Mercedes to turn itself into a 'modern luxury company'

Wider profit margin achieved during chip crisis prompts firm to head upmarket

- NICK GIBBS

Mercedes-Benz saw its average selling price rise from €51,000 in 2019 to €71,500 in the first quarter of this year, a rise of 40%, chief financial officer Harald Wilhelm proudly told an audience of bankers in Monaco recently - and it plans to push that selling price up even more.

"We're not going to compete with volume makers," said CEO Ola Källenius. "We're a modern luxury company."

The message to the bankers was 'tell your customers to buy our shares because profits are only going to go north'. The message to customers, meanwhile, was interpreted as 'don't expect any more cheap or discounted cars'.

Like many manufacturers, Mercedes has been banging the drum of value over volume for a while now, but its executive team used the Monaco event to sketch out what that will really mean for the German firm.

Illustrated by slides liberally sprinkled with diamonds, they compared 2019 figures with their rosy vision for 2026.

By that date, Mercedes predicts its share of "entry" premium cars in the A-Class category will have fallen by about a quarter to settle at around 500,000 sales a year.

Meanwhile, top-end luxury cars such as AMGs, the G-Class, Maybachs, and the priciest EQ electric vehicles will have increased in value by 60% versus competitors.

The share of "core luxury" models like the C-Class and E-Class will be broadly similar.

Illustrating just how much money it is prepared to spend to focus on top-end models, Mercedes said it will apportion 75% of R&D spend to top and core and just 25% to entry.

However, the starting price of the A-Class (if it survives as one of the four compact models, down from seven) will rise, the bankers were told.

"The entry point to the Mercedes brand in the future will be a different one than today," said Källenius.