Mercedes Leans on Diesel Hybrid Tech for Thailand

BANGKOK – Mercedes-Benz is forging ahead in Thailand, where it is the longtime luxury leader and, despite the market’s current sales woes, still quite profitable.

But the German brand’s strategy is about more than just increasing sales volumes. Mercedes has broken out of its traditional segment, where most of its vehicles were aimed at Bangkok’s older, more affluent business buyers, and brought a raft of niche models that have drawn new customers into its reach.

Indeed, compacts now account for a third of Mercedes’ product mix.

At the recent 36th Bangkok International Motor Show, Mercedes boasted one of the biggest stands, put on one of the arguably flashiest visual presentations and rolled out a raft of new entries.

The list includes the locally assembled C-Class BlueTEC Hybrid and four niche models, the CLA Shooting Brake, GLE-Class Coupe and V-Class van, as well as the new AMG-branded GT-S. Dealers already have sold some GT-S models, despite Thailand’s staggeringly high luxury import duties.

The sales figures tell the story, too. Despite the overall market’s loss of about a third of its volume last year, the luxury segment was up and Mercedes outperformed its peers. This year, industry sales are down more than 10% overall, but Mercedes is up nearly 50%. However, official market figures don’t break out gray imports and Mercedes doesn’t provide this data, either.

Significantly, Mercedes has put its leading technology at the core of its growth strategy for Thailand, a move that’s quickly paid off. Its BlueTEC Hybrid technology has been an instant hit with consumers, already dominating the brand’s sales mix.

Mercedes was the first premium marque to launch diesel-hybrid technology here, and it has just introduced its third hybrid complete-knocked-down assembly line at its factory in Samut Prakan on the outskirts of Bangkok.

During a recent ceremony at the factory to launch the new C 300 BlueTEC Hybrid and commemorate the 110th anniversary of the arrival of the first Mercedes car in Thailand, Mercedes-Benz Thailand President and CEO Michael Grewe makes note of the company’s groundbreaking hybrid push.

“We are the first to introduce the diesel-hybrid technology, marketed as the BlueTEC Hybrid, to Thai customers,” he says. “In fact, our local production plant has been producing the E-Class BlueTEC Hybrid since 2013, and our factory later began production of the S-Class BlueTEC Hybrid in 2014.

“As the hybrid powertrain is proven to significantly reduce fuel consumption and carbon-dioxide emission, we spent 650 million baht ($20 million) last year to increase our production capacity for all CKD models. This major upgrade is part of our preparations for the production of our future BlueTEC Hybrid models.”

That factory upgrade also will allow production to be raised over the coming year, Grewe confirms. “With the new investment, the overall production capacity of Mercedes’s CKD passenger cars will increase to meet the increasing demand.”

Mercedes continues to satisfy localization requirements, despite the introduction of these sophisticated new hybrid technologies.

“Well over 40% of parts used to assemble our BlueTEC Hybrid cars also come from local auto parts producers,” Grewe says.

Thailand now is one of the brand’s largest global markets for hybrid sales. BlueTEC engines feature low emissions, high fuel efficiency and responsive performance, and the commitment to build three mainstream models here CKD in hybrid format is quite a feather in the cap of Mercedes Benz Thailand.

“It’s something we are very proud of; we are the only premium brand that produces hybrids in Thailand and we offer (the powertrains) in all three sedans,” Martin Schulz, vice president-sales and marketing, tells WardsAuto on the sidelines of the launch.

He credits a number of factors for the growing success Mercedes now is having here with its BlueTEC-branded models.

“It’s the commitment of the government and the awareness of Thai customers to opt for environment-friendly technologies, it’s supported by the tax system on Thailand and it’s respected positively by the customers,” Schulz says.

Hybrid cars are taxed only 10%, significantly lower than all other types of cars, including the government’s current Eco-Car halo program. Under the new taxation regime, hybrids will continue to remain at 10%, although Eco-Cars will narrow most of the gap.

BlueTEC has been remarkably quick to resonate with consumers here.

“We have amazing feedback off the customers, because the technology combines efficiency with performance, especially in the boost function, you feel the dynamism,” Schulz says.

Dealers Bullish on BlueTEC

Exactly the same message is coming out of local showrooms. Chayut Yangpichit, managing director of Star Flag, the first of the brand’s concept stores here and one of the biggest authorized dealers in the country, points to the immediate economic value of utilizing BlueTEC technology in the huge metropolis of Bangkok, where the bulk of Mercedes’ sales take place.

“Some cars are only used in the city so they save a lot more fuel,” he says. (Savings can be) more than half of a normal diesel engine.”

He believes customers are becoming much more knowledgeable about the benefits of hybrid technology, and that’s driving further sales penetration.

“A lot of people are learning and getting to know what the BlueTEC is all about,” Yangpichit says. “Now they are asking for the hybrid models a lot more. Last year we sold over 3,000 hybrids, and this number is expected to increase further.”

More than 4,000 have been sold in total since the first CKD hybrid model appeared here in 2013.

“I do hope our engineers back home develop more hybrids,” Schulz says. “It’s the technology of the future, and emission-free driving is one of the visions of Mercedes-Benz, so we will follow that and take advantage of any product we can.”

Thailand has a longstanding reputation as an assembly hub that is lacking in R&D capability, so building hybrid models is a significant step toward changing that reality.

“It affects the whole value chain,” Schulz says. “It affects, starting at the source, the packing of the car, the transportation of the parts to Thailand, because it’s high-voltage technology.

“Then it affects the storage in Thailand, the assembly where people have had special training on high-voltage technology, it then affects the logistics of the built-up car and the final preparation in our vehicle-preparation center before dealer stocking.”

Phasing in the three key hybrid models year-by-year has allowed every facet of the organization to come to grips with the new requirements in a progressive manner.

“A considerable amount of hours of training has been put into the aftersales to prepare our dealers for this technology,” Schulz says. “This is why we started the hybrid technology already two years back with the pre-facelift E-Class. We used that time to prepare the network and get everybody trained before we now roll out the technology on all three lines.”

Although other regional markets sell BlueTEC cars, they are sourced from elsewhere, and Schulz is hesitant about confirming Thailand will become a regional hub for hybrid production in the future.

“Everything is under consideration, but at this point in time we are producing solely for Thailand,” he says.