By on March 20, 2014

2013-03-05_Geneva_Motor_Show_8072

Strong sales of the Mercedes-Benz CLA have led Daimler to add a third shift at the Hungarian factory that produces the compact front-drive sedan, as well as the B-Class hatchback.

According to Bloomberg, Mercedes can’t get enough capacity for the new small cars based on their front-drive architecture. Even though parent company Daimler also builds the smaller A-Class, the B-Class and GLA compact crossover at a factory in Germany, they also had to contract out production of 100,000 units of the A-Class hatchback to Finland’s Valmet Automotive. In the United States, sales of the CLA have been strong, with over 14,000 units sold in 2013, despite being on sale for a mere four months. Although sales were weaker at the start of 2014, sources report that inventories are tight in many key markets, with most cars being pre-sold.

In our market, the CLA is a strong proposition for many buyers, offering an entry point into the Mercedes brand below the larger, rear-drive C-Class, at prices more in line with a well-equipped Honda Accord (the CLA starts at just under $30,000). But in world markets, specifically Europe, the CLA is crucial for Mercedes-Benz. A weak economy has hit young Europeans the hardest, leaving older buyers best positioned to buy new cars. Despite their affluence, they are, literally, a dying demographic.

On the other hand if there is indeed a “lost generation” of consumers, continuing to sell expensive vehicles on a volume basis is not necessarily sustainable over the long run. The CLA allows Mercedes to capture both older buyers looking to downsize, and appeal to younger buyers with less money, but premium aspirations, both in Europe and other markets worldwide. The latter demographic may not be conventionally wealthy, but they are used to brands and products that are considered to be luxury products, even if they don’t necessarily have the exorbitant price-tag of exclusive brands – think Starbucks, J.Crew and Apple.

This is the kind of car buyer that will gravitate to the CLA, and you can bet that the GLA will be also a smash hit in the nascent small-crossover segment. Like the CLA, it has the right badge and the right price tag, but with the added bonus of having the right form factor to sell not just in Europe and North America, but emerging markets with a whole new class of affluent customers, willing to pay a significant premium for a slightly higher ride, a two-box body and perhaps some faux-rugged cladding.

The target buyer for the CLA and GLA often comes up for criticism on TTAC, as well as the vehicles themselves: a small Mercedes with a transverse engine layout and a four-cylinder engine is anathema to most car enthusiasts, and a crossover doubly so. But in this kind of analysis, it’s important to suspend value judgements and look at it from a business perspective.

The business case for the cars is stellar. Four models spawned from one architecture, with the CLA and GLA able to serve as the high-margin variants. Combine that with the low assembly costs presented by building the cars in Eastern Europe, and you have a textbook example of how a car company can leverage economies of scale while also bringing to market a series of enticing products that are able to penetrate emerging markets and untapped demographics. Even BMW is looking to get in on the action, with their new front-drive 2-Series Active Tourer minivan.

The idea may not be terribly enticing to some – as an enthusiast, I’m certainly not thrilled about this direction - but this is where the market is going.

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63 Comments on “Analysis: Three Shifts, Four Models A Profitable Formula For Daimler’s Front Drivers...”


  • avatar
    EX35

    “Strong sales of the Mercedes-Benz CLA. . . ”

    Why?

    • 0 avatar
      DeadWeight

      Because marketing, low I.Q., financial suicide & fake Rolex.

      The CLA is a miserable car by the relative standards of the CamCord class.

      Yet, it enjoys strong sales from people literally paying 1 & 2/3rds the price of what a superior, more reliable, better built, better riding, more quiet and less garish Accord, Fusion, Camry, Altima, Malibu, etc. would cost.

      Because Janis Joplin.

      Because emblem.

      Because Real (bankrupt) Housewives of Atlanta, Tampa, New Jersey, Camden, French Lick, Gary, Mobile, Glendale & Mississauga.

      • 0 avatar
        bball40dtw

        You and I have had this discussion before. Almost all of the volume brand midsized sedans currently on sale in America are better than the CLA and A3. I drove a Cruze LTZ the other day. I would buy a Daewoo Cruze over the CLA.

        • 0 avatar
          DeadWeight

          You may have psychic abilities, because I deleted Cruze & Focus from the lost of cars that ride better at the last moment (only doing so since they aren’t technically midsize).

          I test drove a CLA the same week (maybe within 10 days) I test drove a Lexus IS250, because of Consumer Reports incredibly harsh review of it.

          Their review was fully warranted, and I OWNED a 2006 VW Passat 2.0T which is the same car (essentially) as the VW CC Consumer Reports contrasted with the CLA in that same issue, giving the VW CC a road score of 82, and the CLA a road score of 61.

        • 0 avatar

          > Almost all of the volume brand midsized sedans currently on sale in America are better than the CLA and A3

          Technically the CLA and A3 are both built off econo-car chassis anyway. Surprise as it may be there’s nothing in the german water to ensure their their basic global platforms are superior to any other.

          • 0 avatar
            bball40dtw

            I’d say the same thing about many of the volume compact cars. The Cruze, Focus, Mazda3, and Civic are all products that are better than the CLA or A3. The materials may be more expensive inside the German luxo-compacts, but a $23-25K Cruze or Focus is a better place to be.

    • 0 avatar

      ““Strong sales of the Mercedes-Benz CLA. . . ”

      Why?”

      BECAUSE IT SAYS MERCEDES BENZ ON IT!!!

      Because regardless the handling dynamics, regardless the engine output, regardless the wood trim quality, regardless the leather (faux) quality, regardless the transmission aggressiveness, regardless the 0-60, regardless the depreciation, regardless the efficiency of COMAND…

      I’M DRIVING AROUND IN A MERCEEDEEEZ!!!

      I’ll never understand why car reviewers and car enthusiasts think the rest of the people buying cars actually is paying attention – or basing their buying habits on what they type!

      • 0 avatar

        Hate to say it but, he’s right.

        • 0 avatar

          I see so many of those CLA on the road nowadays. I see more of them than I see Sonata 2.0T. Someone on my block just got one.

          I test drove it the day Mercedes got them in and I was just amazed I fit in it. I liked it more than the C-class and the C-class coupe.

          This car is a winner.

          It doesn’t matter if the car had manual windows, manual seats and manual everything else…

          You are now understanding just what that “tri-star” actually means to buyers.

          I really think the W221 was the best car I’ve ever owned.

      • 0 avatar
        DeadWeight

        There are exactly 2 positive things I have to say about the CLA.

        It had decent fit/finish and accelerated briskly.

        That’s it.

        It is a laggard to the cars I mentioned above in every other substantive way, and the Fusion, in particular, has a chassis that feels 2x as premium as the CLA.

      • 0 avatar

        Sadly he is right. I live east of the Hudson, and there are a LOT of these puppies running around. The NY Times Car section, normally fairly tame with references to driving to Dutchess County, was hard on the base version, but even harder on the AMG “nervous, never calms down” version. Wow.

        Yup I can Haz Benz is the operative function. The car itself could be two hand trucks with a lawnmower engine.

        • 0 avatar
          28-Cars-Later

          Demonstrates the true power of marketing and reinforces P.T. Barnum: ‘Nobody ever lost a dollar by underestimating the taste of the American public.’

      • 0 avatar
        Syke

        And that is exactly why my sister (M.D., DINK, north east liberal, reasonably stylish) bought herself a new ’14 C-class just before this car came out (trading in an ’08 C-class). She knows cars well enough to want a ‘real’ Mercedes-Benz, not a status-seeking ripoff.

    • 0 avatar
      stanczyk

      because brainwashed nouvoriche hipsters buy like crazy fake Mercedes …
      CLA – shmanncy-fancy, overdesigned (‘korean curves’), FWD! hipstermobile..

  • avatar
    bomberpete

    Why? Maybe the masses as asses.

  • avatar
    Stumpaster

    OK you may have made a point why MB would actually sell these ugly POS for wannabes the world over. But I see nothing here about why this would be a profitable car for MB. Hungarian labor to assemble may be nice but the fixes will come at US labor rates. Any truths about that?

  • avatar
    PenguinBoy

    “The front-drive Mercedes models have been a success…”

    Works well, until it doesn’t.

    These remind me of post war junior Packards, or early ’80s Cadillacs. As mentioned in the post on the new 200, I sat in a CLA at our local car show, and thought the 200 had a more convincing “premium” interior.

    I imagine the CLA is a decent enough car, but I don’t see how it is significantly better than a Chrysler 200 or Toyota Camry – it is certainly not “Engineered like no other car in the world”, nor is it “The best or nothing”

    To paraphrase Jack, the badge is real but the car is fake*. I can appreciate that Mercedes needs volume to survive, but I wonder how long they can offer products like the CLA before they start to devalue their brand?
    ____________________________________
    *”The wood inside may have become real, but the car itself has become false, forgettable.” from http://www.thetruthaboutcars.com/2011/07/review-1976-cadillac-fleetwood-sixty-special-talisman/

    • 0 avatar

      Me too. I wrote about that in one of the Generation Why articled I linked to.

    • 0 avatar

      The cheapening of interiors had nothing to do with CLA. I sat in a C-class at a car show and it was astonishingly cheap when compared to a 3xxi sitting right next to it. Chrysler 200 before redesing was junk, however. The analog clock: PLZ STAHP. Sitting under the clock face was a hideously incogrous REZ radio from Chrysler parts bin. That unit looks very much at home in a Wrangler (although I have a cheaper version, REP or such), but in a premium car it was ludicrous. Anyhow, if CLA allows Merc to un-cheapen the C-class, more power to them.

  • avatar
    The Heisenberg Cartel

    Audi loads their lineup with FWD cars and nobody bats an eye. Mercedes releases a few FWD models and everyone loses their minds!

    Joker memes aside, I fail to see why this is a problem. If their core RWD models stay good (and judging by reviews of the new C class and S class, they have), then no big deal. It’s not like they’re considering moving the bloody SLS AMG to a FWD platform. Wow. So tempest. Much teapot. Very overblown.

  • avatar

    I prefer to think of the CLA as a Hyundai Sonata 2.0T with a $10,000 Mercedes Appearance package.

  • avatar
    dwford

    These aren’t as cheap as everyone tries to make them out to be. Yes they advertise the $29,900 (before freight), but to even get heated seats puts you over $33k, let alone AWD, or real leather, or navi etc. These easily reach the high $30′s if not low $40′s.

    I wasn’t a big fan of these until I saw the AMG. That kinda won me over. Of course, the $47k ad price is really at least $52k with a couple options and can push $60k.

    • 0 avatar
      sportyaccordy

      Blegh the AMG version looks boring as hell. Quick, sure, but doesn’t seem to have any character. Muted 2.0T, AWD, auto transmission, heavy. I don’t see the point personally, when the same money gets you an equally fast, better looking, sounding, more characterful, manual transmission 335i, G37, etc etc.

      • 0 avatar
        hubcap

        @SportyAccordy

        +1–And don’t forget the S4.

        How the hell did that car make it out of Affalterbach with that weak a$$ AWD system? Does AMG need to look towards the Diamond Star for clarification of how a performance system should be built?

  • avatar
    EX35

    I agree. I even found the new Accord to be a better driver than the CLA.

    • 0 avatar
      bball40dtw

      Pretty much all of the midsized sedans are better drivers than the CLA. The much maligned Malibu being one of them.

    • 0 avatar
      thornmark

      autoblog just reviewed the 200 and liked it. But the reviewer also rated the comparison cars and

      “The Honda was the revelation. Even with its monochrome dash cluster and a lower screen that washes out completely in direct sunlight, it offered the best, gimmick-free interior among 200 competitors, the smoothest ride, the softest leather on its thick steering wheel, the best exhaust note and the best transmission responsiveness; you barely needed Sport mode because the Accord was always on alert for kickdown, even in Drive. Among the five midsize cars at the event, to my eyes, the Honda was the standard, but being able to drive all of them back-to-back proved that the 2015 Chrysler 200 very much belongs in the ring.”
      http://www.autoblog.com/2014/03/20/2015-chrysler-200-review-first-drive/

  • avatar
    Zykotec

    It sells well because there are reasonably wealthy people out there that like really good looking ‘compact’ cars, and who won’t buy an ILX.
    (I say ‘compact’ because it is longer than my CRV, back in the 80′s and 90′s this would be a midsizer here in Europe, like an old 190 or C-class)
    I tihnk it’s a silly car by all means, but it does look great on the road. The cougars that drive these (and the 1-series hatchbacks) don’t always look quite as good with all their tanning-bed wrinkles though…

  • avatar
    gakoenig

    The bashing of this class if car amongst enthusiasts is quite extraordinarily stupid.

    I think we all agree that most people in cars basically hate driving in the modern era. The fantasy of the open road is an only occasionally realized one at this point. Driving is really about sitting in traffic or tooling along, nose to tail, along a freeway at 60-70mph (on a good day). Cars have become appliances to traverse a miserable, restricted, overcrowded transport infrastructure at tremendous expense.

    A CLA makes sense. The cabin of even the low-rent Mercedes, BMW, Audi or Lexus is a way nicer place to be than the bean-counter crippled schlock from GM, Ford or Dodge. The CLA is a fantastic looking vehicle in the flesh, with a badge that carries some prestige, a very nice interior cabin and more than enough performance for the 30 minute, traffic clogged drive between the suburban starter-luxury tract home and the glass curtain wall office complex.

    Guess what? Buyers care about the transverse mounted engine and front wheel drive about as much as the 55 million iPhone buyers (per quarter) care about the L1 cache on the Apple A7 chip and the animation APIs in Cocoa (those of you with iPhones mystified by what I just said? That’s how car buyers feel about talk of transverse mounted things and FWD drivetrains).

    Or, we as car enthusiasts could just continue to push manufacturers to make lightweight, simple cars with manual gearboxes. How many more companies do we want to goad into destruction begging for our fantasy car (See: Lotus, Toyota/Subaru)?

    • 0 avatar
      DeadWeight

      You’re just wrong.

      You talk about a comfortable, pleasant vehicle to drive in the urban commute of modern day life, and I will tell you that a Ford Fusion feels twice as solid, rides twice as well (the CLA rides like rubbish), has better steering feel, and is MUCH more quiet at idle or speed, and overall feels twice as premium in terms of driving composure (at 65% of the price) – especially evident on bad road surfaces.

      The CLA is a cheap, cramped, loud, harsh riding (for no handling benefit), unrefined piece of garbage, and it is the ultimate cynical product.

      • 0 avatar

        It’s the 3rd comment about Fusion you’re making on this post.

        Let’s just hope that CLA has no MyFordTouch.

        • 0 avatar

          I think the CLA doesn1t have my ford touch. But they’ll surely have some other contrived thing to do what the Ford thing does. I think that’s not really important.

          But what DeadWeight is saying is. It’s proper that the big Ford should encroach and even be better than the lesser German trio. Except for maybe the last decade, when the majors retreated from contesting them, but back in the nineties and before, the biggest Fords, Renaults, Citroëns, Opels, Fiats always gave the smaller cars of the Germ uber trio trouble. A 90s Mondeo would kick lesser BMWs butts. A Renault Laguna was faster, bigger than most A4s. Going back in time even further, Fiats, Opel Opalas all could beat most lesser Germans. That was always the case. Citroës Goddess anyone?

          Maybe will see this again. The Fusion is the first. Let’s see if Citroen keeps working on it, their recent C6 almost cracked it. Give Opel some Cadillac hardware and see if they can’t come up with a contender.

          Probably new car prices have gone up so much, while the Germans are reaching so low, that the majors do again have what it takes to beat the Germans.

          The Fusion/Mondeo is shaping up a great car. Like it was once, like it should be again.

          I haven’t driven the CLA, but having driven A3s and the lessest BMW3 of recent vintage, I too would say the new Fusion beats them in a lot of ways. Specially the suspension. Ford hasn1′t lost that aptitude that’s for sure.

          • 0 avatar
            DeadWeight

            If I HAD to buy a fwd 4 door sedan, with an accomodative back seat, and a manual transmission was not a core requirement, I’m 80% sure it would be a Fusion for the chassis, ride quality, quiet interior and overall “premium” driving characteristics.

            I like the Mazda 6 (which can be had with a stick) and Accord, too, but I want the best chassis for the money given the terrible state of Michigan roads, and the Fusion delivers this.

            And so many think I have some irrational hatred of Ford.

        • 0 avatar
          DeadWeight

          I’ve always, consistently maintained that the Fusion has the best chassis, ride quality and quiet interior of any car in its class. It genuinely feels premium in a Teutonic way (as does the Buick Regal, IMO, which happens to be Teutonic).

          My criticism of the Fusion, rightly or wrongly, relates to its 1.5 and 1.6 liter ecoboost motor, and MyFordTouch, and spotty reliability.

          Even with those criticisms, I’d MUCH rather have ANY Fusion, even without consideration of price, than ANY Mercedes Benz CLA.

          With the price differential in mind, the CLA looks even more pathetic in contrast to the Fusion.

          I’m many things, but I genuinely believe I am consistent, and that I’m not hypocritical.

          • 0 avatar

            Consistency is good but adapting to what you see and changing because of it is also good. I thought I’d never meet a VW I’d like. My recent up! article is proof positive that somehow, to my criteria, VW pulled it off. I never thought I’d like a Brazilian Chevy. There are plenty of good cars in their line up now. I though Fiat in Brazil could do no wrong (as to their cars), but I see plenty of decisions nowadays that are taking them down a worrying path that will come back to bite them. The competition is gaining and surpassing them in many ways.

            We just have to call it like we see it and keep an open mind.

          • 0 avatar
            thornmark

            Fusion ok, but not class leading.
            http://www.autoblog.com/2014/03/20/2015-chrysler-200-review-first-drive/

    • 0 avatar
      PenguinBoy

      “The cabin of even the low-rent Mercedes, BMW, Audi or Lexus is a way nicer place to be than the bean-counter crippled schlock from GM, Ford or Dodge. The CLA is a fantastic looking vehicle in the flesh, with a badge that carries some prestige, a very nice interior cabin”

      Have you been inside a CLA, or some recent non-premium cars for that matter?

      I thought the CLA interior was nothing special, while some of the non-premium domestic cars have surprisingly nice interiors.

      The only thing the CLA has going for it is the badge – which is worth a lot to some people. For now…

  • avatar
    Athos Nobile

    Price is right, looks are hot on A and CLA (B-class is better than previous but still not there), AMG versions sound the business and seem to have the go. The badge is VERY right.

    As BTSR@youtube.com said above, these things have “WINNER” written all over them.

    They’re selling like hotcakes here, and every time I see a CLA parked in the street I can see why.

    I could put some money that the people buying them is not cross shopping them with Camcordimasionbunata fridges.

    “but this is where the market is going” Seems like you had a “game changing” getting religion moment.

    • 0 avatar
      bomberpete

      “But I thought a Mercedes was supposed to be reliable!”

      When VW re-did the current VW Jetta with severe de-contenting (aka rear drums) to lower the price, sales went up and the word was “VW is back.” But when the corner-cutting led to irate customers and harried service departments, sales fell through the floor. Why do I have a feeling the same thing will happen with the Benz CLA?

      • 0 avatar
        Athos Nobile

        Last Cain segments about compacts I can find here shows Jetta sitting at 135K units (Nov 13). That doesn’t tell me sales are through the floor.

        And that’s another car that despite its conservative style, looks good.

  • avatar
    Kenmore

    Look at that belt line. It almost appears to be *dropping* towards the rear end in glaring contravention of everyone else’s (except the new Accord) slavish adherence to the ass-high wedge paradigm.

    I would never buy a Mercedes but I certainly applaud this bucking of a hideous norm.

  • avatar
    NMGOM

    Sorry, Guys…

    I have a radar scanner in my car-buying life.
    It is pre-sensitized to look for RWD and Manual Transmissions.
    CLA flies under the radar, and therefore does not exist.
    My scanner seems to have increasingly smaller signals these days….

    —————

  • avatar
    SD 328I

    I haven’t driven a CLA, but it looks great in person. I had no issues with how it looked, the fit and finish was also excellent.

    I didn’t see a single one on the lot that had a below 30K price, the cheapest one was $33,000, the average was $35,000, with quite a few going close for $40,000.

    You can’t even really negotiate with them, since they are sold almost immediately.

  • avatar
    korvetkeith

    The fact that this exists make me want a 560SEC a little bit less.

  • avatar
    DrGastro997

    It’s not hard to believe the CLA is selling. All the wannabes will buy it with hopes you’ll just see the MB emblem and ignore the rest. Test driving was a great disappointment. Nothing about this model suggested premium, superior, engineered, craftsmanship, etc. In fact the lower model class budget minded Mazda 3, just for example, far exceeds the CLA in quality and engineering. It’s disappointing to see MB introduce a product that’s this bad.


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