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Mercedes-Benz Källenius Distances Himself from the Luxury Strategy

Source: dpa | Translated by AI 2 min Reading Time

The recently pursued sales strategy of Mercedes is showing cracks. CEO Ola Källenius himself is distancing from the term "luxury strategy."

Luxury, exclusivity, or simply desirable? Mercedes is grappling with defining its strategy during challenging sales times.(Image: Grimm – VCG)
Luxury, exclusivity, or simply desirable? Mercedes is grappling with defining its strategy during challenging sales times.
(Image: Grimm – VCG)

According to a press report, Mercedes-Benz is softening its high-price strategy. The Stuttgart (Germany)-based automaker reportedly no longer aims to exclusively "think and act like a luxury brand" in its passenger car division, the "Handelsblatt" (German economy magazine) reported on Monday, August 11, citing insiders. The trigger word "luxury" is to be largely removed from the strategy. "Our vision will broaden," a decision-maker reportedly said. The company declined to comment explicitly to the newspaper.

"We have actually never referred to our strategy this way," said CEO Ola Källenius in an interview with the newspaper. Mercedes, however, stands for the extraordinary. "Our goal was and still is to offer the most desirable offering to customers in all our segments," emphasized the CEO.

Mercedes still intends to prioritize margins over volume, but only as long as the factories, particularly those in Germany, are operating at full capacity, according to the "Handelsblatt" report citing corporate sources. With the onset of the slowdown, Källenius had announced plans to significantly reduce production capacities in Germany to ensure sufficient profitability even with fewer vehicles sold.

Three Reasons for the Challenging Industry Situation

Automakers in Germany have recently reported significant declines in profits. At Mercedes-Benz, the company's earnings fell by more than half in the first half of the year compared to the same period last year, dropping to around 2.7 billion euros (approx. 3.1 billion USD). "The complexity of the environment in which we operate is currently extremely high," Källenius said in the interview. The industry is simultaneously experiencing heavy rain, hail, storms, and snow: "Car manufacturing is a tough business, now more than ever."

The head of the car manufacturer sees three main reasons for this. When the USA decides to redefine a decades-old world trade order, it impacts business. Under President Donald Trump, the USA recently increased tariffs on imports from the EU, including cars.

"Secondly, we are experiencing a Darwinian competition in China," said Källenius. In the Chinese market, more than 100 automakers are competing against each other. "Additionally, the buying mood in the higher segments, which are important for us, has been very subdued for several years, to put it mildly," Källenius noted. Together, these factors result in incredible competitive pressure that affects all players.

And thirdly, the transformation to electromobility is taking longer than anticipated a few years ago. "Therefore, we are investing in multiple drive technologies in parallel over an extended period," said Källenius.

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