Business

Mercedes fights back against tough rivals

  • 26 September 2010
  • From the section Business
Mercedes C63
Image caption Most Mercedes buyers opt for more modest C and E class models, but performance versions like the C63 help attract attention

Sliding sideways in a Mercedes C63 is an interesting way to mark the 125th birthday of the German marque's parent company Daimler.

Having turned off the car's stability controls, its 6.3 litre 449 horse power engine gets the wheels spinning on the skid pan at Mercedes World, yet at the touch of the electronic stability button the car readjusts itself and gets back on track.

The experience mirrors how a carmaker that for years was the world's number one lost its way in recent years, and how it is now regaining control as it resumes the battle for the top slot.

Having been pushed into third place globally in the luxury cars segment, after BMW and Audi, Mercedes' global sales are now on the rise.

During the first six months of 2010, the marque overtook Audi in terms of global sales. In the crucial US market, Truecar.com predicts that Mercedes could soon overtake the Japanese luxury marque Lexus.

And with its current well-received model line-up, Mercedes is once again a contender to be reckoned with.

"Daimler can boast a much improved model mix in its passenger car sales," according to a recent report by IHS Global Insight, which predicted "vastly improved financial performance from the company's passenger car division".

Image caption The SLS helps build the Mercedes brand

Frank Schwope, automotive industry expert at Norddeutsche Landesbank, is also optimistic.

"After surviving the crisis, Daimler has returned stronger to the race for the title of world's leading luxury car maker," he says.

Quality and reliability

Staying ahead in the luxury car market is an expensive process that requires the creation of performance cars to bolster the marque's desirability.

Mercedes' new flagship is the SLS two-seater supercar.

Driving it on a test track gives insight into the sort of technologies that could eventually trickle down to more ordinary models, such as the C and E class saloon and estate cars, which make up the bulk of sales.

But although supercar performance may attract attention, it is no secret that Mercedes customers tend to be rational rather than passionate.

"A reputation for quality and reliability is among the most important purchase criteria for Mercedes owners," J D Power observes.

In recent years, there has been much talk about how Mercedes quality has slipped.

So the company has responded by keeping up investment throughout the recession, having set aside an annual budget of 4bn euros for its R&D director Dr Thomas Weber to develop better cars.

"No other company outside the arms industry spends that sort of money on research and development," a company official says. (A claim disputed by Toyota, which says it spends much more.)

Image caption Mercedes truck sales rose 55% during the first half of 2010

As a result, earlier this summer Mercedes came top of the J D Power car ownership survey of German customers, which has always been won by Japanese carmakers in he past.

Making money

Mercedes' recent revival has bolstered the company's bottom line.

The latest set of financial figures, for the April to July quarter, revealed a sharp turn-around in operating profits, which came in at 2.1bn euros compared with a 1bn euros loss during the same period a year ago.

When releasing the result, group chief executive Dieter Zetsche raised his earnings estimate for the year from 4bn euros to 6bn euros, before interest and tax.

The car division delivers the bulk of the earnings, though they have also been bolstered by a 55% rise in truck sales and a 42% rise in van sales during the first half of the year, when compared with the same period a year earlier.

Commercial vehicle sales are expected to remain strong this year as the global recovery gets underway, Mercedes predicts.

And given the positive outlook for both the car and the commercial vehicle divisions, there is every chance that 2010 will be the year to remember for Daimler's Mercedes.

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