Mercedes boss Ola Källenius is forcing the car manufacturer to return to its firm positioning in the luxury segment. Källenius wants to earn more with fewer cars in the future. Apparently this means the end of a successful model family.
According to a media report, the car manufacturer Mercedes-Benz intends to remove its A-Class from the range in the coming years. The “Handelsblatt” reported, citing corporate circles, that the A-Class should be completely discontinued around 2025. There will be no successor for the variant as a hatchback or as an extended sedan. According to the report, the Stuttgart carmaker is also phasing out its B-Class. Accordingly, both model series are considered unprofitable. According to the “Handelsblatt”, the changes will lead to higher entry-level prices for a Mercedes, from currently under 30,000 euros to around 40,000 euros.
The end of the compact models in the group portfolio then also fits with the concentration on the high-price segment proclaimed by group boss Ola Källenius: “We are a luxury company,” Källenius announced in May at an investor conference. The A-Class is a bestseller in Europe, and Mercedes sells more cars from no other model family every year. But Mercedes doesn’t want to make big money from sales figures in the future, but rather from higher margins. The share of top models in total car sales is expected to increase by 60 percent from 2019 to 2026. He expects, the Swede said in May, that the number of rich people in the world will increase. That is why there are opportunities to sell more luxury models such as the S-Class, Maybach or AMG in the future. This means that the operating profit margin can be increased even more than previously planned by the middle of the decade – under good conditions, Källenius even promised 14 percent in a “Strategy Update”. These numbers cannot be achieved with the A-Class, which is not very popular in the important markets of the USA and China.
Three out of seven compact cars will be removed from the portfolio, said Källenius in May, but he had left the end of the A and B classes open at the time: “I’ll leave the rest to your imagination,” he said in response to specific inquiries. However, the group’s investment planning left no room for imagination: in the future, Mercedes wants more than 75 percent of investments in vehicle development to be in the top-end vehicle categories (with the luxury brand Maybach, the sports car subsidiary AMG and the S- and G-Class with their respective electric and SUV offshoots) and the core offer (with the best-selling models around the C and E class). In the first quarter of 2022, Mercedes had to accept a drop in sales of 10 percent with 487,008 cars sold. Nevertheless, sales of passenger cars increased by 8 percent.
“I think this strategy is a mistake, it will also lead to acceptance problems if you only build cars for the rich and super-rich,” quoted the “Handelsblatt” Winfried Hermann, green transport minister in Baden-Württemberg. The head of transport policy at the environmental organization BUND, Jens Hilgenberg, criticized the strategy of the Stuttgart company in May. Large sedans and heavy SUVs are not sustainable luxury, not even in the E variant. What is needed, however, are cars with minimal energy, resource and space requirements. Källenius countered that even the larger cars would be more and more electrified.
The A-Class has been part of the Mercedes family since 1997, but the new model initially caused a sensation with a spectacular breakdown: During the so-called “elk test”, a test car overturned, which was reported to the media – the “fall” meant a PR disaster for the group. This did not detract from the success of the A-Class: 120,000 vehicles were already sold in 1998 – freshly revised and upgraded with the Electronic Stability Program ESP. In 2021, the group sold almost 185,000 vehicles worldwide.
