Mercedes has a busy schedule up ahead as it aims to slim down on the number of entry-level cars from seven to four in a bid to pursue higher profit margins with bigger and more expensive cars. To make it happen, the German luxury brand has decided to invest more than 75 percent in vehicles from the C-Class segment above, thus relying less on the compact models. Another major change will take place within the distribution network.
The three-pointed star is focusing on increasing the number of direct sales by introducing this "agency" model in 15 additional markets by the middle of the decade compared to only five today. If everything goes according to plan, 80 percent of the volume achieved in Europe will be done through direct sales by 2025. Going down this role will enable Mercedes to not only have more control but also reduce distribution costs.
Speaking of which, its distribution network will be overhauled by cutting 10 percent of dealerships globally by 2025. Three years later, there will be up to 20 percent fewer showrooms at home in Germany. Automotive News Europe cites Bettina Fetzer, vice president of communications and marketing, saying Mercedes needs fewer big dealerships in mature markets. However, new outlets are being added in China. In addition, dedicated AMG, Maybach, and G-Class showrooms are on the agenda as well.
Meanwhile, Mercedes estimates online sales will gain traction in the years to come, so much so that by 2025, one and one in four buyers will purchase their next car by doing a few mouse clicks. Fetzer mentioned that "customers are getting younger, wealthier, and more digital." Consequently, they are more willing to shop online instead of heading to one of the 6,500 dealers around the world. In its domestic market, the company operates approximately 1,000 outlets.
At the same time, Mercedes is pushing further into luxury territory by preparing a Maybach SL, an electric G-Class, and a Mythos lineup of ultra-limited special cars. The microchip shortage has been somewhat of a blessing in disguise as the company made more money by prioritizing semiconductor distribution to fancier cars.
Even though the sales volume had to suffer, profits were healthy. It showed Mercedes it can concentrate more on larger and more luxurious vehicles to the detriment of compact offerings.