Is Mercedes-Benz Losing Its Prestige as a Luxury Car Brand?

Mercedes-Benz is one of many good things in the automotive landscape. It is defined by its innovations, resiliency as a brand, and the performance of its cars, especially in racing. It also has the bragging rights of having a founder who invented the first automobile. Some claim, however, about Mercedes-Benz losing its prestige as a luxury car brand over the years.

A short documentary from CNBC in 2021 explains why Mercedes may already be losing its shine. The factors attributing to this, include:

1. Quality Control Issues

One of its contentions is that the brand has suffered quality control issues over the years as it struggled with its electronic components and its predisposition to cut production costs. We would like to add that this still happens based on the frequent recalls it has announced in the past couple of years.

2. Dilution of Exclusivity Due to Aggressive Market Expansion

Another is that over the years, the efforts of the company were mainly focused on boosting the volume of its products to capture more market share. With that, Merc has been enticing younger buyers by making less expensive vehicles with lesser luxury features. However, such a strategy was not always successful as with the case of the C-Class Sport Coupe in 2002, which failed miserably in the market resulting to its discontinuation in 2006. It should be noted that the same thing happened when the brand dipped into the luxury pickup truck segment through the short-lived Mercedes-Benz X-Class. These and the presence of so many vehicles in its lineup tend to dilute its exclusivity as a brand, too.

3. SUVs Don’t Inspire the Same Level of Interest as Its Cars

Moreover, the source stated that its SUVs don’t inspire the same level of interest as its passenger cars. This may be attributed to the presence of formidable rivals in the industry, including BMW, Audi, and Lexus, not to mention that some of the said brands sometimes have products that are almost alike design-wise such as the Mercedes GLE, BMW X5, BMW X3, Audi Q5, and Lexus RX. Add the fact that Merc has initially held back from introducing its hottest SUVs from Europe into the US like in the case of the GLC so it missed out on its huge demand there.

4. Losing Ground in the US Luxury Vehicle Market

CNBC further cited Benz lagging in the third position in terms of the number of luxury vehicles sold in the U.S. Citing 2020 data, BMW was on the top of the list selling 278.9K units, Lexus on second with 275K sold, and Merc on the third spot with 274.9K sales. Nevertheless, it should be recalled that Mercedes remains the top-selling luxury vehicle brand in the world.

5. Fall in Profits

Next, the presenter took into account a time in 2019 when Daimler, the then-parent of Mercedes, saw its profits fall by $5 billion due to its involvement in the Dieselgate scandal and electrification R&D. If its EV investments fail to produce favorable results in the years to come, it could threaten the confidence of its shareholders.

6. Strong Competition in the EV Market

Speaking of electrification, the brand has to struggle amid strong competition in the EV market. One of which is Tesla, and the entry of many other brands in the segment, particularly the cheaper Chinese EVs.

Based on McKinsey’s Electric Vehicle Index, Tesla holds a 16% global market share EV. Mercedes is not even in the top 10 list of the data as of 2019. Its traditional rival, BMW, made it but most entries came from Chinese EV makers. When it comes to China, which has the largest demand for EV nowadays, Merc also has to watch out for its local EV brands.

7. The Tesla Threat

An interesting fact that was pointed out by the video was the tendency of the top German luxury automakers (Mercedes, BMW, and Audi who own a 60% slice of the Chinese market) to drop their overall market share advantage whenever Tesla opens up a new store in a location. From the looks of it, Tesla is aiming to maximize its exposure by opening up more international dealerships in the years to come, thus, if the trend continues, it will be one hell of a ride for the German luxury brands.

Furthermore, Merc takes more time to develop its EV models due to its high standard and efforts to make it right the first time, which are not exactly a bad thing. However, competitors like Tesla are moving quicker and more adventurous when it comes to exploring tech that other automakers are reluctant to adopt. The state-of-the-art tech is usually what attracts younger buyers to the American brand.

Nonetheless, Tesla is far from secure in the American market because EVs still comprise a small percentage of total vehicle sales in the US.

Our Take

We agree with most of the arguments presented by CNBC about Mercedes-Benz losing its prestige over the years because several of them have been manifesting within the brand already. Then again, it’s worth mentioning that the data offered from several sources were two or three years from the present, and since then, Mercedes has made big leaps in its marketing, particularly in its EV development.

So far, the German automaker is enjoying success in its Mercedes-Benz GLC SUV with 51,805 units sold in 2021, and 16,910 units sold in the first quarter of 2022 and is about to roll out its next-generation model for the range in dealerships.

Lastly, the three-pointed star marque just made big strides in its electrification via the triumphant demonstration of the Mercedes-Benz Vision EQXX, which recently displayed an actual range of 747 miles on a single charge. The said car serves as a preview of what the brand has in store for its EV units going forward.

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