Fancy Forward: Mercedes-Benz Can No Longer Cater to Plebs

Matt Posky
by Matt Posky

Mercedes-Benz looks poised to retreat from high-volume compacts. During an online corporate strategy meeting held on Tuesday, Daimler CEO Ola Källenius indicated that the luxury subsidiary may have overextended itself.

“Maybe we went at a bit too far to cover each and every space into each and every segment. Compact particularly comes to mind,” he explained. “This is not where the main thrust should go, we should not become a competitor of the volume makers.”

But the company only has itself to blame for that. Around a quarter of the brand’s annual sales come from compact vehicles and they’ve been taking up a larger share of its product portfolio. Källenius seems to think Mercedes has done enough to broaden its appeal and need to refocus on higher-end vehicles with better margins. “Our [current] strategy is designed to avoid non-core activities,” he said, adding that funds will be prioritized for more profitable products.

“We’re not chasing volume, we’re targeting profitable growth.”

While that seems to indicate fewer A and B-Class vehicles (not to mention CLA and GLA models) moving forward, Källenius made it abundantly clear that many of the brand’s smaller vehicles were too new to consider taking off the table. He also said that those units likely played an important role in bringing new customers into the fold but that Mercedes had enough of them.

But there will be consolidation. Daimler has repeatedly indicated that Mercedes-Benz would be utilizing fewer platforms to underpin its products as a way to free up cash for its electrification program amid restructuring. For smaller vehicles, MMA (Mercedes-Benz Modular Architecture) will be the obligatory starting point and capable of supporting battery applications. According to Automotive News, Tuesday’s event included a slide presentation showing five silhouettes of cars using the platform. While none of them were identified by vehicle time or time frame, it’s technically less than what the brand currently offers. MMA is also supposed to underpin midsize models in addition to compact cars, which may require the elimination of several existing models.

“We have a great opportunity for horizontal growth, not adding more cars to the compact segment but finding more customer groups to come under the Mercedes master brand,” Kallenius said.

From Automotive News:

Daimler described the platform as ‘electric first’ with batteries fitted under the floor in a sandwich style structure similar to Volkswagen’s MEB electric platform. Unlike MEB, the Mercedes platform can accommodate an internal combustion engine in the front so it can be used or full-electric cars and versions with gasoline or diesel engines.

The platform will incorporate fast charging via an 800-volt electrical system and over-the-air updates.

Ultimately, the company said it was vying to achieve profit margins in the “mid to high single digits” by 2025 (regardless of market conditions) and doesn’t think compact vehicles are the way to get there. It’s doubling down on electrification and noted that China will play an important role as its market had grown more than 23 percent from July to September (vs 2019) while the North American market shrank. China is currently the brand’s largest customer by volume and is assumed to be more receptive to electrification than the United States.

Of course, shifting toward EVs also alleviates some of the regulatory pressures being exerted on Mercedes. It has spent billions of euros trying to adhere to stringent emission mandates and buying its way out of diesel-related scandals that have become all-too-familiar within the industry. There’s also a very real regulatory push in Europe and China that is effectively driving players to introduce electric vehicles just to fulfill government requirements. We’re not sure how environmentally sound that strategy actually is but it’s not surprising to see so many manufacturers take the bait, especially if they plan on selling globally.

[Image: Pixfly/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Thornmark Thornmark on Oct 08, 2020

    anyone can lease a MB but you have to rich to afford the maintenance and repairs when they go off lease - which is why MB resale value is terrible there was a time when MB's were exceptional and that time has past

  • Speedlaw Speedlaw on Oct 08, 2020

    Benz has already split (US Market) into two...upper benz starts at C class, and with options, you get the same ICE, switchgear, etc as S class or the sports cars. Lower Benz, CLA, and such are a lower tier of build. I've driven the whole line over various service appointments, the guys at the dealer like the C43 and will cater to my car geekery...only missing are S class and G wagon, they aren't loaners. The top-est tier has some small improvement over the mass upper benz set of parts and such, but it's really a tiny up-sell. Meanwhile, my ace of base Jetta S also has power windows with one touch, all controls on steering wheel, A/C, IRS and all wheel discs, and passable stereo. Backup cam, ABS, Traction Control. All the items you used to pay for are standard on the most base car VW sells...and no, while you can't compare the 385 hp AWD to the 140 hp FWD, it does point to a commoditization of autos in general. The benz has more...but not different. The lower Benz cars are Honda equivalent, which is fine, but Benz clearly doesn't want to play there in the USDM, it's a different world than popping out 80k E classes and big trucks, and when the maid comes up in a dented secondhand CLA with tints it tarnishes the GLS truck in the driveway.

    • Thornmark Thornmark on Oct 09, 2020

      not really Hondas are better in fact the Accord is better in most respects to the E class

  • Dukeisduke Womp womp.
  • FreedMike China's whining about unfair trade practices? Okay.
  • Kwik_Shift Hyunkia'sis doing what they do best...subverting expectations of quality.
  • MaintenanceCosts People who don't use the parking brake when they walk away from the car deserve to have the car roll into a river.
  • 3-On-The-Tree I’m sure they are good vehicles but you can’t base that on who is buying them. Land Rovers, Bentley’ are bought by Robin Leaches’s “The Rich and Famous” but they have terrible reliability.
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