A-Class (W176) Mercedes-Benz A-Class pricing needlessly aggressive, says BMW Australia

[Monster]

BMW Australia has questioned rival Mercedes’ pricing strategy with its A-Class hatchback, believing it has been unnecessarily aggressive.
The smallest Mercedes (main image) was launched with a $35,600 starting price earlier in 2013, with all models including the base generously equipped.
It forced Audi to introduce an identical entry-level price for its new-generation A3, and subsequently BMW with its 1 Series. BMW also announced revised prices and increased specification across the 1 Series range.
BMW Australia boss Phil Horton said that while Benz’s move to get more buyers into its brand was helping to grow the luxury car market, he believes the company’s margins will be hurt by the weakening Australian dollar.
“[Mercedes] have been aggressive with positioning of the A-Class, and the support they’ve put behind B-Class and C-Class,” said Horton.
“They’ve set their stall out. They have been more aggressive than needed. They’ve stuffed [the A-Class] full of kit.
“Spec adjusted, that car was positioned below a [VW] Golf. Clearly it’s a very single-minded attempt to push into areas where brand hasn’t been before.
“We put a lot of spec with 1 Series… we have to respond to what happens in the competitive market.
“With premium cars, don’t think they have never been more affordable in Australia as they are now.”
Horton said the base A-Class was easily a $40,000 car. He added it also wasn’t ideal for customers that there is a waiting list if they want an A-Class and is surprised Mercedes didn’t anticipate demand by increasing production levels of the model.
Horton said all manufacturers were now putting in more equipment as standard, but says the 15 per cent reduction in the Australian dollar in recent times will put a lot of pressure on those companies – such as Mercedes – putting more equipment in cars.
He says the increasing affordability of luxury cars have the potential to eventually double sales in the premium segment locally.

http://www.caradvice.com.au/248341/mercedes-benz-a-class-pricing-needlessly-aggressive-says-bmw/

Er......hummmmmm....................it is called COMPETITION......

 

[fortuner]

Feeling the heat..

 

[LaArtist]

hah

 

[Zafiro]

Why don't they do same....

 

[Monster]

Why don't they do same....

It is all about the $$$.

 

[mini_cooper4]

LOL Good times. Lot's of fun out there!

 

[Kowalski]

The new Mercedes-Benz A-class. So good that even BMW says it's a great buy.

 

[Mr. Mercedes]

LOL this is the stupidest statement by BMW Australia. They are basically confirming what I have been saying for some time. They are completely out of touch with market expectations and are price gouging. They still think sat nav and alloy wheels are enough to satisfy 'luxury' car buyers.

 

[Beemer B773ER]

LOL this is the stupidest statement by BMW Australia. They are basically confirming what I have been saying for some time. They are completely out of touch with market expectations and are price gouging. They still think sat nav and alloy wheels are enough to satisfy 'luxury' car buyers.

I disagree. This strategy by MB did not come about because their focus groups suddenly uncovered what prospective customers truly expected from a luxury branded hatch/compact car. I'm sure all of these successful premium companies know what they're customers would like to see, and they do offer it..but at a price. They're not in the value-for-money business like Toyota, Hyundai, Ford, et al.

It's no secret that the sales strategy for the new A-class is offering very aggressive pricing. Here in the US market, they paid a LOT of money to purchase a TV ad spot just to promote the 'affordability' of the new A-class (starting at under US$30K). Take into account what BMW Australia has said about a comparatively kitted VW Golf costing more than the A-class and it's dead obvious that it's Mercedes who is breaking away from the norm and pricing aggressively rather than BMW or Audi being out of touch. A premium brand is supposed to milk more money out of you with costly add-on options...but Mercedes is going after sales rather than profit margins.

Now, definitely not saying it's a stupid strategy. I think it will work in attracting new buyers to the brand, and therefore steal sales from their key competitors (maybe not any more since BMW and Audi have responded) ....but IMO it's incorrect to single out BMW as being out of touch or having an outdated sales/pricing strategy for this segment.

Problem is, once you set that precedent, you're stuck with it.

 

[EnI]

Problem is, once you set that precedent, you're stuck with it.

Exactly. There is no way back. Even more: they are in deep trouble when starting to downsize even further. What then?

Perhaps MB is confident with their modular FWD platform, which may be quite profitable & they can afford to lower the prices. Just like VW did in some segments when starting to present shared platforms. But I really doubt it that's the case here.

Although the price wars are good for customers in the short run. While in the long run be sure they will rip you off somewhere else (after-sales services; rising prices after competition is destroyed etc). They need your money, and there are different ways & manners to get it.

But anyway ... At least in entry segments the so called "premium" offers are rarely premium at all. At least not as much as the price might indicate. But R&D costs are extremely high. Especially with tons of models in portfolio, and especially in the high-end segments.

I don't know. It weird seeing MB starting a price war. It's not the first time. They did it with W212 as well in some markets. And with poor profit margins MB Cars division has been generating lately it's hard to understand what they are doing. I'm not sure shareholders & investors will be very pleased with such moves.

 

[Monster]

This A class isn't cheap when you factor in the final drive away price, at $40k to $65K...they are from Golf's level and beyond. The 1 series is just way too expensive. Their prices and equipment remained unchanged when the Australia dollar was high, now Mercedes took advantage of that and BMW were caught out.

 

[mini_cooper4]

A typical Kamikaze move by MB.
Killing both competitor's and its own profit margins.
BMW's statement is funny tho

PS: I do agree with that: "Problem is, once you set that precedent, you're stuck with it."

 

[Monster]

You guys do realize how over priced cars are in Australia right?

 

[mini_cooper4]

You guys do realize how over priced cars are in Australia right?

There should be a reason for that. Like import taxes or something else?

 

[Kowalski]

The motoring business doesn't tolerate "kamikazes" or sacrificing profit margins. There is a method in what Mercedes is doing and it's up to the rivals to figure out how to do the same.

 

[mini_cooper4]

The motoring business doesn't tolerate "kamikazes" or sacrificing profit margins. There is a method in what Mercedes is doing and it's up to the rivals to figure out how to do the same.

I guess by that you mean "How to earn less money"
MB has the worst profit margins compared to its main rivals.
MB has to figure out how to achieve what its rivals achieve.... not the other way around.

 

[Monster]

Well they are sacrificing margin for sales and it is working with a 6 to 9 month waiting list for the A-class.

 

[mini_cooper4]

Well they are sacrificing margin for sales and it is working with a 6 to 9 month waiting list for the A-class.

In general MB is selling less cars and earns less money per car.
I don't see their strategy working at all. I would understand if they sold more cars than the competition or if they sold less but got a better profit margin. Neither is the case.

 

[deity]

In general MB is selling less cars and earns less money per car.
I don't see their strategy working at all. I would understand if they sold more cars than the competition or if they sold less but got a better profit margin. Neither is the case.

They'll never be able to beat the margins of VAG.

 

[LaArtist]

^me to.. and also while the competition might be selling more by a small margin for the moment, MB has been showing green numbers year after year just like the competition.
So yes in relation to the others they are selling less cars, but in fact they are selling more each year.

And the effect of the A,CLA and GLA has yet to be seen in the coming reports and the final report for year 2013.
In reality the real effect of those cars will be seen in 2014 as most of them debuted pretty far into 2013.

BMW aus are just bitchin as far as im concerned.

I do not think MB are selling the cars at a loss. And as long as they are making money, and the consumer gets bang for the buck who the fug cares about anything else?
Unless you are a Exec at these companys or a major share holder, even then you should sit tight and see what their long term strategy is.
Car stocks are reletivly slow movers, this aint the IT industry.