Mercedes Thinking Big With Small Cars

Daimler AG expects a coming range of A- and B-segment vehicles will expand the customer base of its Mercedes-Benz brand.

Mercedes customers are defined by a “function of pricing,” concedes Dieter Zetsche, Daimler CEO and head of the luxury brand’s global car division. But the popularity of pre-owned Mercedes vehicles, as demonstrated by younger consumers, suggests a ripe market for new models that are lower-priced but similarly upscale, he tells journalists in a briefing from New York.

So the auto maker is responding with next-generation platforms of current A- and B-Class Mercedes models, none of which are sold in the U.S. “Out of this new lineup, we will be able to offer some of these four models in the U.S. as well,” he adds.

Zetsche is short on details, except to say the U.S. will not see an A-segment vehicle with a conventional powertrain. However, an electric vehicle is possible, he says.

The introduction of a B-segment fuel-cell car in the U.S. next year is unrelated. First announced at the Detroit auto show in January, the plan will see the launch of a small test fleet.

Zetsche is mum on timing, but current A- and B-Class models are nearing the end of their life cycles.

His remarks echo hints dropped last year by Ernst Lieb, president and CEO of Mercedes-Benz U.S.A. Inc, who told Ward’s the auto maker was “looking at various variations of the (Mercedes-Benz B-Class) which might prove better for markets like the U.S.”

The new Mercedes models would not compete with Daimler’s Smart-brand Fortwo 2-seat microcar, Zetsche says. Launched last year in the U.S. to such anticipation dealers compiled waiting lists, the fuel-efficient Fortwo is languishing despite growing consumer interest in improved fuel economy.

China’s importance to Daimler “cannot be overestimated,” says CEO Dieter Zetsche.

Through October, sales totaled 13,082 – 35.8% below like-2008’s tally of 20,392, according to Ward’s data.

The median age of a Mercedes customer is 51, according to California-based industry watcher, Strategic Vision Inc. But while Zetsche sees the coming small cars as an opportunity to attract younger buyers, Strategic Vision suggests one metric has more significant growth potential.

“Age plays a role, but the greater opportunity is life stage,” says Christopher Chaney, vice president and director-special projects.

Citing his firm’s 2009 New Vehicle Experience Study, married consumers with no children represent the most promising target.

“If a B-segment vehicle arrives that fits the right ‘retro/innovation’ cues branded Mercedes-Benz, then there is some chance of recreating or emulating the ‘BMW/Mini’ phenonmenon,” Chaney adds.

In its first full year on the U.S. market, Mini logged 36,010 deliveries, according to Ward’s. Through October, the BMW AG-owned brand is on pace for full-year 2009 sales of 47,000 – down 13.1% from last year.

Zetsche also stokes the fires of speculation surrounding the introduction of a U.S.-market Mercedes vehicle equipped with a 4-cyl. engine. He does not discount the possibility because turbocharging can satisfy the performance expectations of would-be Mercedes buyers, but ride comfort is another matter.

“You will never be able to get it to the same level,” he says. “But the difference should not be too remarkable. At the same time, we are certainly very happy for every customer buying a 6- or 8-cylinder, even 12-cylinder engine, as well.”

Through October, Mercedes U.S. sales totaled 101,250, 25.8% behind like-2008’s tally, according to Ward’s. But global deliveries for the month ran 4% ahead of prior-year, the first time this year the tri-star brand was in positive sales territory, according to Daimler totals.

Economic recovery is tepid in all regions of the world except for Latin America where Zetsche calls the climate “surprisingly positive.”

Traditional Mercedes customers are largely unaffected by the recession that has gripped the industry, he says. But they stopped buying in deference to the grim realities facing the majority of consumers – a phenomenon noted by other luxury-brand auto makers.

Meanwhile, China remains the unpolished gem in the global sales crown. While recession has slowed activity there, it is the largest market for Mercedes’ flagship S-Class lineup and “soon” will be the brand’s third-largest market overall, Zetsche says.

Its importance to Daimler “cannot be overestimated,” he adds.

In other news, he confirms two key strategies remain under consideration: the addition of a 4-seater to the U.S. Smart lineup; and plans to assemble the Mercedes C-Class at the auto maker’s plant in Alabama.

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