Mercedes-importers T. Gargour & Fils were not spared the economic winter that beset the first half of 2005. The company had expected it to be a bumper year with sales hitting 500 units but instead witnessed a 5% drop on 2004, when the company sold 437 units.
The good news is that, although unit sales dipped, revenue rose by around 15% – or $8 million – from $52 million to $60 million because Gargour & Fils were able to sell higher bracket models, in particular the new S-Class.
“Last year, we sold a lot of the most expensive model, the S-Class, which was introduced in September 2005,” said Gargour & Fils Deputy General-Manager Joseph Zoghbi. By the end of the year, Gargour had sold over 75 units of the flagship model, which in Lebanon sells for between $130,000 and $200,000. Marketing-wise, Gargour went all out on the year-saving S-Class. “We invited our clients to a big event, a dinner, a show,” Zoghbi recalled.
Marketing offensive
The push paid off. S-Class sales helped push Gargour & Fils into an undisclosed profit. Selling Mercedes in Lebanon is a challenge despite the nation’s love affair with the German legend. Local prices range from $40,000 for the smallest Mercedes car, the C-Class, up to a staggering $1million, or thereabouts, for the exclusive SLR MacLaren. In a few weeks Lebanon will be treated to the new V-Class which will retail from $35,000.
But while the high end models are performing, could it be that the nation is bored with a brand that, as well as luxury excellence and performance is also synonymous with taxis and social climbers. Might the Lebanese consumer be becoming more discerning? According to Zoghbi, this is nonsense. “No. On the contrary. Everybody in Lebanon wants a Mercedes. Overall, including used cars, the best seller in Lebanon is Mercedes. Not everyone can afford a new one though.” Zoghbi said no figures were available indicating what portion of Mercedes sold annually in Lebanon was used. But he said that used cars accounted for around two-thirds of all cars sold every year.
Not one to be put on the back foot, Zoghbi even insists that unit sales are actually on the way up, despite the political blips. “Politics affects sales item figures. But since 2000 we have been going up. Business was affected in 2005 because of the political situation and the bombs, but we were expecting to sell more than 500 cars. And the year had started that way. January was a very good month, as was February, until the assassination. The political situation really affected us. We hope that it will improve in 2006. We expect to sell more cars this year, especially since we have new models coming in.” He said he conservatively expected to sell “around 500” cars in 2006, more than 100 of them the V-Class, sales of which he predicted would continue to rise in 2007. And projected revenue for 2006? Similar to 2005, he said.
After-sales
Among the new models expected are the sprawling, luxurious “American-size” R-Class – a new-concept blend of MPV, estate and off-road ingredients as well the more compact, but still equally innovative, “European-size B-Class.”
Zoghbi said that in the luxury S-Class-type segment, Mercedes had no competitors in Lebanon. In pure overall unit sales figures, though, BMW, as a rival German manufacturer also associated with luxury, is the primary competitor. “And now the Japanese are entering the luxury segment in Lebanon with cars like the Nissan Infiniti. We must be concerned by them,” he admitted, before asserting confidently, not to mention predictably, that, “everyone in Lebanon wants a Mercedes.”
Gargour & Fils go back a while. They’ve been importing Mercedes since before the Second World War. In fact, they were the pioneers of Mercedes sales across the Middle East.
“In the 1950s, we were very aggressive in the market,” said Zoghbi. “You can still see in Lebanon, as old taxis, some of the Mercedes that we sold in the 1950s.”
Lebanon’s 15-year civil war, though, took a massive bite out of business for Gargour. “During the war, business was very bad,” mused Zoghbi. “But Gargour kept on all the employees. They lost money, because of the lack of business, but they didn’t kick anyone out.
“After the war, they invested in the Mercedes dealership again. We have since reached European standards, mainly on the after-sales side – which is very important. We have invested a lot in after-sales, in tools, training and equipment. We have German people taking care of it. Today, we are considered an after-sales leader in the Middle East.”
Gargour pays particular attention to the luxury element in its marketing campaigns, but is increasingly also trying to lower the customer age bar. “Everyone in Lebanon considers Mercedes as a luxury brand,” Zoghbi explained. “We focus on that. But we are trying to attract younger buyers. We want to hit more modern young people with the B-Class. That will be our marketing objective for 2006 with the B-Class.”
The idea, Zoghbi went on, is to make of younger buyers lifelong Mercedes customers. And the earlier they are reeled in, the more [more expensive] cars they are going to buy. “If they buy the B-Class today, tomorrow they will buy the E-Class,” said Zoghbi.
High taxes
Again, Zoghbi preferred opacity. He declined to divulge the average age of a Mercedes buyer in Lebanon, reverting to his favorite mantra: “Everyone is a Mercedes buyer. Everyone wants one. If they can’t buy a new one they buy a used one. Mercedes is the brand everyone who can considers first.” He also declined to reveal how much Mercedes spends on marketing annually, repeating: “It’s a secret,” before adding, “We don’t spend that much. Compared to other German and Japanese dealers we spend less.”
In addition to political instability, Lebanon’s vivacious trade in fake car parts also eats into Mercedes revenue. “It’s a problem,” complained Zoghbi. “We are working hard on it with the government, with Mercedes lawyers, and customs officials” – whom Gargour helped train last year to better spot the counterfeit parts. Zoghbi said the newly-trained customs officials had since stopped and destroyed “a lot” of fake parts. Mercedes has also periodically launched campaigns in local newspapers warning of the potentially life-threatening peril associated with bogus parts. Zoghbi said there was no estimate of the cost to Mercedes in Lebanon, of the counterfeit parts trade here.
In chorus with other dealers in Lebanon, Gargour & Fils complains about the high taxes on imported cars, taxes which, especially with high-end models, jack up the end price – in the case of the SLR MacLaren to almost 100% of the car’s base value.
Lobbying for change
Lebanon’s car importers association has long been lobbying the government to reduce taxes, but to no avail, despite the suggestion the loss in customs revenue would be more than compensated for by a rise in VAT revenue generated by increased sales. “Last year, only 15,000 new cars were sold in Lebanon,” Zoghbi complained. “If they reduced customs and registration fees, people would buy more cars more often and the government would actually make more money.” Gargour & Fils in particular could sell 50% more cars, he said.
