The CEO of Mercedes-Benz, Ola Källenius, is being subjected to growing criticism. Several investor representatives believe he must execute a major shift to get the German automaker back on track. More specifically, the critics are looking for a reversal that could signal the end of the strategy focused on ultra-luxury launched by the CEO in 2022.
The message has been increasingly clear and already, Mercedes is quietly adjusting its trajectory. The company has softened its luxury-focused discourse, extended the production of the compact A-Class by two years and confirmed the development of its replacement.
For analysts, this repositioning indicates a reorientation toward more accessible models.
Rebuilding the base of critical importance
The priority, according to analysts, is to rebuild the entry-level segments, which are essential for volume and customer loyalty — an issue illustrated by the decline of Mercedes' presence in German taxi fleets, once emblematic.
In 2022, Ola Källenius presented a strategy he dubbed The Economics of Desire, which banks on high margins, moving towards ultra-luxury and increased autonomy for Maybach, AMG and the G-Class. But results haven’t been as hoped: the company saw margins erode to 16.4 percent in 2022, 12.6 percent in 2023 and only 4.8 percent in the third quarter of 2024.
A strategy made for the post-pandemic period
The consensus among analysts is that that the ultra-luxury strategy worked in the post-Covid period thanks to supply shortages and wealthy buyers willing to pay higher prices.
But in a market that has become competitive again, Mercedes could not maintain those high prices. The slowdown in the utilization of certain plants highlighted the structural fragility of the high-end focused model.
Chinese competition is disrupting the equation
In addition, the global landscape has changed, especially in China. Brands like BYD, Nio, Xpeng and Xiaomi have caught up to Mercedes-Benz in terms of EV technology, offering premium products at significantly lower prices. One result was that sales of Mercedes’ luxurious EQS never took off in China.
Meanwhile, U.S. tariffs are threatening margins. And with the technology gap narrowing, German manufacturers can no longer demand a high premium, particularly in Europe, where aggressively priced, well-equipped Chinese models are flowing in.
A renewed focus on volume seen as a structural necessity
Internal critics and outside analysts are seeing the reorientation not just as a simple correction but a vital imperative. Automakers need volume to:
- • reduce production costs;
- • secure better pricing from suppliers;
- • and support the multiplication of models adapted to regional markets.
Without this volume, costs explode, even if smaller models generate little profit on paper.
Re-finding the key to customer loyalty
A renewed focus on entry-level models also aims to repair Mercedes-Benz's traditional loyalty model: attracting young first-time buyers and accompanying them toward higher-end models over time.
For some investors, this carries a risk of prestige dilution. Others, like analyst Matthias Schmidt, believe that the choice to exclude small models had already compromised the fundamental principle of brand loyalty.
Ola Källenius under increased scrutiny
For the CEO, then, pressure is mounting. The restructuring of senior management—the replacement of Marcus Schäfer by Jörg Burzer (CTO) and the appointment of Michael Schiebe (Production and Supply Chain) — shows that Mercedes wants to tackle costs. One potential solution is to rely more heavily on Geely, a major shareholder, to develop lower-cost entry-level platforms, as Volvo did with the EX30.
A good quarter... that changes little
Mercedes exceeded expectations in the third quarter with better-than-anticipated margins thanks to premium models. But this doesn't reduce the pressure: Chinese competition remains fierce, and Tesla has just surpassed Mercedes-Benz in global volume for the first time.
All eyes on what comes next
The question now is rather simple: Can Ola Källenius bring Mercedes-Benz back to a sufficient scale to maintain its profitability in a shaken, fragmented market dominated by aggressive new players? The coming months will be decisive for one of the oldest names in automotive luxury.