By on November 13, 2009

Malaisey-Benz?

Ever get the feeling that the car game is dealing with some malaise? Dieter Zetsche sure seems to. “The definition of luxury will be somewhat different,” Doctor Z tells the Wall Street Journal. “It will be fewer CO2 emissions and more modesty in appearance.” And this from the company that sells cars on the back of a brand dripping with immodesty and ostentation. But no matter, the decision has been made: Zetsche wants to chase what the WSJ terms “Americans’ growing interest in downsized models that offer upscale features and finishes.” Wait, growing interest? The MINI sells decently, but the A3 (fewer than 3k units sold year-to-date) and 1 Series (fewer than 10k units year-to-date) are hardly setting the luxury segment on fire. Damn the torpedoes, people want green modesty, and Zetsche’s going to give it to them with four compact models planned for the US sometime after 2011.

For sure, there will be another B-class, which will be pretty similar, address the same customer as the B-class today. The three other body styles clearly intend to target additional and different segments from the one that we can target today, including gender barriers.

Smaller, greener and more identity-politics-y. That sounds like just what the luxury market has been begging for! And we haven’t even started in on the cost-cutting yet.

Daimler is trying to cut $7.5b from its annual outlays, which includes cutting hours and freezing assembly worker pay as well as cutting back unneeded commercial truck capacity. But part of the cost-cutting includes the new compact architecture on which the four new US-bound premium compacts are based. Daimler admits that its a “low-cost” platform, and vehicles based on it will be largely produced in Hungary. Similarly, Mercedes is strongly considering bringing C-Class production to its Alabama plant. Zetsche tells Automotive News [sub] that currency exchange rates will make that decision for him. Exchange rates killed the last plan to bring Mercedes A and B Class compacts to the US, but Zetsche is confident that the underlying platforms and Hungarian production will be so cheap that the four compacts will still be profitable.

But profits aren’t everything to Mercedes-Benz. With Audi on a roll, and BMW expanding its lineup, Mercedes is playing catchup in a number of markets, including the US and China. Which, is where the four compacts of the Apocalypse fit in. “We certainly have a strong growth phase coming” Zetsche tells Bloomberg. The four compacts “would certainly give us faster growth than our direct competitors.” And its not just sales volume that is justifying this line of cheap (to build, not buy) compacts. Daimler has to reduce its average carbon emissions by 30 grams per kilometer by 2015, or face up to €3b in fines.

After a decade or so of stagnation, Mercedes is playing catchup. It can swaddle its ambitions in talk of redefining luxury and eco-consciousness all it wants, but the reality is is considerably more desperate. Volume must go up, costs must go down and emissions really have to go down: not the combination of dynamics that portends good things for a luxury brand. Though this will doubtless shake M-B out of its overly traditional brand image, it will be tough selling this transition as an organic expansion or redefinition of the brand. Execution of these four 2012 compacts will be crucial.

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13 Comments on “Mercedes Benz: Smaller, Cheaper, Greener...”


  • avatar
    TrailerTrash

    I also believe the US consumer is looking for smaller, better equiped cars.
    The trouble is the Euro imports are all REALLY upscale.
    There is a big, big difference between the now nicely equipted Mazda3s, Civics and Subarus and these. These cars are setting a new bar for what econo cars MUST be.
    Hyundai is learning this as well.
    Everybody wants more for their money, but the Euro small cars are costly.

    However, I also think they are doing this in Europe so deciding to bring here is no really big change in design.  The dollar value now has also opened doors.

    • 0 avatar
      Mirko Reinhardt

      You can’t really compare the Mazda 3 and the B-Class. The B is shorter than the Mazda3, but offers nearly twice the cargo capacity and a very, very roomy back seat. Of course it doesn’t offer a sporty ride. It’s an entirely different kind of car and I doubt anybody would cross-shop them.

    • 0 avatar
      wsn

      Umm… no. These Euro cars are not “upscale”. They are just costly.
      Here in Canada, an MB B200 would sell for $30K+. It’s as big as a Honda Fit. Not very powerful (200 …). And did I mention that it’s FWD?
      Why would any sane person buy this over a more reliable $18K~20K Fit? With $30K, you can buy an Acura CSX for luxury, or Mazdaspeed 3 for speed.

  • avatar
    mtymsi

    That is one fugly vehicle pictured. Good luck with your plan Dieter, Mercedes has never successfully sold small vehicles in the U.S.

  • avatar
    Mirko Reinhardt

    I’m sure many people here see the A and B-Class as bad for the Mercedes brand, but if you drive one, you’ll see they are actually great cars.
    They are not sporty, but very comfortable to drive over long distances, they offer a stupidly large interior (A-Class is more that 2 ft shorter than a Caliber but has more passenger space and more cargo capacity!), they have high windows and a low beltline (which is rare these days) and they have a high seating position, which many older people like.
    They also come with frugal diesels and a Miata-slick 6-speed.
    The A and B-Blass sell more than 10,000 a month in Germany alone, I wonder how they do in the rest of Europe.

  • avatar
    Mr Carpenter

    Mercedes should save themselves the trouble.  Everyone who wants a practical vehicle such as the A-class or B-class in the USA has the choice of a Honda Fit (sporty, reliable, practical, economical) or larger Mazda 5, or Kia Rondo.  Yes, you read right.  Kia Rondo.  I see them all over the place where I live.  They seem to sell like hotcakes.  

    Why would anyone in their right mind pay twice the money and settle for less reliability with the B-class?  

    “Snob appeal”.  That’s all that sells Mercedes.  

    Ask the dead executives at Pierce-Arrow, Duesenberg and  Packard “how’d that work out for ya?” – and you’ll get an idea of where Mercedes is going. 

    All it’ll take is another dip in what some are now slowly beginning to whisper is “the Greater Depression” (as opposed to the “Great Depression” of 1929-1942)

  • avatar
    YotaCarFan

    I agree there’s a market for better equipped small & mid size cars.  The bulk of small & mid sized cars in the US market have spartan, noisy interiors.  The imports in these size categories are typically de-contented versions of what the manufacturers sell back in Japan, Korea, & Europe.  It’s high time they offer more smaller cars that have more techno gadgetry, luxury, and style than what we currently get in the US.  My opinion is that one of the reasons Toyota’s Prius sells well is that it is a smaller car that has not been de-contented for the US market — it can be had with upgraded interiors and an assortment of goodies like navigation, bluetooth, HID lights, leather, etc.  Lexus’ Prius, the press-maligned HS250h, as well as the IS250, both fit into the smaller luxury category.  The IS250 sells like hotcakes around here (DC/MD/VA).

    Dr. Z’s comment about gender-friendly models/marketing is gag-worthy, though. Are car designs now considered sexist? Will adding more pastel and pink paint color options help sell more Mercedes cars? Are thousands of women agonizing over how they really would love to drop $50K on a new Mercedes, but the “gender barrier” of a phallic-shaped ignition key makes them decide to buy a Hyundai instead?

  • avatar
    mtymsi

    Well, they never tried.
     
    What do you call the C class and the miserable failed hatchback version? They certainly aren’t mid size or large cars. Mercedes is marketed completely differently in the U.S. than the rest of the world. Mercedes is marketed here as a luxury brand. How do these proposed small cars fit in with the luxury brand marketing? They don’t. If the car pictured in this thread is what they intend to try to sell here not only will they fail, it will diminish their luxury brand status. There are many examples of this, the Jaguar X Type comes to mind. You don’t see BMW or Lexus attempting to market utilitarian small vehicles with good reason, why do you think Mercedes would have success with it? For the U.S. market this is a bad move IMO, time will tell.

  • avatar
    pourspeller

    I’m sorry, but anyone who tries to compare the Mazda 3 or the Honda Fit to the B class has obviously never been in the B.
    I see them all the time in Vancouver. Never thought much about them until a friend rented one for a road trip. I came away very impressed.
    The Mazda 3 is a small, fun compact car. Great for a second vehicle, single folks, etc.  But the hatch is tiny and rear seat legroom isn’t great. It feels like a compact.
    The Fit too is a nice little car too. But never are you ever under the impression that you are driving anything but a subcompact. It’s noisy, thin, buzzy etc. Fun to drive, yes. But, even though it has neat space flexibility, it still ain’t all that big. The rear seats are thin and offer little support. It’s also really low to the ground and I find it tiring to drive long distances.
    Neither, IMHO, are great family vehicles. One kid, sure. Two is tight and cramped.
    The B class, by comparison, is huge. It’s like a midsize. With ample rear legroom. A big storage area, and a “big-car” feel. The only other vehicle I’d compare it to is the Mazda 5. The Mazda is great too, but it doesn’t have the weight or substantive feel to it.
    The B can get all sorts of luxury options, like a panoramic sunroof, leather, etc, that aren’t available on the Mazda. I checked a loaded one out and they look and feel inside like a luxury car. No Audi, but very nice. Honestly, I never thought I’d even think about this thing, but with a couple of kids and my wagon getting a little long in the tooth, I’m looking at picking up a used one. (I agree, they’re stupid expensive new). I don’t want a huge minivan, I think most CUVs are silly and wagon options are limited. The B is just the right size, gets good fuel economy, drives well, and feels solid. Plus, unlike so many cars today, you can actually SEE out of the thing. Kids love the windows. Personally, I wish there were more options like this on the road.

  • avatar
    ajla

    How hard would it be to do a grill-swap and rebadge on it, then sell it under the “Smart” brand in the U.S.?
    That allows Mercedes “prestige” to remain intact, gives Smart something new to sell, and allows Daimler to sell what is reportedly a good, small vehicle in the US market.

  • avatar
    TrailerTrash

    pourspeller

    And others…

    I did not mean to compare the newest small cars like the Mazda3, Civic and such to these.  I was simply trying to show how the consumer is asking for and getting small cars that have options and interiors unheard of just a model series before.
    If it sounded as if I was, I am sorry.
    However, once you get the cost of a car over 30 Grand, it gets pretty competitive.
    Right now, today.
    Lexus and Acura set the entry level  luxury standards here.
    And unlike the 3 series or Audis, the Asians don’t put you into the 40s and 50s  AND UP with the addition of the options you want.
    IF the Germans want to do this, these cars will need to stay in the low 30s…or Americans will option for bigger.
    They will simply pick a CX9 or Flex or whatever.
    If you get more for the money, gimmicks OR size, Americans grab it.
     

  • avatar
    nikita

    I own a Fit and would not compare it to a Mercedes in quiet, “feel”, etc. However, it replaced a BMW 325i that was almost as noisy and had tighter seating. I test drove the C230 and 318i and both those expensive German hatchbacks failed in this market for good reasons.


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