Mercedes-Benz A-Class Exclusive Edition Front Beach for Craig's feature about semiconductors in issue 164Mercedes-Benz A-Class Exclusive Edition Front Beach for Craig's feature about semiconductors in issue 164


Mercedes to axe cheaper models to focus on higher margins as A and B Classes put at risk

  • Mercedes to slash compact car offering from seven models down to three
  • German outfit wants to pour extra resources into high-end cars with larger profit margins
  • Boss says company needs to ‘expand at the top’

Time 8:17 am, May 20, 2022

Mercedes is to axe three of its cheaper models in order to focus on more profitable cars with higher margins, the firm’s CEO has confirmed.

Ola Källenius said Mercedes was looking to grow in a ‘financially stable way’ and saw the change in policy as the ideal way to increase profits.

He would not confirm which models would be affected but its is believed that the A and B Classes are among those at risk.

The change would allow the German outfit to increase its profit margins to around 15 per cent by 2025, moving the firm closer to Porsche.

It would mean that Mercedes would reduce its compact car offerings from seven models down to four.

It will then be free to focus more resources on luxury AMG models as well as other more expensive cars like the G-Class and the Maybach.

Despite selling less models, Mercedes has no plans to significantly reduce volumes, despite selling 400,000 fewer cars in 2021 than it did before the pandemic in 2019, largely due to the semiconductor crisis.

The brand delivers around two million cars every year, way ahead of Porsche which sits around the 300,000 mark.

Källenius says that the change will result in 75 per cent of Mercedes’ investment going on high-end vehicles, the FT reports.

The CEO said: ‘If you want to drive your margins upwards, you need to trim the tree at the bottom, and you need to try to expand at the top.

‘We don’t want to shrink the company but we want to grow the company in a financially sensible way.’

Mercedes is far from the first car brand to shift its focus towards high-end models in the wake of the semiconductor crisis.

Volkswagen Group also recently announced plans to slash its line-up to focus on premium vehicles.

Jack Williams's avatar

Jack joined the Car Dealer team in 2021 as a staff writer. He previously worked as a national newspaper journalist for BNPS Press Agency. He has provided news and motoring stories for a number of national publications including The Sun, The Times and The Daily Mirror.

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