Ola Källenius, CEO of Mercedes-Benz, is under intensifying pressure as investors demand a radical pivot. His 2022 strategy, “The Economics of Desire,” which bet the company’s future on ultra-luxury models like Maybach, AMG, and the G-Class, has backfired spectacularly. Margins have cratered from 16.4% in 2022 to a paltry 4.8% in the third quarter of 2024. What once appeared as a masterstroke in the post-Covid supply-constrained market now reveals itself as a gamble that ignored the structural realities of global automotive competition.
The cracks are visible everywhere. Mercedes’ flagship EQS has failed to gain traction in China, where local EV manufacturers—BYD, Nio, Xpeng, and even Xiaomi—have caught up in technology and dramatically undercut pricing.
Meanwhile, U.S. tariffs and a narrowing tech gap in Europe have eroded the high-margin fantasy that Källenius sold investors. Plants idle. Entry-level models have vanished. And in a market where brand loyalty is built from first-time buyers climbing the ladder, Mercedes is haemorrhaging influence.
Calamity Born From Narcissistic Fantasy
Internally, the message is clear: course correction is non-negotiable. The company is quietly extending production of the A-Class, confirming its replacement, and recalibrating toward more accessible models.
Senior management reshuffles—CTO Marcus Schäfer replaced by Jörg Burzer, and Michael Schiebe brought in to oversee production and supply chains—signal an acknowledgement that costs have spiralled out of control. Analysts warn that unless Mercedes regains scale in the entry-level market, profits will remain fragile, no matter how impressive the luxury halo.
The pressure on Källenius is not just financial but existential. Tesla has overtaken Mercedes in global volume, Chinese EVs continue their aggressive expansion, and internal critics argue that the ultra-luxury obsession has undermined the very foundations of brand loyalty.
The coming months will determine whether Mercedes-Benz can survive in a fragmented, hyper-competitive market—or whether one of the oldest names in automotive prestige will finally succumb to the forces it refused to reckon with.
