KUALA LUMPUR (May 12): Hap Seng Consolidated Bhd announced it is in discussions with Mercedes-Benz Malaysia Sdn Bhd (MBM) to shift from its present dealership distribution model to an agency model.
This came after Hap Seng’s wholly-owned unit Hap Seng Star Sdn Bhd (HSS) and MBM inked a memorandum of understanding (MOU) to commence negotiations over the proposed business model change, according to the diversified group’s bourse filing on Friday (May 12).
“HSS will continue to represent MBM for Mercedes-Benz passenger vehicle sales in Malaysia, albeit the proposed change in business model,” Hap Seng explained. The MOU is to remain effective for six months unless either party issues a notice of early termination.
While specifics behind the shift in business model were not disclosed, the shift to an agency model proposes the removal of middlemen — dealerships — in reaching out to the market.
According to Hap Seng’s 2022 annual report, its automotive segment operates 10 Mercedes-Benz passenger car dealerships across the country — six in Klang Valley, and one each in Iskandar Malaysia, Melaka, Kota Kinabalu and Kuching.
Besides HSS, Mercedes-Benz’s other large dealer in Malaysia is Cycle & Carriage Bintang Bhd, which was delisted in September last year after being privatised by Jardine Cycle & Carriage.
Looking elsewhere, MBM’s counterparts have already embarked on a similar transition.
In Australia, Mercedes-Benz did away with dealerships and adopted an agency model in January 2022. Under the model, the car manufacturer retains ownership of the cars while dealers become agents that sold cars at a fixed price for a set commission.
According to a Reuters report back in April, this transition is also slated to take place in Germany in the second half of 2023, and 80% of the European market is to be migrated to the new system by 2025.
For the financial year ended Dec 31, 2022 (FY2022), Hap Seng’s net profit rose 5.58% to RM950.66 million from RM900.43 million a year earlier, as revenue climbed 18.26% to RM7.11 billion versus RM6.01 billion previously.
Hap Seng’s automotive segment contributed RM1.75 billion, 24.59% of the group’s FY2022 topline, higher than RM1.21 billion in the year before, on the back of higher vehicle sales.
“Generally, passenger car sales benefitted from the backlog deliveries of stocks from its principal which enabled it to fulfil some of the orders received prior to the expiry of the sales tax exemption on June 30, 2022, for cars which are to be registered by March 31, 2023,” it said in a filing back in February.
Shares in Hap Seng closed one sen or 0.21% lower at RM4.74, giving the group a market capitalisation of RM11.8 billion.
Read also:
Cover Story: Removing the middleman – a disruption in the automotive industry
https://www.theedgemarkets.com/article/cover-story-removing-middleman-%E2%80%93-disruption-automotive-industry