Mercedes-Benz in Crisis: Why Ola Källenius's Strategy Failed?
Mercedes-Benz Group AG is in a deep crisis whose causes extend far beyond economic fluctuations. Falling profits, weakening business in China, and increasing competitive pressure in the electric vehicle market reveal that the premium manufacturer is grappling with structural problems. At the heart of the matter lies CEO Ola Källenius's strategic direction in recent years; he consistently focused the company on luxury, high prices, and low production volumes. What initially seemed like a clever move to increase profit margins is now proving to be a risky miscalculation.
Mercedes focused on the principle of "value over volume" and consciously withdrew from broad market segments. Vehicles became significantly more expensive, more exclusive, and more suitable for affluent customers. This model worked as long as global markets remained stable and demand for luxury vehicles increased. However, with rising inflation, geopolitical uncertainty, and changing consumer attitudes, this strategy has come under pressure. Today's buyers are far more price-sensitive, while competitors are successfully capturing the mid-price segment. In conclusion, Mercedes has lost not only sales volume but also market presence and importance.
The problem is particularly evident in the electric vehicle sector. From the beginning, Mercedes positioned its electric vehicles as large, powerful, and expensive premium products. However, the market has evolved in a different direction. For many customers, prestige and status are less important when it comes to electric cars; instead, range, efficiency, software quality, and an attractive price-performance ratio are key. While Mercedes is still trying to redefine the electric luxury class, manufacturers like BYD have rapidly gained market share with technically competitive, significantly cheaper models. The result has been high development costs and disappointing sales figures.
In addition, there are problematic developments in the Chinese market, which for a long time was Mercedes' most important growth engine. Today, China has become a risk factor. Demand for classic luxury sedans is declining, local manufacturers are better accommodating customer tastes, and are responding more quickly to technological trends. Mercedes underestimated this change. Local development, software expertise, and pricing flexibility played a secondary role for far too long. In conclusion, sales are falling and profit margins are narrowing in a market once considered safe.
Therefore, the current decline in profits is not a short-term anomaly, but the result of a strategy that assumed ideal conditions and left no room for maneuver in times of crisis. High fixed costs, low volume flexibility, an excessively narrow model range in the entry and mid-range segments, and strong reliance on only a few markets have increased the company's risk of decline. Luxury has increasingly become an end in itself, no longer a result of obvious technological superiority.
Mercedes has announced a necessary change of course. The goal is to cater to a wider customer base with future models, standardize platforms, and significantly reduce cost structures. Instead of a purely luxury-focused approach, the goal is now "profitable growth." However, this transformation is taking place under significant time pressure. Lost market share cannot be quickly regained, especially in China and the highly competitive electric vehicle segment.
Mercedes is thus at a critical juncture. The brand remains strong and maintains its global recognition, but strategic overconfidence has undermined trust. Luxury without scalability, electric mobility without clear market adaptation, and a belated rethinking of the Chinese business have put the company in a difficult position. The coming years will show whether Mercedes can successfully transition from a confident luxury brand to a competitive, technology-driven mobility provider, or whether the current crisis will become a long-term structural problem.
Mercedes-Benz steckt in der Krise. Gewinne brechen ein, China schwächelt, die Luxusstrategie unter CEO Ola Källenius gerät unter Druck. Eine Analyse der Ursachen.
mbpassion.de
