Mercedes signals reduced compact lineup in profit drive

Mercedes-Benz signaled it will reduce the number of compact models it offers in the next-generation range as part of a new strategy to focus the brand on larger, higher margin cars.

Cars such as the A- and B-Class had helped rejuvenate the brand but would not be the main priority for devoting resources in future, said Ola Kallenius, CEO of Mercedes parent Daimler.

“Maybe we went at a bit too far to cover each and every space into each and every segment. Compact particularly comes to mind,” Kallenius told analysts during on Tuesday during an online strategy presentation.

"This is not where the main thrust should go, we should not become a competitor of the volume makers," Kallenius said.

Mercedes sells eight compact models. Besides  the A-Class hatchback and sedan and and B-Class minivan, the range includes the coupe-styled CLA, and GLA and GLB SUVs.

The models accounted for 25 percent of the brand’s 2.38 million sales last year, according to company data.

Kallenius, who succeeded Dieter Zetsche as Daimler CEO in May 2019 , aims to achieve a double-digit return on sales for Mercedes by 2025 by doubling sales of Maybach ultraluxury cars and increasing sales of AMG performance 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.

Mercedes will not drop any of its current compact models, some of which are relatively new to market. The latest to arrive was the GLB seven-seat SUV, which was launched in winter 2019.

Kallenius said that the sales focus would now be on higher-end versions of those models.

“We will not take existing products out. We want to move them upwards in terms of their margin contribution,” he said. “We want to raise the bar to extract the maximum out of the existing portfolio.”

Mercedes’ next-generation compact models will be built on Mercedes’ new MMA (Mercedes-Benz Modular Architecture) electrified platform that covers compacts and midsize models.

A slide presentation given during the strategy presentation showed five silhouettes of cars using the platform, but Mercedes did not give an indication of model types or a timeframe for launch.

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.

Reuters contributed to this report