From grandfather’s car to thirty-something’s dream.
At the end of the 2000s, Mercedes-Benz had a business problem: Its cars did not attract young people, and the average age of the brand’s buyers was over 50, more than that of its German rivals Audi and BMW. The star brand had to do something if it wanted to survive another decade.
The first step was to redesign the Class A, the entry, which was more susceptible to increased sales, thanks to its lower price. It went from being conceptualized as a small minivan to adopting a five-door hatchback body. It no longer seemed destined to be a second family car that moved in the city center, but was going to compete with two best sellers of its competitors, which until then had no rival in Mercedes: the BMW 1 Series and the Audi A3. .
Mercedes also created a sedan version of its new A-Class with four doors and much more aggressive lines.
After a complete renovation of its range, carried out in the last decade, the average age of buyers has dropped by almost 15 years and sales, after the economic crisis of 2008, have risen again to break their own records throughout the years.
Now the star brand faces a new challenge that it will have to face in the next decade: to find new technological differentiators, beyond the power and performance of the engines, that will allow it to remain a relevant player within the premium segment. About 90% of all future automotive innovation will take place in the electrical-electronics area, as the number of lines of code in vehicles could rise to 300 million from the 50 million to 100 million they have today.
Jaime Cohen, CEO of Mercedes-Benz in Mexico, talks about the challenges the brand faces in the next decade to achieve more profitable and sustainable growth going forward.
E: The automotive industry is going through a technological revolution. Cars will no longer have motors and steering wheels. What is the brand’s vision regarding this technological change marked by electrification and autonomous driving?
Jaime Cohen: We have been progressing little by little in autonomous driving. There are different levels or phases and all manufacturers want to reach the maximum, but the question is whether customers want to reach this level. Although we could put cars without a steering wheel tomorrow and that drive themselves on the sales floors, the issue is that you have to keep up with the customers. The vision of the company is to develop maximum autonomy, but little by little. You also have to be careful with the infrastructure, it is not only that the car is ready, but the lines of the road must be well painted, as well as the lines of the pedestrian crossings. All the symbols and the signaling infrastructure must be up to date. But I remain convinced that, even if the brand has the technology available, customers will not want to let go of the wheel. At least not soon.
E: In the last century, the mechanical capabilities of vehicles, such as engine power, have been important differentiators in the market. But now new differentiators are emerging, such as the size of the infotainment screen or the voice interfaces. Does Mercedes see the new differentiators in technological capabilities?
JC: I think that the differentiator in the future will be the detail in the development of the technology. A good example is the screen. We have not just put a big screen and that’s it. Of course we know how to make large screens, the new EQS has a 52-inch screen that covers the entire front of the vehicle, but that’s not a differentiator, I think the differentiator is in the functionality it has, how that screen coexists with the rest of the car . And that is extrapolated to all vehicle systems.
E: Some technology brands, like Tesla, have defined vehicles as “computers on wheels” and therefore have designed them as such, as devices that receive remote updates to keep them up to date. Have cars stopped being a metalworking product to become a gadget?
JC: Everything is a balance between technology and functionality. It is not enough to put screens and buttons on cars. Making them work, while maintaining the values of aesthetics and quality, is difficult. Obviously it takes more time, but it is possible. Today, the computing power of a car is even greater than that of a home. Our cars are not just going to be ‘computers on wheels’, but ‘Mercedes with capabilities’, be it computing, connectivity or electrical.
E: Why did Mercedes decide to put the latest technology available so far in a sedan, the S-Class, and not an SUV?
JC: Because the S-Class is not a fad, it is an icon. It is a car that, regardless of the country you go to, has a high level of recognition and loyalty. And we are not going to sacrifice this for a fashion issue. Sure we have an SUV offering, which we like a lot, but the sedan still has its place.
I: What is the vision of the brand regarding electrification?
JC: It is necessary to create a cargo network, cannot someone live with the worry and anguish of: I am going to go out but I only have half a load. That can not be. There has to be a solid cargo net. We support its development. But my business is not creating cargo nets. There are expert companies in doing that. What we can do as assemblers, and what we can influence, is the design of the car: how I work with battery suppliers to create greater ranges and capacities. We are working on that. The EQS is going to have more than 700 kilometers of range. We do get into those. But creating networks, that is not up to us.
E: In other countries, it is easy for the private sector to install and monetize the charging infrastructure, but in Mexico, until now, the CFE is the only one that can sell energy. Will this delay the arrival of electric vehicles in Mexico?
JC: Well, we have to talk with them (with the CFE) and I think there have already been approaches. We tried a rapprochement a year ago, but what happened (the pandemic) happened and we had to postpone it. We are already taking it up. Each country is different, each country has a different regulatory framework, so you have to work with that. In Mexico, there was already a certain government initiative, but the pandemic hit us all. And I think that achieving a certain normality to restart these talks and conversations with them.
E: Technology is highly dependent on microprocessors. How has the semiconductor shortage affected the brand?
JC: I believe that the learnings from the pandemic are not over. First we had damages in the logistics supply lines, suddenly there were not enough ships to bring things, and well, now the semiconductor thing is the result of the imbalance in demand due to the pandemic, and on top of that there was a fire in an important plant of chips in Japan, so … Here we go, trying to stabilize the situation, but this has affected the entire automotive industry. There have been plant closures, and it is a situation that has to be leveled, but it has impacted us all.
I: Will 2021 be a better year than 2020?
JC: I use an analogy, the movie ‘Apollo 13’. When there is an emergency, turning everything off is very easy, but turning it on again, button by button is not so easy. We are right now in this restart. This is going to take time but I think we are going to come out stronger.
