Mercedes Draws Up Electric Maybach to Defend Luxury Position

(Bloomberg) --

Mercedes-Benz wants its line-up of battery-powered cars to extend all the way up to ultra-luxury vehicles to help defend its high-end market position, where electric offerings remain scarce.

To underline its ambition, the Daimler AG subsidiary could make use of the Maybach brand -- for now reserved only for its most exclusive vehicles -- and add the name to variants of the EQS sedan debuting next year, Chief Executive Officer Ola Kallenius said in an interview.

“There’s room to do more with the Maybach brand name,” Kallenius said. “The electric platform offers some opportunities.”

Focusing on larger luxury cars in the shift toward electric vehicles is a cornerstone of Kallenius’ strategy to revive margins at Mercedes. Bigger vehicles generate higher profits that are critical to fund large outlays for new technology, expand software operations and foot the bill for restructuring costs.

In a sign that efficiency measures introduced last year are beginning to bear fruit, capital expenditure will decline this year despite costs to roll out new vehicles packed with the latest electronic gadgetry, like the updated S-Class or the EQS, Kallenius said.

While demand for Mercedes cars has remained robust in recent years and the brand kept outselling rivals BMW AG and Audi AG, poor efficiency squeezed returns. Mass-market peers like Toyota Motor Corp. or PSA Group generated higher margins from selling bread-and-butter vehicles.

Chinese Rebound

“We have to improve the financial performance of the company,” Kallenius said. “Nobody here underestimates the challenges of the industry transformation -- but the opportunities for us prevail.”

The Maybach brand dates back more than a century, and Daimler took over the name in the 1960s. The company brought out a stand-alone Maybach limousine about a decade ago that it positioned above its S-Class, but the vehicles had only limited appeal and ended their run without a successor. Instead, Mercedes went on to use the Maybach badge for a variant of its top-of-the-range S-Class sedan, a car that costs more than $200,000 and has been popular mainly in China.

Demand in China, the largest sales region for Mercedes, has recovered in recent weeks, helping generate the revenue needed to finance an expansion plans beyond the traditional industrial business.

“I see substantial potential for value creation -- as a luxury brand, through the transformation and from an additional profit pool through digital business areas,” Kallenius said. Revenue generated from digital offerings could exceed 1 billion euros over time, he said.

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