Mercedes Benz is perhaps the biggest name in luxury cars in the world. Sure, there are Italian exotics like Lamborghini, stately British brands such as Bentley, Rolls-Royce and Aston Martin, and plenty of competition in Benz’s home country of Germany. But the German make with the three pointed star logo is for countless buyers around the world – the brand to aspire to.
It has a reputation for superb build quality and excellent engineering. It also has an extremely strong pedigree, including bragging rights that its founder, Carl Benz, invented the world’s first production automobile.
Mercedes Benz has been a dominant force in racing, a relentless innovator, a symbol of the pursuit of excellence no matter the cost, and for its buyers, a sign they have finally made it.
Today, it faces a new class of challenges. Electric vehicles are coming into the world, pushed by eco conscious policy makers and at least a few eager buyers.
Tesla has become an aspirational brand for younger consumers, and there is a slew of other EV hopefuls vying for the mantle of the next generation’s aspirational vehicle.
Mercedes Benz has had a magnificent run, but those who study the global auto industry say it is undergoing one of the most dynamic and uncertain periods in its history.
Just a few years ago, U.S. auto sales hit historic highs, but automakers have had to sink billions into new technologies and contend with a new crop of competitors in the key Chinese market and around the world.
Mercedes Benz has been a leader since the birth of the automobile. What it does now may determine whether it remains a leader.
The company traces its history back to the 1830s and to three pivotal figures, Gottlieb Daimler, Wilhelm Maybach and Carl Benz.
Daimler, for whom Mercedes long time parent company is named, was an engineer who developed the engines that powered the earliest Mercedes cars. Maybach, whose name now graces a line of ultra luxury cars, was the company’s first technical director. Carl Benz was the inventor of what is widely considered the first true gasoline powered, commercially available car.
In addition to that, Benz, Daimler and Maybach participated in the world’s first known motor sport event, a 126 kilometer race from Paris to Rouen in 1894, organized by a French newspaper publisher.
The event placed steam, gasoline and even battery driven vehicles side by side. 9 of the 17 vehicles to cross the finish line had Daimler engines in them, including the first four to finish the race.
In other words, there are a few brands that can match Mercedes Benz automotive pedigree. That first race began one of the richest histories in international motor sport.
Unfortunately, Mercedes Benz left racing for decades after a catastrophic accident in 1955 at the 24 hours of the Le Mans race. A three way crash with a Jaguar and Austin Healey sent the Mercedes Benz car flying into the stands. Somewhere around 80 people died. Mercedes Benz did not return to racing until 1989.
As of 2021, Mercedes sponsors one of the most successful Formula One teams in history. Its drivers have together won seven consecutive double world championship titles, the most ever. Its innovation in racing, tech and in cars have often seeped into its production vehicles.
The racing program has also produced some iconic vehicles, including the 300 SL with its trademark Gull-Wing doors. The two seater sports car was developed in 1952 and went on to win races at Le Mans, Bern, Nürburgring and Carrera Panamera. It was released to the U.S. public in 1954. The move was motivated by an U.S. importer who convinced the company there would be strong demand for the car.
Its track success helped the company form a reputation for superb engineering, quality materials, innovation and execution.
Mercedes cars didn’t rise to the top by always being the most feature rich or even the most luxurious. What buyers were paying for was a leaner, simpler car built very well.
The company goes to some striking lengths to back up this reputation for attention to detail. For example, like many other automakers, Mercedes Benz has its own in-house performance tuning division known as AMG.
AMG began as an independent tuning shop that Mercedes later acquired, but AMG is somewhat unusual in that engines for many AMG cars are each hand built by a single engineer at a time. Each engine has a plate etched with the builder’s signature.
Whenever there’s a brand image ranking exercises with consumers, almost without failing, Mercedes Benz always comes out at the top. It’s always the top, most aspirational brand, even among people that aren’t necessarily interested in owning a Mercedes Benz themselves.
Of course, not everything has been perfect, while Mercedes is known for excelling in engineering, they haven’t fared as well in assessments of other features, especially electronics and systems such as the Infotainment Controls. Mercedes has also struggled with quality control issues. The brand’s reputation began to take hits in the 1990s, and that persisted throughout the early 2000s.
It has also taken some criticism for its repeated efforts to boost volumes, capture more market share and lure younger buyers by making less expensive vehicles.
Some of Mercedes Benz efforts in lower priced segments have not exactly been successful. It’s C-Class Sports Coupe was one such model introduced in 2002 and discontinued in the U.S. by 2006. The company has also at times found itself challenged by some formidable competition from its closest rivals or other traditional German makers, specifically BMW and Audi.
BMW has long cultivated a reputation for high performance vehicles, and Audi has distinguished itself with forward thinking design and an eye toward tech features. Other brands have mounted a challenge too, including Toyota’s Lexus brand.
When Lexus was introduced in the United States in 1989, many were skeptical that a high end Toyota could prove a rival to German makers. But by 1991, Lexus was the top luxury import in the U.S.
Going along with the perception that Mercedes is really at the top of the heap, there’s still also the perception that Mercedes Benz is for people who are older, that its for old money, that its for people who have more stately tastes.
On the other hand, there is absolutely the perception that BMW and Audi are for younger affluent people who wants to be more sporty and dynamic.
The other concern is that Mercedes sport utility vehicles don’t always seem to inspire the same interest as its largest sedans have. Before the U.S. auto market shifted from mostly traditional passenger cars to SUVs, Mercedes was consistently one of the top three considered brands.
This is largely because the C class, S class and full size E class sedans were typically popular vehicles. But Mercedes have dipped a bit, in part because its dominant SUV, the GLE, is similar to the Lexus RX, Acura MDX, BWM X5, X3 or the Audi Q5.
In the U.S. in 2020, BMW took the top spot and sales among luxury brands with 278,732 units, Lexus came in second with 275,041 and Mercedes, which had been the second place brand and occasionally vied for the first place, fell to third with 274,916.
To be sure, Mercedes Benz was still the top seller of luxury vehicles globally. In fiscal year 2019, Mercedes Benz parent Daimler saw profits fall by about 5 billion dollars, due in part to costs from the diesel gate scandal and heavy investments in electrification.
In 2021, Daimler spun the Mercedes Benz cars business out of the truck and van business. Now Mercedes is focusing on investing very heavily in electrification like so many other automakers. Key markets like in its home market in Europe, the fast growing and essential market in China and even the U.S. market are all pushing for electric and hybrid cars.
Part of their engineering excellence has come from taking their time out of doing things and trying to get it right first time. And then we have competitors like Tesla who are moving more quickly on trying things that maybe some of the traditional automakers would not try.
And in that new electric car market, there are brands such as Tesla, which are already beginning to distinguish themselves.
McKinsey’s Electric Vehicle Index shows Tesla increased its global market share in 2019, the most recent year available to 16% of the total, the largest of any one brand. BMW had less than 6% and Mercedes did not make the list.
Tesla and some local Chinese brands are also making headway in China, according to a report from Piper Sendler.
The three German brands BMW, Mercedes and Audi have historically controlled 60% of that market. But Tesla, Li Auto and others are on the rise, and Piper’s report said things are only going to get worse.
Bottom line, the report said, whenever Tesla opens a store in a new city, The Germans lose share, and there are still lots of headroom for opening new stores.
Of course, there are many in the auto industry who think Tesla’s future is far from secure and so far, electric vehicles compromise a tiny share of total sales in the United States.
So, what is the threat posed by new brands?
Mercedes Benz obviously is still perceived as extremely prestigious and it still enjoys its very top place ranking in terms of aspiration. But that can fade over time, Tesla certainly does not possess the sort of quality that Mercedes Benz has, but it does absolutely have innovation.
When you have upstarts like Tesla all of a sudden owning the space of innovation, that threatens a brand like Mercedes Benz.
Mercedes has delayed the introduction of its EQC electric sport utility vehicle in the United States for now, the company said in February. So far the plans to introduce its electric sedan in the U.S. are on track. And Mercedes says it plans to make AMG versions of at least some of its electric vehicle lineup, which stand a chance of being more profitable.
The company has also entered into the Formula E electric racing series, showing that it might still understand how great automotive reputations are made.