The transition to electrification appears to be meeting some resistance. Now, with interest rates up, U.S. buyers are backing away from high-end models too. As a result, Mercedes-Benz has announced plans to pivot its focus towards entry-level cars, incorporating a greater mix of combustion-powered vehicles in its lineup.
Several automakers went to a margin-focused strategy in the years surrounding the pandemic. Supply was short, demand was somehow out of this world, interest rates were often close to zero, and making high-end luxury cars worked well for many brands. Now, that strategy isn’t as effective since supply is up and interest rates are too.
To keep sales figures up, Mercedes reportedly told dealers at a meeting in January that it would change its supply mix placing a greater focus on lower priced models and less on EVs. First on order will be more entry-level cars like the GLC. In addition, it’ll ramp up production of combustion cars and hybrids to meet the demand of customers in the USA. That’s not all too different from what Nissan is doing too.
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Analysts appear to have a positive view of this change. “Mercedes is keeping in touch with reality instead of trying to alter it,” Edmunds Insights Director Ivan Drury told Autonews. “The past year has shown that you can only fly so high before you become out of touch. Entry-level vehicles allow consumers to get a taste of what is to come if they can afford to stay within the brand’s family.”
To hear dealers speak, it sounds as though they’re not particularly thrilled about stocking electric vehicles. “The carrying expense is choking me,” said a dealer to AutoNews. “I’d rather have entry-level vehicles with a turn rate of less than 30 days that I can make a small profit on than carry $100,000 [electric] vehicles for half a year and lose money on.”
Another says that even customers near the top of the pile prefer gas over electric. “I don’t think the space for Mercedes is there,” one exec said. “Most of our high-end clients seeking performance-oriented cars will pick a gasoline engine over an electric motor.” Focusing on lower-priced non-electric models could give Mercedes the sales boost it needs to continue growth throughout 2024.
25 New additions to U.S. range this year
Mercedes has notified its U.S. dealers of plans to increase the availability of traditional combustion and hybrid vehicles this year bringing 25 new and updated models to the market. This includes expanding the lineup of S-Class and GLE models with plug-in hybrid variants, as well as introducing an electrified GLC crossover by the fall.
“Before the end of this quarter, we’ll see a big change in the inventory mix with ICE supply being more than electric,” a dealer told Autonews.
“We’re very happy to bring into the market what is needed, which is the right balance of ICE products, electric products and now also adding PHEV into the mix,” stated Senol Bayrak, Sales Director at Mercedes-Benz USA.
