A Mini Mercedes with Big Ambitions

Daimler Chief Executive Officer Dieter Zetsche had been at the helm of the German luxury automaker less than a year when in 2006 he moved to stanch the eroding position of his flagship Mercedes-Benz unit. The storied brand had fallen behind rival BMW, while Volkswagen’s Audi line was in hot pursuit. Zetsche’s answer to the crisis? Think small. Despite the fact that Mercedes’s reputation was based on the strength of big sedans for the middle-aged affluent, Zetsche figured that a range of upscale small vehicles would raise Daimler’s near-term sales volume and attract a younger generation of buyers to propel the brand for years to come. “We were running the risk that our people assume it’s a law of nature that we grow slower than BMW and Audi,” says Zetsche. “A mindset like that is poison.”

The first fruit of Zetsche’s plan, the dimunitive Mercedes B-Class, was unveiled on Sept. 13 at the International Motor Show in Frankfurt. The vehicle is built on a platform Mercedes engineers designed to eventually be shared by five different small models, ranging from a hatchback to a sport-utility vehicle. The new B-Class starts at €26,000 ($35,656), compared with €32,700 for a C-Class sedan and €71,900 for the flagship S-Class. Daimler, which is investing €1.4 billion in two small-car factories, is counting on the new models to help it retake first place in global luxury car sales by 2020. “It’s impossible to tell our customers, employees, and investors that we accept being No. 3,” says Zetsche.