Amid plummeting sales, even Mercedes-Benz can’t withstand the pressure. What once was a joke, “If you don’t work hard, you’ll only drive a BBA,” has now become a reality. The new forces boasting about overtaking the BBA (Mercedes-Benz, BMW, Audi) are probably grinning ear to ear.
The reason is the impact of domestically produced mid-to-high-end electric vehicles. Once dominant, Mercedes-Benz, BMW, and Audi have had to lower their heads and adopt a “price for volume” strategy. Recently, terms like “Mercedes slashing prices in half” and “buying a BMW for 170,000 yuan” have been hot topics.
Among these, Mercedes-Benz, traditionally strong on price, has especially caught the attention of “Visibility in the Car Circle.” In the first quarter of this year, Mercedes-Benz’s performance in the Chinese market was less than optimistic, selling 168,900 passenger cars, down 12% from 191,000 in the same period last year. Pure electric passenger car sales were only 6,300, insignificant in the entire market.
In this situation, Mercedes-Benz started a massive price cut. In the terminal market, some models were even sold at 60% of the original price. For example, the C200L, with an official guide price of 334,800 yuan, could be driven away for just over 200,000 yuan. Similarly, the new energy model EQB’s terminal price has dropped to 176,000 yuan, half of the guide price.
This “price for volume” approach can be understood as a desperate move. However, it’s worth recalling that Mercedes-Benz Group’s Chairman of the Board of Directors, Källenius, once said in an interview that Mercedes-Benz would not follow Tesla’s pricing strategy and adjust prices based on the market, as it would lower consumers’ psychological expectations of brand value and vehicle residual value. So why is there a discrepancy between words and actions?
How long can the “kingdom” saved by price cuts last is a question. However, it is certain that if the price cuts continue, Mercedes-Benz will lose the last dignity of a traditional luxury car brand.
Half-Price Sales
In the luxury car camp, Mercedes-Benz has been like an “elder brother.” For a long time, consumer recognition of the “Three-Pointed Star” has made its prices and residual values very strong, with many models even requiring additional payments for delivery. For example, in 2019, Xinhua News Agency exposed that in some regions, a certain high-end Mercedes-Benz SUV required an additional payment of around 500,000 yuan for delivery.
Even amidst the intensifying “price war” in the domestic automotive market, Källenius believed that blindly following was unnecessary. For Mercedes-Benz, providing consumers with more durable and valuable new cars was the primary goal for the future. However, in reality, Mercedes-Benz has made repeated concessions in terminal market prices over the past two years.
“Visibility in the Car Circle” noticed that as early as the beginning of the previous year, there were rumors of Mercedes-Benz offering “110,000 yuan giant discounts.” According to Pacific Auto Network, at that time, dealers in many places such as Taiyuan and Shenzhen offered cash discounts of up to 110,000 yuan for the Mercedes-Benz EQC; in Beijing and Shantou, dealers offered similar discounts for the entire Mercedes-Benz S-class.
Last year, various automotive forums were filled with information about discounts and promotions for many Mercedes-Benz models. For example, by the end of last year, the lowest configuration model of the 2023 Mercedes-Benz GLB had a reference minimum price of around 182,200 yuan in Shanghai and Beijing, a discount of up to 117,600 yuan from the manufacturer’s guide price.
This year, the trend continues, with even more staggering discounts. Some Mercedes-Benz fuel models saw discounts of up to 60%, and new energy models were directly reduced to 50%, sparking extensive online discussions. On June 19, the term “Mercedes-Benz slashing prices in half” even trended on Weibo.
On the Autohome platform, there are numerous posts about Mercedes-Benz’s “significant price cuts” and “hot promotions.” For example, in Changzhou, the Mercedes-Benz A-Class is running a discount promotion, with subsidies of up to 100,000 yuan, reducing the starting price to 150,300 yuan, equivalent to a 60% discount.
Similarly, in the Guangzhou promotion channel, it is mentioned that the Mercedes-Benz S-Class is offering unprecedented discounts of up to 180,000 yuan, making it more accessible with a starting price adjusted to 782,600 yuan.
In the electric vehicle segment, Mercedes-Benz is not holding back on price cuts either. As of June 25, the Mercedes-Benz EQS electric sedan is under a highly attractive promotion in Tianjin, offering up to 350,000 yuan in cash discounts. The 2023 EQS 450+ Pioneer Edition, originally priced at 881,000 yuan, is now only 531,000 yuan after the discount.
Another electric SUV model, the Mercedes-Benz EQB, saw discounts of up to 171,000 yuan in Suzhou earlier this month. After the discount, the starting price for the 2024 EQB 260 is only 181,000 yuan, allowing consumers to buy a Mercedes-Benz electric vehicle at nearly half the price.
These extensive terminal discounts make Källenius’s previous remarks seem like a joke. It can only be said that the market will educate every brand owner who refuses to listen.
Plunging Sales
Choosing to lower prices is essentially a compromise with the market. In the brutal era of electrification, traditional luxury brands, including the BBA, have had to give up some brand premium to retain more market share. Last year, Mercedes-Benz delivered about 765,000 new cars in China, roughly flat compared to 2022 levels, making it hard to say that this was not due to “price for volume.”
However, this year, Mercedes-Benz’s situation in the Chinese market may be worse than last year. So far, both fuel and electric vehicle sales have been less than ideal.
According to Mercedes-Benz’s first-quarter 2024 sales data, global total sales for the quarter were 568,400 units, with 463,000 passenger cars, an 8% decrease compared to the first quarter of 2023. Pure electric vehicle sales were 50,500 units, a 9% decrease from the same period last year, with 47,500 pure electric passenger cars sold, an 8% year-on-year decrease.
In the Chinese market, Mercedes-Benz delivered nearly 170,000 passenger cars in the first quarter, still the highest sales region for Mercedes-Benz, but with a nearly 12% year-on-year decline. This led to an 8.9% year-on-year decrease in total revenue in the Chinese market to 5.793 billion euros.
In contrast, in the US, UK, and French markets, Mercedes-Benz’s sales grew by 3%, 43%, and 35% year-on-year, respectively, making the Chinese market’s performance look somewhat out of place. In other words, the global sales decline in the first quarter had a lot to do with the sluggish Chinese market.
Focusing on the new energy sector, in the first quarter, Mercedes-Benz’s pure electric passenger car sales were 47,500 units, an 8% year-on-year decrease. Meanwhile, rival BMW Group’s pure electric vehicle sales reached 82,700 units, a 27.9% year-on-year increase, creating a stark contrast between the two.
According to Dongche Di data, in the first quarter, Mercedes-Benz’s pure electric vehicle sales in China were only 6,300 units, with the best-selling EQE SUV selling just over 2,000 units, making it hard to rank in the domestic mid-to-high-end new energy market and widening the gap with BMW.
Expanding the time frame further, data from Sina Auto, using new car compulsory insurance numbers as the statistical criterion, shows that in the first five months of this year, Mercedes-Benz’s cumulative insured number in China was 289,300 units, down significantly from 319,700 units in the same period last year.
Given that Mercedes-Benz’s substantial price cuts have lasted for a long time, it suggests that these heavy promotional activities have not been very effective this year. On the contrary, discounts of 50% and 60% have led netizens to joke, “If they keep cutting prices, I might really afford one,” undoubtedly impacting brand value and residual value.
A report jointly released by the China Automobile Dealers Association and JDPower shows that Mercedes-Benz’s residual value was 79.5% in December 2021, but has fallen to 67.2% by April this year.
The China Automobile Dealers Association analysis indicates that in the electrification era, traditional luxury brands rarely make breakthroughs in products. Mercedes-Benz, BMW, and Lexus are technically on par with independent brands, leading more high-end consumers to abandon overseas luxury brands for domestic ones.
What Else Can Mercedes Do?
“Visibility in the Car Circle” previously analyzed that the decline in Mercedes-Benz sales has many factors. One is the slow electrification transition, making it a “latecomer,” with some “oil-to-electric” products struggling to gain consumer recognition. Additionally, its stronghold in the fuel vehicle era is becoming increasingly unstable. Now, in the Chinese luxury car market, many independent new energy brands have successfully broken through, threatening the positions of BBA brands.
Current major car sales rankings show that the top spots are almost all occupied by new energy vehicles. For example, in May this year, the AITO M9’s sales were 16,500 units, while the BMW X5 sold only 7,683 units. In the B-class sedan market, Mercedes-Benz is far behind Tesla; in the C-class market, the ZEEKR 001’s May sales also surpassed the Mercedes-Benz E-class.
Given this, what can Mercedes-Benz do to stabilize and prevent further decline? The future product lineup is obviously crucial. According to Mercedes-Benz’s plan, it intends to launch 15 new models in China this year.
Additionally, in terms of continuous transition, Mercedes-Benz has already obtained a conditional autonomous driving (L3 level) highway road test license in Beijing, China. It has also activated the first batch of supercharging network stations in China, the US, and Germany.
At the recently concluded 2024 Beijing International Auto Show, Mercedes-Benz brought 21 significant models, covering various drive types and market segments, including the global debut of the all-new Mercedes-Benz all-electric G-Class SUV.
At the same time, at the auto show press conference, the Mercedes-Benz CLA Concept demonstrated the electrification and digital technology innovations of the Mercedes-Benz Modular Architecture (MMA) platform and the newly developed MB.OS operating system. This marks the next step towards an electric future for Mercedes-Benz.
Markus Schäfer, a member of the Board of Management of Daimler AG responsible for Greater China, said in an interview: “Mercedes-Benz’s determination to promote the transition to electrification has not changed,” “Our strategy is to continue to expand the electric product lineup with quality, comfort, safety, and intelligence.”
Regardless, Mercedes-Benz has the attitude and determination for transformational development. However, this is a “long-term battle.” Compared to its competitors, Mercedes-Benz’s pace is still relatively slow. Without quickly establishing a technological advantage and making significant breakthroughs, it will likely be challenging to capture more market share.
Moreover, “Visibility in the Car Circle” believes that to compete with new forces such as NIO, XPeng, Li Auto, AITO, and ZEEKR, traditional luxury brands, including Mercedes-Benz, need to find ways to appeal to younger consumers. They must make changes in design, marketing, and services instead of continuing down the path of heavy discounts.
Credit: Visibility in the Car Circle
