Mercedes-Benz drops cheaper models in favour of top-end luxury cars
25 May 2022
Mercedes-Benz is focussing on higher-priced luxury vehicles to increase profitability. It also plans to upgrade its product portfolio and speed up electrification.
Around 75% of the car manufacturer’s investments will flow into developing top-end products with the highest margins and profitability. Sharpening its business strategy, Mercedes-Benz will cut some entry-level vehicles, in effect trimming its portfolio. By 2026, the carmaker hopes this will increase the sale of top-end luxury vehicles by 60%.
Cutting low-end models
The Stuttgart-based automotive player emphasised that its strategic approach would lead to better financial results, especially as market conditions remain challenging. Mercedes-Benz expects strong demand for high-end luxury cars, which allows it to offset rising raw-material costs with higher prices.
‘What has always been the core of our brand is now also the core of our strategy: the luxury segment,’ said Ola Källenius, chairman of the board of management at Mercedes-Benz Group.
‘We are further sharpening the focus of our business model and product portfolio in order to maximise the potential of Mercedes-Benz even in challenging conditions. At the heart of that is our goal to build the world’s most desirable cars.’
The company wants to turn its attention to three product categories – top-end luxury, core luxury, and entry luxury. In the entry luxury segment, Mercedes-Benz will cut the number of model variants from seven to four. However, the company did not specify which models would be affected. Entry-level models include the A and B-Class compact cars, which might now see an end to their production.
The carmaker recently unveiled examples of high-end vehicles, including a bespoke concept known as the Mercedes-Maybach Haute Voiture, which it describes as the pinnacle of sophisticated luxury. The model will hit the market in 2023 in a limited edition, making it a very exclusive car.
Overall, Mercedes-Maybach is expanding its product offering in the top-end segment, led by the Mercedes-Maybach EQS SUV, which is due to launch next year. Other models in the carmaker’s high-end luxury segment include all vehicles from Mercedes-AMG, as well as the Mercedes-Benz S-Class and G-Class models, and the full-size luxury GLS.
‘Most luxury companies build their portfolio on the basis of one or two true icons. Mercedes-Benz has the good fortune to have multiple iconic products and brands at the upper end of its portfolio – such as the S-Class, the SL, the G as well as the AMG and Maybach brands,’ said Källenius. ‘We see great potential here to expand our top-end portfolio with even more fascinating products for our customers.’
The news of Mercedes Benz’s new strategy comes at a time when carmakers are increasing prices because of market complications brought on by the war in Ukraine, semiconductor shortages, and pandemic-related shutdowns in China. This has led to widespread supply-chain issues, production pauses, and delivery delays for many automotive companies.
Despite disruptive market developments in the first quarter, Mercedes-Benz reported a rise in earnings before interest and taxes (EBIT) to €5.2 billion, with price hikes helping the carmaker to improve profits. The manufacturer recently confirmed it had sold the world’s most expensive car, a rare 1955 Mercedes-Benz SLR coupe, to a private owner for a staggering €135 million.