Mercedes Thailand Winning Back Gray-Market Customers

BANGKOK – Mercedes-Benz believes it is winning the fight against Thailand’s gray-market vehicle deluge.

Unlike some other auto makers, Mercedes last year bit the bullet and took a tough line, announcing its aftersales dealer network would no longer honor warranties of parallel imports (PI).

At the time, Mercedes-Benz President and CEO Alexander Paufler described the decision as a “measure to prevent risk associated with these vehicles, which have not been factory-customized to suit the driving conditions in Thailand and may incur damage or increase the risk of road accidents.”

He also pointed to a lack of available database information on the models in question at the dealerships.

That aggressive policy seems to be paying off, Martin Schultz, Mercedes-Benz Thailand’s vice president-sales and marketing says, on the sidelines of the recent launch here of the three new completely built-up models the auto maker is bringing to market: the CLS Shooting Brake, CLS 250 CDI and E300 BlueTEC hybrid.

Schultz is adamant about the decision to stop honoring PI warranties. “There is a risk from buying from unauthorized dealers. Our customers must understand who they buy the car from.”

Mercedes has been working hard to become more competitive in order to pull the rug from under gray-market importers, he says, and is seeing a “very strong trend” of returning car buyers. Shultz believes one of the auto maker’s biggest growth areas going into 2013 will come from former customers returning to the fold.

Paufler agrees, noting “a shift in consumer behavior towards buying from authorized dealers” already is noticeable. “Customers can foresee the advantages of buying from an authorized dealer, especially in terms of better cost of ownership and better resale value in comparison with parallel imported vehicles,” he says.

He also cites the advantages of Mercedes’ comprehensive aftersales network, warranties and roadside assistance programs in helping drive customer retention.

“We have understood the market, and we are now offering a much more competitive product,” says Shultz. “We have (a) more customised package (than) the gray market.”

The gray market’s biggest advantage here is speed: Getting new models into the showrooms ahead of official dealers in a city where luxury cars are a strong fashion statement. For example, the three Mercedes’ models launched this week will be used for homologation and registration purposes, with customer orders only starting to be fulfilled in January.

Schultz argues the competitive angle of grey imports isn’t a strong suit anymore. The grey-market CLS Shooting Brake model is priced at about 750,000 baht ($24,480) more than the Mercedes Thailand equivalent. That’s partly due to customers paying for options they don’t need here, such as heated windshields and seats and digital radios that won’t work in Thailand.

Schultz expects the Shooting Brake to take “a big share” of its segment here.

Getting the PI issue under control now is vital, he adds, as Mercedes is gunning hard to raise volumes this year and next. While declining to cite a specific target for 2013, he says to expect “double-digit growth.”

That will be driven partly by the success of its fight against the gray market and also by its continued expansion into new segments. Says Schultz: “There is a lot of potential going into new segments and regaining customers. We are in a good place.”