Home: Motoring > Automobile hot topic Q&A (Ep.204)

MB “Engine Oil Leak” incident is closing file, automaker-dealer relation needs a change

From:Internet Info Agency 2019-05-30 17:50:02

Author:He Lun, IIA’s Co-Chief Content Officer, Deputy Head of IIA Academy of Auto

Automobile hot topic Q&A (Ep.204)


The Mercedes-Benz engine oil leak incident has once again become a hot spot. On May 23, Mercedes-Benz and authorized dealers issued the "Services Agreement", reaffirming the legal compliance business philosophy and proposing relevant measures. On May 27th, the market supervision department of Xi'an High-tech Zone reported the investigation and processing results of the incident, and found that the vehicle involved in the incident, the Mercedes-Benz CLS300, had defects in quality. Mercedes Benz 4S dealership, Xi'an Lizhixing Auto, had two illegal acts that exaggerated and concealed information and misled consumers. The act was punished by a total fine of 1 million yuan. Subsequently, Xi'an Lizhixing Auto issued a statement expressing sincere apology and accepted the punishment. On the same day, one of the protagonists of the event, the car owner, said on social media platform Weibo that "the Mercedes-Benz incident is really coming to an end...".

Q: Do you have any comments on the fine of 1million?

A: I won’t comment on how much the fine should be. But I suppose it is regrettable that this incident has not received enough attention from the regulatory authorities. I think the regulatory authorities also need to introspect themselves on the incident and improve their complaint mechanism.

Q: I remember that you said at the beginning of the incident that Mercedes-Benz is very helpless. It can't manage the dealers and is afraid of breaking the Anti-Monopoly Law. But until now, I have never seen anyone else raise this question. Do you have any comments?

A: You can see that Mercedes-Benz wrote this in the April 16 statement: "4. In accordance with relevant laws and regulations..."

The laws mentioned here refers to the “Anti-Monopoly Law” and the “Car Sales Management Measures”. There is also an “Anti-Monopoly Guidelines for Car Industry” Exposure Draft. Its third paragraph (1), (6) of Article 2 are relevant to this incident. But this draft has not enacted yet.

As for the “Car Sales Management Measures”, its amended Article 18, 19, 22, and 24 are all relevant to this incident. However, these measures have insufficient coverage and binding force.

It can be said that from the beginning of the automobile anti-monopoly storm since 2014, there have been disputes and penalties for manufacturers of large and small. Especially after shaking the industry's Mercedes-Benz, BMW, Audi dealers "defense rights" storm, the relationship between some of the mainstream joint-venture brands has changed from the former manufacturers to the absolute, to the dealers to a considerable degree of laissez-faire, simply said that it is overkill.

Q: I remember that you are very optimistic about the Mercedes-Benz relationship. However, it seems that this relationship has a problem now?

A: Yes, I have always been very optimistic about Mercedes-Benz's efforts to improve the relationship between manufacturers, mainly because it gave up the traditional practice of backing up inventory to dealers, and negotiated sales targets with dealers. I have always believed that backlog inventory is the root of all evil.

On the other hand, the vendor relationship is much more complicated. For example, the dealer has done bad things and damaged the manufacturer's brand. If the dealer is punished, it is not an "equality relationship" and is suspected of breaking the relevant laws and regulations. If you don't punish, it is regardless of the dealer. Mercedes-Benz is deeply immersed in this dilemma. This is the case. After receiving complaints from the owner, there was nothing to do with the dealers, which caused the situation to deteriorate. It is only after a period of time after the incident that a statement is issued.

Q: Do you think this sensational incident will have an impact on the introduction of the “Anti-Monopoly Guidelines for Car Industry”?

A: I hope so. This incident is a classic case and I believe it should be helpful to the relevant departments in formulating relevant regulations. After all, the ultimate goal of enacting the Anti-Monopoly Law is to protect the interests of consumers. Therefore, the adjustment of the manufacturer relationship must meet this goal. At present, the "Guidelines" are mainly aimed at price monopolies and suppliers' restrictions on dealers. On the other hand, if the authorized dealer damages the consumer's interests in the service and damages the reputation of the supplier's brand, whether the supplier should be managed or not, to what extent, and where is the limit. If the supplier is forbidden to refuse to supply the dealer or cancel the distribution agreement in advance without justified reasons, then what reasons are justified and unjustified. These are the questions that need to be clearly answered in the Guidelines.

This time, Mercedes-Benz and dealers jointly formulated the "Services Agreement", which is a re-adjustment of the over-corrected vendor relationship in the anti-monopoly context, which can provide a reference for the industry.

Q: Many media have pointed out that Lei Shing Hong Auto (LSH), the parent company of Lizhixing, is one of the shareholders of Mercedes-Benz China, accounting for 25% of the shares. Their bosses are also the chairman and director of Mercedes-Benz (China). The problem seems to be inside. What do you think?

A: Do you think that Mercedes-Benz enjoys the relationship with LSH? It is earning the money as the general agent and dealers simultaneously, and the allocation of resources is also imbalanced. It holds 40% shares of the network of its dealers. Mercedes dealers have long complained about this.

What’s worse, Lizhixing has made trouble for Mercedes-Benz. The parent company not only did not punish it, but privately asked a financial media not to mention LSH when reporting. This leads the public's attention to the Mercedes-Benz. There is absolutely no shareholder responsibility for doing so. Sadly, Mercedes-Benz has no way to do this.

However, this incident offered Mercedes-Benz an opportunity to eliminate or minimize the impact of LSH in Mercedes-Benz China. After all, the negative impact of the incident is too great, and this relationship must have some change.

Q: Some media said that Mercedes-Benz's sales in April increased by 0.8% year-on-year. Mercedes-Benz, who has been in the air of public concern for a long time in the past, still "laughs to the end." A company that can stand up in the cold winter must have a sufficiently strong system, especially the product performance level must have extraordinary strength. Some media also said that consumers did not choose to give up Mercedes-Benz because of the "oil leak" incident. The sales data proves that the market does not believe in tears, and that good products can guide consumers to pay the bill. Obviously, in terms of comprehensive product performance, the influence of Mercedes-Benz as a leader has never been shaken. This incident, not only did not affect the sales of Mercedes-Benz in the Chinese market, but may have played a certain role in boosting. Any comments?

A: In this context, I don't think this is praising Mercedes-Benz. No doubt, its sales in April did increase year-on-year, but fell by as much as 15% month-on-month. In addition, BMW sold 57,000 vehicles in China in April, an increase of 18% year-on-year, surpassing Mercedes-Benz's 56,000 units. Does Mercedes really benefit from this incident? 

Editor:He Lun