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#1 Old 09-10-2015
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Mercedes exec shares strategy to protecting brand's image

Automotive News Europe
September 10, 2015 06:01 CET
Mercedes-Benz is on a winning streak. Because of surging demand in China, the brand finished July within a couple hundred units of passing Audi for second place in global premium-car sales. In addition, its first-half margins exceeded those of BMW and Audi. Sales chief Ola Kaellenius spoke to Automotive News Europe Correspondent Christiaan Hetzner about how Mercedes plans to protect its premium image -- and its profits -- despite a growing reliance on smaller, lower-margin compacts.

Do your more affluent customers feel Mercedes is diluting the brand’s image with its growing emphasis on volume compact models?

I often got this question when I was at AMG and we wanted to introduce the A 45 [a performance version of the compact A class]. People would ask how the S 63 or E 63 customer might feel about that. I spoke with many of our customers personally, and the reaction was actually always positive. The S 63 driver feels that the A 45 is a really cool offering for that segment and he may consider buying one for his son or daughter. So you see, I cannot give you any anecdotal evidence about an unhappy S-class customer because I haven’t been confronted by any.

How far can it go? Will you add a subcompact to rival the Audi A1?

We think the A class is a natural starting point for the Mercedes brand. We have no plans to go below it. That maybe takes it a tad too far from a brand point of view, and it’s also economically less interesting.

Will China’s economic slowdown cause you to change your plans there?

It remains our biggest growth market so we have not changed our midterm or long-term view. We opened up about 100 sales points last year, many Tier 2, 3 and 4 cities where we were not present before. This year we will add about 50 more showrooms. In some cases it is starting to make sense to expand current sites now that our car parc is big enough in some mature urban markets.

Ola Kaellenius: "We think the A class is a natural starting point for the Mercedes brand. We have no plans to go below it."

Why is Mercedes growing in China while its rivals decline?

We’ve adjusted our product lineup to better match the tastes of our Chinese customers. By offering a long-wheelbase version of the C class we sell two or even three times the volume we sold with the old C class. We are dominating the upper-premium segment with the S class and its Maybach variant. In March we added local production of the GLA compact SUV, which is giving us an additional boost.

Will your China sales keep growing this year and next?

We’re counting on good growth in the second half of this year but it is too early to comment on how the market will develop in 2016.

How high are the incentives in China?

It’s very competitive, no question, but so is Germany and the U.S. If you look at the weighted average rebate level that you get at the point of sale, Mercedes-Benz has stayed relatively flat in China over the past 12 months.

You want to launch 10 all-new models. Where can you still expand in your product range?

There are complementary niches where we can achieve profitable volume. Every now and then we give a glimpse [of where we might be headed] like we did with the Vision GLC Coupe at the Shanghai auto show. It’s an interesting niche. We just entered this segment [for coupe-styled crossovers] one class above with the GLE Coupe. Order entry looks very, very strong. I see some potential in SUV segments. I also see some room to grow in compact cars, not in the current generation but longer term.

Meet the sales boss
NAME: Ola Kaellenius
TITLE: Mercedes-Benz Cars head of Sales & Marketing
AGE: 46
MAIN CHALLENGE: Gaining ground in the global sales race against front-runners Audi and BMW without sacrificing margins.

How is demand for your growing lineup of plug-in hybrids?

We’ve received a tremendous reception for the C-class plug-in hybrid, our second model with the technology after the S-class plug-in. And we have announced that both the GLE and the GLC will be available as plug-ins, bringing us to four model lines. To a certain degree demand is dependent on the market’s regulations and incentives. The C350e plug-in is sold out in Holland. We’re trying to get more volume there because cars that emit less than 50 grams per kilometer of CO2 are so attractive that our customers are knocking down our doors to get one.

Why do you remain in Formula One?

It’s part of a holistic brand building. We were the inventor of the automobile; we were there in 1894 when the first car race was held, and it was won by a car with a Daimler engine. Racing is part of our DNA. We use it to display the strength of our technology, particularly our hybrid technology, and our products.

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