Pursuing Larger Market Share with Local Production

Q: How is Mercedes-Benz progressing toward its goal of becoming the number one selling premium brand in Mexico by 2018?

A: The beginning of last year was rough for the entire market, but also resulted in us having to change the C-Class, which is our best-selling model and accounts for 40% of our sales. However, since July 2014 things have been turning around and our sales have increased by 16%. The market’s recovery in the first half of 2015 certainly helped, but our own growth was mainly due to our products, our dealership network, and our price range. Although it only makes up for 3% of our global sales, the AMG has been quite popular in Mexico, representing 6% of Mercedes-Benz’s sales in the country. Our financial services have been equally important, as nearly one in every two customers finances their purchase through us. Furthermore, given that we are now approaching the higher segment of middle class consumers, financing has become crucial to our strategy.

The C-Class has been the core business for Mercedes-Benz for a long time because it answers client desires being a large and spacious vehicle, offering the best technology, comfort, and security. In terms of our compact generation, the CLA and the GLA have had the biggest success in the market. These lines were launched mainly for the European market, but they have begun attracting new customers to the brand in Mexico. This is because compact cars are being well received by younger generations, while they are also attracting a higher percentage of female customers. The CLA has been the most successful, selling 1,300 units in 2013, with an expected total of 1,600 units for 2015. The GLA was also a success with 800 units sold, the A-Class sold 1,000 units in 2014, which is a truly high number for a hatchback, but the B-Class has not been that popular, as it is not an ideal car for the Mexican market. In early 2015, we launched the AMG GT, an ultra sports car that will succeed the SLS to compete with McLaren and Ferrari. Finally, as well as having a new SUV model in the pipeline, we will also launch the new Smart ForTwo and ForFour. We are fortunate to have the highest loyalty in the market, which says a lot about our products. However, loyalty among our younger customers, though higher than that of the competition, is still far lower than with our older clients. The new generation is well informed, they are always aware of the alternatives, and they are willing to try different vehicles. For that reason, we must continuously strive to maintain the integrity and quality of our products. Mercedes-Benz is the brand with the most diversity in terms of additional equipment a client can order with the car. Nevertheless, we must take into account how our clients operate in order to have the right models ready for them.

Q: What factors have triggered the decision to start manufacturing in Mexico?

A: There are two main factors, namely the growth of the luxury car market worldwide and Mexico’s open economy. Even though plants are usually built in Mexico because of its proximity to the US market, Mexico allows its products to be exported everywhere without tariffs, which is reassuring if the US market becomes stagnant. Additionally, this expansion has caused ample availability of Tier 1 and Tier 2 suppliers, offering the best combination of quality and cost.

Q: Why was Aguascalientes selected as the location for the plant, and which other locations were considered?

A: We did consider many other sites; in fact, we even considered other countries and met with almost every governor in Mexico. Ultimately, Governor Carlos Lozano of Aguascalientes made a good deal with us without having to offer anything exceptional. Plus, the relationship he already had with Nissan made things a lot easier. The other main factors that made us choose Mexico were its low production costs, truly skilled people, and its logistics given the importance that exports have for our operations. Instead of building a plant from scratch, we are using preexisting Nissan infrastructure. We exchanged shares with the Renault-Nissan Alliance a few years ago, obtaining 10% of Nissan and Renault for 3.5% of Mercedes-Benz’s shares. We are now working together on different projects worldwide. However, this is our first joint production, so we have been extremely careful to build our premises in Aguascalientes without interfering with each other’s work. We expect that by becoming local producers, aside from lowering our production costs, we will become a main player in the country and create a stronger presence in the media. That way, we will constantly be in the eyes of potential new customers.