand, Mr Voortman said dealers needed “maximum notice” to adjust to changes.

“Dealers employ people, take on apprentices and undertake capital expenditure on the basis of commitments and assurances made to them by their manufacturer partners. It is simply not good enough for a massive organisation to cut short an agreement and leave the dealers to pick up the bill,” Mr Voortman said.

“I think the jury is still out on whether the agency model will be better for consumers. Consumers have been served incredibly well by the intra-brand competition that exists under the current franchise model. We will have to wait and see whether the downward pressure on prices will continue when manufacturers set the prices.”