Mercedes-Benz Australia CEO: Luxury tax is ‘holding us back’

Ross Greenwood is joined live at Mercedes Benz Parramatta by the CEO of Mercedes Benz Australia, Horst Von Sanden, who says Australia’s luxury tax on cars is holding back important innovation.

Introduction: Mercedes-Benz Australia CEO: Luxury tax is ‘holding us back’

Ross Greenwood: Great to have your company here on Money News going right around the country. As I told you, we are broadcasting from Mercedes-Benz Parramatta and the reason for that is Mercedes-Benz turns 60 this year in Australia, which a lot of people wouldn’t realize that or understand it’s been around as long as that. I must’ve been doing a bit of research on that. I just found some fascinating things out, say, for example, when Mercedes arrived here in Australia, it competed with a range of brands. Think about Rover, think about Chevrolet, think about Pontiac, think about Dodge.

All those brands who were broadly in Australia give or take disappeared. Mercedes continues and obviously, it’s one of those marquee brands that has been around for a long time. 60 years is a long time. When Mercedes arrived, there were clearly fairly tight import restrictions into the country, there was a limit on the number of cars that Mercedes could bring in here. The boss of Mercedes in Australia is Horst Von Sanden who is with me right now here at Mercedes-Benz Parramatta. Hello there, Horst. How are you? Good to have you on the program.

Interview with: Horst Von Sanden, CEO, Mercedes Benz Australia

Horst Von Sanden: Hello Ross, thank you for having me. I’m glad to be here.

Ross Greenwood:  It’s amazing seeing all of these brands, all of these cars around you today. It’s really interesting to note that Mercedes with the history of 60 years, with a history of that upmarket identity that Mercedes Benz has got, it’s just interesting to note in the early days to get around those import restrictions, Mercedes had to assemble cars in Australia. I find that interesting to think about.

Horst Von Sanden:  Yes, that’s obviously a long time before me, but I was assembling our cars then and not only our cars, but many other cars and these days are long gone. Also, most of the import restrictions gladly.

Ross Greenwood:  The import restrictions were gone. The protection is gone. It’s a fairly open market in terms of vehicles, which has now led to the demise of Australia’s car manufacturing industry. Do you think the demise of Holden, Toyota and also, Ford in Australia, does that open up opportunities for other car companies for importers such as Mercedes when it comes to a person’s idea about which vehicle I would choose?

Horst Von Sanden:  I think it does to a degree. Initially, we didn’t compete against those brands because we’ve always been a luxury brand, but also, in the meantime, we have adjusted our price value proposition dramatically. So the stretch from a volume brand into our brand is no longer what it used to be. What happened by the demise of the local production is basically a certain guilt factor was removed. A lot of proud Australians rightly wanted to buy local, but there’s nothing local to buy anymore, that gives of course certain additional opportunities to brands like us.

Ross Greenwood:  It’s interesting isn’t it, because does that mean you can see a commensurate kick up in sales. I know certainly you’ve broadened out the range to give different price points, but there’s another aspect of this because you’ve always been, if you like, the custodian of the brand because it has been a prestige brand, but if you broaden out your price point, is there a danger that you then also diminish that prestige brand that you’ve always held.

Horst Von Sanden:  That requires a very precise brand management, you’re absolutely right. We replaced the small amount of cars and the extreme luxury in a low volume by a philosopher when we said we produced the best kind every segment. We are basically today in every segment literally, but we still maintain our premium position when it comes to quality and price.

Ross Greenwood:  In that regard also, because that’s it because you wish to appeal to everybody, but the other side of it as I would imagine it, when I look at all cars, it doesn’t matter whether it’s Mercedes or different brands, the affordability of cars today has never been better. It’s a bit like I don’t know, communications equipment, mobile phones or it’s a bit like overseas travel. It’s well within people on average salaries grasp to be able to buy a car, a new car, or to be able to buy a mobile phone, or to be able to travel overseas. This is one of the things that’s happened, cars have become more affordable.

Horst Von Sanden:  Absolutely. Our range starts under $40,000 today and if you then look at the great finance opportunities, I think more and more people are doing that. They buy cars like they buy phones. Actually, they don’t buy them, they finance them and they pay their per week fee so to speak and use them and enjoy them.

Ross Greenwood:  It’s interesting because I spoke with Josh Dowling who we spoke too often on this program, really about cars and even Mercedes. He’s told me that one of the cars that you have got, which are high-performance cars, C63 AMG. He says if you go back 20 years ago that car was give or take $150,000. The car today is give or take, it’s a little bit more, but give or take $150,000. The price of cars I could take you to the Mazda 3, the Mazda 3 in 20 years has not changed price. They’re the same price as what they were 20 years ago. It’s got to mean because wages have risen, because house prices have risen, that they are more affordable for people today than they have ever been.

Horst Von Sanden:  Absolutely and of course, the competition in this country has helped. There’s every car brand there is in the world is represented in Australia and that has helped the consumer dramatically. That also forced us to relook at our price value proposition and bring the cars on a level to compete against everyone else.

Ross Greenwood:  Okay, there’s another message here because do bear in mind that the government bought in a luxury car tax at one stage to protect the local Australian car industry. That was the claim when the luxury car tax was introduced in Australia. One of the arguments about Australians who pay higher prices for cars, particularly luxury cars as compared with consumers overseas, is because of taxes including that luxury car tax. Now that the local car manufacturing industry has disappeared, there would be nothing to protect by having a luxury car tax. Is that something you’ll be putting to the federal government at some stage?

Horst Von Sanden:  You wish there’s nothing to protect, but to give an income stream for a government is always a problem. Whilst there is nothing to protect, there is certainly still money to be made, but we will certainly keep fighting against it because I personally think the luxury car tax for starters, it had the wrong name. If you tax luxury, then you tax luxury in everything and not only in cars, but also, it is really holding us back for developing technology. It is a tax basically on innovation and certainly what I hope is that with the negotiations about the European free trade agreement that we have another opportunity to question, seriously question the luxury car tax in Australia.

Ross Greenwood:  Okay, because that’s an interesting thing because Australia is talking to the European Union about a free trade agreement. If that were to occur, would that mean that potentially the price of Mercedes Benz vehicles in Australia could come down. Is that what you’re saying?

Horst Von Sanden:  Look, it could. It would be an illusion to believe that it would not replace by something else, but there is certainly more sensible ways of taxation. If we think about environmental textile or something like that, that would make sense, but there is an opportunity that car prices especially in the top end come down.

Ross Greenwood:  Will it give Mercedes more incentive here in Australia, for example, to do more potential development. We know that some of the manufacturers who have left have actually left centres of excellence in Australia to try and develop technology because there is, obviously, a skill set here in Australia. There are skills still remaining in Australia in the development of cars and also, technology.

Horst Von Sanden:  I’m not involved in our development department and what the plans and the stretch is there are, but absolutely, that would change the whole ballgame.

Ross Greenwood:  It’s really interesting. Horst Von Sanden as I say is the chief executive, the head of Mercedes-Benz in Australia. We’re talking to him here tonight at Mercedes-Benz Parramatta celebrating the 60th anniversary Mercedes-Benz. I just thought when we discovered that out that we should get him on and have a long chat because it’s such an interesting thing and such a dynamic industry that is changing on a regular basis. Horst, I really appreciate your time here on the program this evening.

Horst Von Sanden:  It was a pleasure to be with you, Ross. Thank you.


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