Mercedes-Benz announces new car business strategy – focus on luxury, cost reduction, new MMA platform

During its recent virtual investor and analyst conference, Mercedes-Benz outlined its new car business strategy, which will pursue profitable growth in the luxury segment and target leadership in electric drive and car software.

The new strategy has six main pillars, with the first being to think and act like a luxury brand. According to the company, this will see a “renewed focus on luxury, making it an integral part of all products, customer interactions and digital technologies.”

While vague, it appears as though Mercedes-Benz wants to distance itself from the premium segment where it currently exists alongside Audi, BMW, Jaguar and Lexus, and instead step into the realms of Rolls-Royce and Bentley.

The second pillar is to focus on profitable growth, which involves improving contribution margins from the current and future product portfolio. On the latter, the company will focus its product development resources and capital on the most profitable parts of the market and the segments in which it competes, so underperforming models might cease to exist in the future.

This leads to lowering its cost base and improving its industrial footprint, where the company aims to cut more than 20% of its fixed costs by 2025 (compared to the 2019 baseline) by reducing spending, capacity adjustments and lower personnel costs.

Additionally, capital expenditure as well as R&D costs are set to decrease by more than 20% by 2025, while variable costs will be slashed by 1% per annum until 2025. This is necessary as the company says that 2020’s events have confirmed that its break-even point is too high.

On to pillar four, and that is to expand customer base by growing sub-brands like AMG, Maybach, G and EQ. The EQ brand is the flagbearer of Mercedes-Benz’s electrification initiatives, but every other sub-brand will also go electric, so you could say that an all-electric Maybach or G-Class are in the works moving forward.

On a related note, the company also says embracing customers and growing recurrent revenues as being important. The aim of the fifth pillar is “for customers to love owning a Mercedes-Benz and to be so satisfied by the relationship that they stay with the brand for a long-time, ideally forever.” Brand loyalty and higher repeat purchases will be backed by services and aftersales, as well as subscription services.

The final, sixth and most important pillar is having the lead in electric drive and car software. This covers the brand’s Electric First strategy, which has already seen the announcement of four electric vehicles based on the company’s large-car EVA platform, namely the EQS, which will be followed by the EQE, EQS SUV and EQE SUV.

As mentioned previously, all sub-brands (AMG, Maybach and G) will also go electric, but the company’s plans go even beyond that. From 2025, multiple further models will be added to its EV portfolio, which will be based on a second dedicated electric platform known as the Mercedes-Benz Modular Architecture (MMA). This platform is designed for compact and medium-sized cars, but no specific models have been announced.

To this end, the next step in electric vehicle development for the company will involve the Vision EQXX technology programme, with the goal of building an EV with “spectacular efficiency and range,” with the knowledge gained being transferred to series production cars.

In the area of car software, Mercedes-Benz also announced its own proprietary MB.OS operating system, which will allow Mercedes-Benz to centralize the control of all the vehicles’ domains and also its consumer interfaces – this is scheduled for launch in 2024.

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