Mercedes New A-Class Attacks From Behind With Apple IPhone: Cars

Mercedes-Benz will kick off its effort to regain lost ground in the luxury-car race with a sporty hatchback targeted at users of Apple Inc. (AAPL)’s iPhone.

The Daimler AG (DAI) brand, which dropped to third in high-end auto sales behind Volkswagen AG (VOW3)’s Audi last year, is outfitting the overhauled A-Class with technology that pulls iPhone content into the car’s display. The model, which debuted yesterday at the Geneva International Motor Show, will serve as the brand’s new entry-level model in its bid to win over younger drivers.

“It will quickly become clear that the ‘A’ in A-Class stands for ‘attack,’” said Thomas Weber, Mercedes’s development chief. The A-Class and four other small cars, including a planned coupe and sport-utility vehicle, will make a “significant contribution” to a goal of boosting sales 27 percent to at least 1.6 million vehicles by 2015, he said.

Mercedes targets reclaiming the luxury-car crown it lost in 2005 to Bayerische Motoren Werke AG (BMW) by introducing 10 new models by 2015, including five youth-oriented compacts and the CLS Shooting Brake, a wagon-like variant of the $71,300 four-door coupe. Chief Executive Officer Dieter Zetsche aims to reverse a slow-growth trend, which has seen BMW and Audi increase deliveries five times more than Mercedes over the past decade.

The A-Class, which was originally introduced in 1997, has been transformed from a boxy van-like vehicle to a sporty compact that will compete directly with BMW’s 1-Series and Audi’s A3. Audi premiered the third generation of the A3 yesterday. An additional rival will come from Volvo Car Corp. (GEELZ)’s new V40, which will be shown in Geneva today.

Hot Pot

The compact car segment is “one of the hottest pots of water you can dip your toes into, but it’s a huge market” in Europe, said Christoph Stuermer, a Frankfurt-based analyst with IHS Automotive.

Mercedes plans to price the car, which hits showrooms in September, from about 20,000 euros ($26,400) before tax, which will probably make it the brand’s cheapest model. The van-like B-Class, the first of Mercedes’s new small cars, starts at 21,850 euros. Audi’s A3, which costs less to build because it shares parts with VW models, will be priced from about 18,000 euros before tax, while the BMW 1-Series starts at 20,000 euros.

The A3, which was the first high-end compact car when it was introduced in 1996, will probably maintain its lead in the segment. Deliveries of the Audi compact, which start this summer, are projected to surge 48 percent to 241,000 cars next year, beating the A-Class’s sales of 180,000, according to IHS.

Broader Line

Audi also plans to broaden the line with a sedan variant targeted at the U.S. and Asia as well as a plug-in hybrid version that will be introduced in 2014, sales chief Peter Schwarzenbauer said. Overall, the VW unit aims to sell 25 percent more of the new A3 compared with the previous version, which has delivery times that average four months even with the successor on the way, he said.

“I’m absolutely convinced about our all-new Audi A3,” Chief Executive Officer Rupert Stadler said in a March 1 Bloomberg TV interview. “It’s a fantastic car, fully-loaded with technology, and I think our customers will really enjoy it.”

While Audi can draw on a 15-year history in the segment, Mercedes (DAI) is effectively starting from scratch. Existing A-Class customers like Manfred Dobiasch probably won’t stick with the model, because the low-slung design makes it less comfortable.

Working Harder

“I won’t buy something flat again,” said the 64-year-old retired printing press worker from Berlin, who bought a shiny black A-Class in 2005 after 40 years driving Golfs and other VW cars. “The elevated seating position is decisive.”

That will force Mercedes dealers to work harder. Paul Ostendorf, managing director of a Mercedes dealer in Ahlen, Germany, plans to reach out to new customers by bringing the car to shopping centers and other areas with a lot of foot traffic. He expects the A-Class customers to be about 45 years old, around 15 years younger than drivers of the current model.

“Selling this car will be all about test drives and conquests,” said Ostendorf. “Just putting a Mercedes star isn’t going to be enough. It’s a very hard-fought market. It’s going to be a price war.”

The Daimler unit is looking to draw in new buyers by offering technology drawn from the S-Class flagship sedan like a radar-based collision prevention system. The Stuttgart, Germany- based manufacturer also boasts the deepest iPhone integration of any carmaker. The technology reorders content on an iPhone into media, places, and social categories and allows the driver to access the device’s features through the car’s armrest controller or via voice commands.

Younger Drivers

“Mercedes has appeal for the older car buyer and technology is one of the ways of winning over younger drivers,” said Jonathon Poskitt, an analyst with researcher LMC Automotive in Oxford, England. “Mercedes has to be looking at the next generation of people with money to keep the business growing.”

In its push for growth, Daimler plans to continue to roll out new technology for so-called digital natives, consumers that have grown up with the Internet and are accustomed to having uninterrupted access to social media and other services. The challenge for Mercedes is to integrate these services without jeopardizing its reputation.

“Cars have to become a mobile living space, which means the ability for our customers to work and enjoy themselves in a safe environment,” said Eike Boehm, head of innovation at Mercedes. “We intend to lead the way, but we won’t chase after every hype. New features need to be sustainable.”

New Generation

The effort to appeal to a new generation of well-heeled buyers may pay off. Mercedes will probably retake the number-two spot from Audi in 2013, according to IHS. The researcher forecasts Mercedes sales jumping 16 percent to 1.51 million vehicles next year, beating Audi’s 7.5 percent gain to 1.43 million. BMW should remain the luxury-car leader with sales of 1.62 million vehicles.

“Mercedes has to be successful in each and every segment of the market” to make up ground on the competition, said LMC’s Poskitt. “The old A-Class was really well off the pace of the competition, because it wasn’t hitting the mainstream.”

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net.

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net.

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