Mercedes to drop entry-level models and focus on luxury segments

Mercedes-Benz will refocus its model line-up in high-profit luxury segments, dropping cheaper models.

The brand plans to become a ‘dedicated pure-play luxury car company’ and will target three segments: top-end luxury, core luxury and entry luxury.

“What has always been the core of our brand is now also the core of our strategy: the luxury segment. We are further sharpening the focus of our business model and product portfolio in order to maximise the potential of Mercedes-Benz even in challenging conditions. At the heart of that is our goal to build the world’s most desirable cars,” said Ola Källenius, chairman of the board of management of Mercedes-Benz Group AG.

Mercedes-Benz first outlined its plans to shift away from smaller cheaper cars in 2020, when it outlined plans to pursue significant growth for its sub-brands AMG, Maybach, G and EQ.

The updated strategy includes the launch of the Mythos series, reserved for highly-exclusive collectible cars.

By focusing on luxurious high-margin vehicles, Mercedes-Benz aims to achieve an operating margin of 14% by 2025. It will divert 75% of its investments to develop new luxury models.

The top end luxury segment includes all  AMG and Maybach models, alongside EQS, S-Class, GLS and G-Class.

Källenius added: “Most luxury companies build their portfolio on the basis of one or two true icons. Mercedes-Benz has the good fortune to have multiple iconic products and brands at the upper end of its portfolio – such as the S-Class, the SL, the G as well as the AMG and Maybach brands. We see great potential here to expand our Top-End portfolio with even more fascinating products for our customers.”

Core luxury includes the C-Class and E-Class, which typically have the highest sales volumes. With the Core luxury segment, the company plans to go electric on an accelerated timescale, leveraging the EVA2 platform that underpins the EQE and EQE SU. A new E-Class comes to market next year, following the recent launch of new C-Class.

Mercedes-Benz plans to redefine the entry point to its portfolio and will reduce the number of entry-level models from seven to four. Next-generation entry luxury cars will be repositioned, with significant technology upgrades.

The car maker recently reached an agency model agreement with its retailers which will lead to the new retail framework's introduction in the UK from 2023.

It had been consulting UK retailers on the change and announced in December that it had agreed key points of the process which would bring the model to the UK and its native Germany in 2023.