A SWOT Analysis of Mercedes Benz
2016 brought dynamic and continuous growth for Mercedes Benz. Its unit sales and revenue rose again and EBIT to a record level. Amid all this, focus remained on the new E-class which is being touted as the world’s most intelligent business sedan. However, Mercedes has aggressively focused on technological innovation for popularity and growth. Apart from E class, its focus was on convertibles and roadsters. It also makes a range of SUVs and has modernized and extended this range further. Coupled with these developments, Mercedes has taken a firm step towards electric mobility.
Its growth throughout the year was largely based on the new products and specifically due to SUVs and the new E class. It is a brand recognized mainly by its premium vehicles. Now, it is trying to find faster growth by focusing on new models and designs. In 2017, the demand for luxury vehicles is expected to rise and it means major opportunities for Mercedes. Here is a SWOT analysis of Mercedes Benz that evaluates the strengths, weaknesses, opportunities and threats before the luxury vehicle brand.
Mercedes Competitors: Lexus, BMW, Audi, Porsche, Volvo,
Mercedes Benz cars performance over last three years:
|Revenue (Million Euros)||89,284||83,809||73,584|
Mercedes is a globally renowned brand of premium vehicles. It enjoys high brand recognition and its popularity has kept increasing rapidly during the past few years. Once it was known mainly for its luxury sedans. However, now it is better known for its sporty car models and SUVs.
A large range of popular products
Mercedes makes a large range of vehicles that are immensely popular. Its C class continues to rule as the best selling model which sold around 425,000 units of the Saloon and Estate in 2016. C Class’ popularity has endured since its launch. Since its launch in 1982, it has delivered more than 9 million units. SUVs from Mercedes have also gained popularity and sold more than 700 units. Sales of V class and E class also went up last year. Its smart cars have also kept growing in popularity and sold more than 144,000 units in 2016. Its success in the recent years can largely be attributed to the new models it has released.
In 2016, Mercedes has seen growth in the double digits. Overall, it sold more than 2 million vehicles. In US alone, it sold more than 340,000 vehicles in 2016. March 2017 was its most successful month where it sold more than 228,296 cars. In 2016, its revenue was at 89.28 billion Euros which was a 7% increase from 2015. Overall, Mercedes is seeing a lot of financial success and growth during the recent years. The performance of the ‘SMART’ brand has also kept growing better and better.
High popularity in developed nations
The popularity of Mercedes Benz is higher in the developed markets. In the European markets, it saw a double digit growth in 2016. It achieved strong double-digit growth in 2016 in the major markets of Great Britain (+16.6%), France (+16.7%), Italy (+16.6%), Spain (+18.2%) and Belgium (+17.5%) (media.daimler). China, on the other hand remained the biggest individual market for Mercedes Benz last year. Demand is expected to rise further in the Asia Pacific markets.
Expanding presence in the electrical vehicle segment with the new EQ brand
Mercedes Benz is planning to unveil its new EQ brand for electrical mobility. EQ means electrical intelligence. Its is planning to launch its first series produced EQ model before the end of the current decade. EQ cars will have a range of up to 500 Kms and will come loaded with all the safety, connectivity, comfort and functionality that are the hallmark of Mercedes Benz.
Local production facilities worldwide
Mercedes Benz has a global production network that is spread over 4 continents. It has its vehicle plants in France, Germany, Brazil, USA, Hungary and South Africa. Its vehicle assembly plants are located in Thailand, Vietnam, Indonesia, Malaysia and India. It has joint ventures in China and cooperation with Renault Nissan in Mexico, USA and Slovenia.
Expensive models and high maintenance costs
Mercedes Benz cars are mostly expensive and that is why they are more popular in the developed markets where the per capita income is higher. Apart from it, maintenance of Mercedes cars is also a costly affair. If the economic conditions are good, its sales remain high, otherwise they take a nosedive.
Recently, Mercedes had to recall several of its models because of the involved fire hazard. these cars were built between 2014 and 2017. Most of these cars are in US. According to a report, several such fire incidents had happened and the cause was an issue in the engine starter. Such recalls hurt the brand image and lead to negative publicity.
Increased demand in the Asian markets
Growth in the demand for the automobiles will mainly take place in the Asian markets. Though growth in the next several years in China is expected to remain moderate, in terms of sales figures, the automotive market there might continue expanding. The demand for SUVs is also expected to be high in China.
Rising demand of premium vehicles and SUVs
Since the end of the recession, the demand for premium vehicles has kept rising. Not just in the developed nations, in the developing nations as well their demand has increased over these years. The millenials seem to be in love with the SUVs.
Growth of the automobile industry
The automobile industry has kept growing over the past several years. Apart from the Asian markets, the US Market too has seen growing demand caused by several factors like cheaper gas prices and easy credit options. The low unemployment rate is also a reason that more people are buying cars and automobiles. These trends are going to sustain and particularly the demand for crossovers and SUVs is expected to remain high.
Growing demand for electric and environment friendly vehicles
The demand for electrical and environment friendly vehicles has also grown globally. Environmental laws have become stiffer in most countries and more and more vehicle makers are aiming to introduce smarter electrical vehicles. This is a potential area of opportunities for Mercedes also which it is trying to fill by introducing EQ.
Competition in premium vehicle segment has kept growing intense over these years. Mercedes is also facing intense competition from BMW and Audi and other premium brands in the global market. Particularly, in the Asian and US markets the competition is highly intense.
Globally, there are several political and legal issues that present risks for any automobile brand including Mercedes. Apart from certification and emission laws, there are laws related to labor and other factors that also have a deep impact on the business of Mercedes and other premium vehicles brands. Non compliance for any brand can be very costly in most cases as fines are generally quite big.
Stiffer fuel emission laws
Several nations have already implemented stricter laws to reduce emissions and fuel consumption or are in the process of doing so. These laws are related to the emissions, environmental impact, fuel economy, noise and the pollutants generated by the production plants. Non compliance in these areas may result in severe penalties, reputational harm or even restriction on sales in the relevant markets.
Currency volatility and other economic risks
Currency volatility and other economic factors also present major risks before the automobile industry. Weakening of growth in the emerging markets is also a risk factor before Mercedes. There have been disappointing developments in Russia and Brazil which are important markets for Benz. Weak growth with rising interests in these economies gives rise to risks related to a rise in the number of defaults.
Risks related to raw material and procurement:
Fluctuations in the prices of raw materials, supply delivery failures, insufficient utilization of production capacities at the suppliers’ end etc grow the risks before Mercedes. There was significant volatility in the raw material prices in 2016. Raw material prices are also affected by political crises and uncertainty which in turn affects the automobile brands.