Why Mercedes Is Going Smaller, Cheaper, Greener In The U.S.
After coming in second to BMW in U.S. luxury brand sales last year, Mercedes-Benz is looking to boost its sales here by some 20%--a jump that may rely in part on smaller, cheaper, more fuel efficient vehicles, including a U.S.-only plug-in hybrid based on the B-Class.
Joachim Schmidt, head of global sales for Mercedes-Benz, told Automotive News the car with a range-extending electric motor (similar to the technology used in the Chevy Volt) may arrive in the U.S. to help Mercedes gain back some market share.
In 2011, Mercedes-Benz's U.S. division boosted its sales by 13% from 2010 to reach 245,231, some 2,000 fewer than BMW, which also raised its sales 13%. BMW bumped up its incentives an extra $200 in December, which may have tipped the scales in its favor.
Luxury sales have recovered pretty well since the 2008-2009 meltdown of the financial markets despite the challenges faced by the total auto market, which has gone from 17 million sales a year in the U.S. before the 2008 debacle to about 12 million now. One of the worry spots for luxury brands, though, is the continuing economic challenges facing younger buyers who are under-employed. That is restricting the number of first-time luxe buyers. With that in mind, Mercedes has to cast a wider net. That sustained growth may wrest on smaller cars with alternative drive-train options like the B Class.
Why? Smaller, more affordable cars can mean more purchasing opportunities for the 75 million Generation Y Mercedes sees coming down the road.
"We are planning to redefine the entry point for the Mercedes-Benz brand here in the U.S. starting in 2013 when we begin introducing a new premium compact vehicle class," Mercedes-Benz U.S.A. president and CEO Steve Cannon told AOL Autos.
There will be four new models with the first arriving in 2013 and the others each year after. The vehicles will be a small four-door coupe, a crossover, a 5-door coupe based on the A-Class (pictured) platform and a 5-door coupe based on the B-Class with alternative power-train. Up to this point, the A-Class and B-Class have only been offered in overseas markets.
The least expensive Mercedes-Benz in the U.S. has long been the C-Class. Cannon attributed the promising 2011 Mercedes sales numbers to new product launches the brand had last year, with sales for the new M-Class up 21% year-over-year and the C-Class up 18% (with a record close to 8,000 C-classes sold in December). Mercedes will continue its momentum with the new SL come April and the GL in the fall.
Cannon insisted the sales pecking order isn't of prime importance. "(Sales) Rankings don't matter," Cannon told AOL Autos. "The brand is really on a roll here in the United States. Whether we finish 2,000 units ahead or behind of BMW is irrelevant. We don't think the luxury crown is a consumer-relevant game. Maybe for bragging rights, but what does that do?"
But if Mercedes does want to top BMW next year, the brand will have to compete with a raft of new models the Munich automaker intends to launch--including the new M5, the 6 Series Grand Coupe, the BMW ActiveE and the all-new 3 Series.
The B-Class, whose main competitor is probably the Lexus CT 200h, could serve as a main draw for continued sales growth. Add to that the plug-in hybrid factor, and the compact hatchback has more potential down the line.
When the B-Class does in fact make it stateside next year, it will join the E400 gas-electric hybrid the carmaker just showed at the North American International Auto Show in Detroit in a continued effort for Mercedes to beef up its alternative drive-train options in the U.S.
"In terms of alternative powertrain vehicles, we have the broadest portfolio of any luxury make: diesel, hybrid, electric and fuel cell," Cannon said. "The trick is to bring these models to market in a way that customers are willing to accept."
Significantly, both the A-Class and B-Class are built on front-drive platforms, not the rear drive chassis Mercedes is known for with American buyers. The smaller cars are necessary not only to offer buyers lower-priced Benzes, but to help the German company raise its overall fuel economy to meet stiffening U.S. regulations.
The question to be answered in the U.S. is whether American buyers will still see prestige in the smaller, cheaper cars wearing the famous tri-star logo.
Bottom-line: Smaller vehicles with hybrid power-trains will be a growing part of the Mercedes offerings in the U.S. The B-Class is definitely a long-term investment, but whether or not this will help the brand become number one in luxury sales in the immediate future depends on the expediency with which luxury consumers accept hybrid technology.