Downsizing the key to Benz growth

MERCEDES-BENZ expects sales in Australia to grow over the next five years as it introduces a range of new compact models that it says will eventually account for about a third of its volume.

Mercedes-Benz Australia product manager Gordon Jones told GoAuto last week that sales will climb as the brand’s focus shifts from traditionally large luxury vehicles to more affordable products with lower running costs.

“Our range had been predominantly skewed to high-displacement, high-output engines, so there is growth in an emphasis on having a more balanced portfolio of products.

“The compact car families are where our growth is going to come from. It will certainly account for a third of our volume in the long term.”

Mercedes will also target downsizers who require smaller, more efficient cars but are not willing to downgrade on technology, luxury or performance.

“People don’t want to compromise their standards,” said Mr Jones.

“They understand they might have to cut down to size, but they don’t want to compromise on performance, so while the engines and vehicles are perhaps downsizing, the performance and interiors are not.”

The new products will be spawned from the MFA platform that underpins the latest B-Class and upcoming A-Class, starting with the coupe-styled CLA compact sedan previewed by the CLC concept at the Beijing motor show last month.

The CLA is expected to launch in Australia shortly after the A-Class in the first quarter of next year.

Mr Jones confirmed a new crossover to take on the popular Audi Q3 and BMW X1 – dubbed GLC – is also on the way and expected to arrive in 2014.

“There is something similar to a GLC on the platform,” he said. “It is a little further out, but it does exist.”

Mr Jones spoke of the challenges of increasing sales in a mature, relatively stable market like Australia, where growth requires pinching conquest sales from other brands.

“I don’t think you are going to see volume double overnight. It’s going to be a progressive climb.

“We don’t think our competitors are going to roll over and let us take their customers easily.”

From top: Mercedes-Benz B-Class, and the upcoming A-Class.

The greater presence in smaller vehicle segments will open the brand up to customers for whom Mercedes-Benz products were previously out of reach, and Mr Jones said this will enhance rather than dilute the brand’s aspirational qualities.

“I think there is always going to be a place in the market for products like the S-Class, but the people buying them are not really looking at downsizing. They buy that product more for the status.

“I have come across people in my time who have worked their whole lives to own a Mercedes-Benz and a C-Class is all they can get. We will open up to those sorts of people.”

The range expansion has been partly driven by the need to reduce CO2 emissions, especially in Europe, but Mr Jones sees the move as a way of boosting Mercedes’ presence in Australia.

“If you look at the Australian luxury market, the sweet spot is around $80,000 before it tends to fall away in volume terms, so the bulk of it is down the end where these new products will sit.

“We have been there for the last decade or so with A and B-Class, but they never really fulfilled the potential.

“It is going to be a gradual improvement over time as more products come in, and while we are bringing new products into the line-up, we are still changing over existing products, too – and we aren’t going to slow down there.”

Although Audi and BMW have so far beaten Mercedes to the punch with model diversification in smaller vehicle categories, Mr Jones believes the distinctive design of upcoming Benz products – as illustrated by the CLC concept – is a strength that will give the brand an edge.

“All our models have their distinct identities there is a family resemblance and the three-pointed star, but they have individuality compared with competitors that kind of morph into each other.”

Mr Jones also believes the tie-up with the Renault-Nissan Alliance will yield benefits for Mercedes-Benz in compact vehicle sectors as both French and Japanese sides of the operation have a strong background in small cars, small efficient engines and vehicle electrification.

He agreed that Nissan’s foray into the luxury sector with Infiniti is also a source of synergies between the automotive giants.

In addition to the A-Class, B-Class, CLA and GLC, other potential uses for the MFA platform include a ‘shooting brake’ wagon and a sub-SLK roadster or coupe.

Mercedes-Benz sales in Australia are up 2.8 per cent in the first four months of this year – against a market up 5.1 per cent – with 6174 cars, SUVs and vans finding homes.

The company expects stock shortages of the new B-Class and M-Class to prevent it from regaining the title of number one German luxury brand in Australia this year.