Mercedes Has Growth Challenges

Mercedes Has Growth Challenges

Mercedes-Benz is completing a decade-long rejuvenation with the new E-Class sedan this month, capping an unprecedented flurry of fresh models that have brought rapid expansion but will make future growth tougher to deliver.

The overhaul of Mercedes’ bread-and-better business sedan marks the last major model to get a technology and design upgrade until the next-generation A-Class hatchback rolls out in 2018. By that time, Mercedes will face stronger competition as BMW and Audi rejuvenate their own lineups and possible new rivals from the likes of Apple and Google.

“It’s an extremely critical time right now,” Dieter Zetsche, chief executive officer of Daimler as well as head of Mercedes, said during a test driving event for the new E-Class in Portugal this month.

In a reminder of how tight the race is, BMW outsold its rivals last month, narrowing Mercedes’s lead for the year. That keeps the pressure on to invest in self-driving and connectivity features. Daimler forecast that Mercedes’ profit will rise in a range of 5 percent to 10 percent this year, a sharp contrast from 2015’s 40 percent surge. Sales growth will also likely to come under pressure in the coming years.

“They won’t be able to keep this momentum going forever,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler.

For now though, Mercedes is reaping the rewards of its makeover and is on track to overtake BMW as the world’s best-selling luxury-car brand for the first time since 2005. Mercedes delivered 284,566 cars so far this year compared to the BMW’s 277,304, even with BMW outselling Mercedes in February.

Zetsche, CEO since 2006, has promised a product portfolio of about 40 new or revamped models, including a dozen all-new vehicles, by the end of the decade. That leaves about 10 cars without predecessors left to introduce. That comes along with a technology push to counter a new set of automotive contenders such as Apple, Tesla Motors and Uber.

“It’s about widening the scope and seeing a much wider kind of competition and setting the direction for the company to thrive for the next 100 years,” Zetsche said in Portugal.

Author: Elisabeth Behrmann Bloomberg

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