Plans are not announced until 2022Report: Mercedes-Benz says goodbye to luxury strategy
The situation is very bad for Mercedes-Benz among German car manufacturers. As a result, according to a report, the company buried its luxury strategy. Even though it was only launched in 2022, it has not been successful and has caused internal confusion. The new entry-level model has been in development since the summer.
Mercedes-Benz has removed the controversial word luxury from its strategy. Automakers want to offer premium vehicles at all price ranges in the future, “Handelsblatt” learned from the company. According to the newspaper, the plan has been in place since the summer and will now be implemented.
The term luxury is said to have long generated internal discussions, writes “Handelsblatt”. The criticism is that he is too polarizing and too exclusive. Even top managers end up talking about the “L word.” “The luxury strategy that Mercedes presented three years ago was quietly buried by management in this form,” Patrick Hummel, automotive analyst at investment bank UBS, told the newspaper. Mercedes lost market share as a result of this strategy. Ingo Speich, Head of Sustainability and Corporate Governance at Deka Investment, added: “If Källenius introduces a new entry-level model, its luxury strategy will eventually become history.”
Mercedes boss Ola Källenius has implemented plans to cut Mercedes profits from 2022 with a “margin before quantity” credo. But its luxury ambitions failed in the market. In the first nine months, earnings before tax and interest (EBIT) fell almost 60 percent compared to the same period last year. Mercedes is the only German automaker struggling with falling sales in all major markets this year.
The changes are of course reflected in the group’s model strategy, as suggested at the IAA motor show in September, according to “Handelsblatt”. Since then, the board has worked to introduce a new entry-level model, the report said. They wanted to return to previous values - with traditional car designs and the slogan “Welcome Home”.
The A-Class is built in Hungary
Corporate circles say that the entry-level model should be based on the current A-Class in terms of price and looks. Källenius actually wanted to reduce production – but demand continued to be great and therefore it was extended until 2027. However, the model is not produced at the Rastatt factory, but in Kecskemet, Hungary, where production costs are 70 percent lower than in this country.
Källenius pursues the goal of reaching a younger target group and introducing them to higher priced models in the long term. He didn’t want to get into a brand that was too demanding in terms of price. The base model A-Class costs around 34,000 euros. The next most expensive model, the CLA, costs almost 10,000 euros more. In addition to the already available CLA and the sportier CLA Shooting Brake, the new GL Bund GLA compact SUV is also based on the CLA. Källenius wanted to reduce the number of compact models to four, now to five. The B-Class is scheduled to expire at the end of the year as planned.
With this strategy adjustment, Mercedes is again paying more attention to sales. “Mercedes is shifting too much attention towards luxury and wants to find a new balance with an adjusted strategy so that sales figures do not fall too far,” industry expert UBS Hummel told “Handelsblatt”. When it comes to maintaining volume, the group is overly optimistic with its focus on luxury.
