Luxury Unfiltered: Reclaiming luxury leadership when client expectations shift

December 18, 2024

Daniel Langer is the founder and CEO of consulting firm Équité.

Recently, I was delivering a three-day luxury masterclass in Germany.

On my way to the venue from my hotel and back, I had several drivers who picked me up in Mercedes-Benz limousines. I asked each driver how happy they were with their cars and the answer shocked me.

With no exception, every driver told me that the quality of the cars decreased significantly and that they are having more issues than ever before.

From professional drivers in Mercedes-Benz home market, I was expecting praise, not anger. Fast forward a few days later in Miami, I was picked up from the airport in the electric EQS SUV, and while I was chauffeured to my hotel, the air-condition system of the car broke down and could not be put back into function.

The driver acknowledged frequent technical issues with the car. And then again, a few days later, in Madrid, I was picked up in a Mercedes-Maybach S-Class, which was exceptional in how comfortable it was. Now intrigued, I asked the driver about his opinion, and he said, it’s the best car he ever drove.

These recent observations show that the brand still can create cars that excite, but that there are clear issues that are negatively shaping the perceptions of owners.

As a brand aspiring to lead in luxury, these negative perceptions are concerning. Therefore, Mercedes-Benz, once the undisputed leader in luxury automobiles, finds itself at a critical juncture.

The recent management reshuffle and cost-saving program are symptoms of deeper issues that have been brewing for some time. I see this as a pivotal moment for Mercedes-Benz to reassess its approach and reclaim its position at the forefront of the luxury automotive market.

The company’s ambitious plan to go all-electric by 2030 has hit significant roadblocks. Sales of electric vehicles have plummeted from an already low base, with a 31 percent decrease in the third quarter of 2024 alone.

This decline is not just a result of market conditions but points to fundamental issues in Mercedes-Benz’s strategy and execution. There is a clear disconnect between the company’s offerings and consumer expectations.

While Mercedes has invested heavily in EV technology, the market response suggests that these vehicles are not resonating with luxury buyers the way they are.

The EQS Sedan, meant to be the electric equivalent of the iconic S-Class, has seen sales drop by 33 percent. This indicates that Mercedes has not successfully translated its luxury DNA into the electric era.

The issue extends beyond just the electric lineup. Mercedes’ overall sales have declined, particularly in the high-end segment, including models like the S-Class and Maybach. This suggests a broader problem with the brand’s luxury positioning and value proposition.

To me, this is not a surprise. The brand DNA has been based on a mixture of engineering excellence, especially around engines, safety and comfort, and technological innovation.

Especially the S-Class has been for many generations the car that was always featuring most of the technology innovations.

Consequently, Mercedes adopted the claim, “The Best Or Nothing.” However, if this is not echoed by today’s clients then it becomes an empty promise.

Moreover, Mercedes faces intense competition, not just from traditional rivals but also from new entrants, particularly in the Chinese market. The company’s struggle in China, a crucial market for luxury vehicles, is particularly concerning.

Chinese consumers, known for their discerning taste and quick adoption of new technologies, seem to be turning away from Mercedes in favor of local brands or more innovative competitors.

Another critical factor is the perceived quality, as stated above, and the design of Mercedes vehicles. The brand that once set the standard for automotive excellence is now facing questions about its ability to deliver cutting-edge design and unparalleled quality.

This perception issue is particularly damaging in the luxury segment, where brand image and product excellence are paramount.

Perhaps most crucially, Mercedes-Benz seems to have lost its way in brand storytelling. Mercedes must answer the question, “Who are we?”

Just having the ambition to be a luxury is not enough in today’s hyper-competitive reality. Clients want to know what the brand stands for.

When cars don’t have engines anymore but much simpler electric drivetrains, a brand that takes a lot of its brand equity from engine engineering needs to pivot and communicate deeper values.

The company that once epitomized automotive luxury and innovation now struggles to articulate a compelling brand story that resonates with today’s luxury consumers. In an era where luxury is increasingly defined by experiences and emotional connections, Mercedes’ brand story feels too product-focused without offering enough emotional distinction, making it feel disconnected from contemporary luxury values.

And experience audits in dealerships underline issues also in human-to-human luxury delivery.

The recent decision to delay the all-electric transition and continue producing internal combustion engines beyond 2030 is a clear indication that the company is rethinking its strategy. While this move may provide short-term relief, it risks positioning Mercedes as a follower rather than a leader in the automotive industry’s future, and luxury is always about the extraordinary, not about following the lead of others.

To address these challenges, Mercedes-Benz needs a comprehensive overhaul of its approach to luxury. This goes beyond just product development or marketing tactics.

It requires a fundamental reimagining of what Mercedes-Benz stands for in the modern luxury landscape and a strict client-centric emotional luxury experience delivery.

First and foremost, the company needs to reconnect with its core identity as a luxury innovator. This means not just developing advanced technologies but ensuring that these innovations enhance the luxury experience in meaningful ways.

The focus should be on creating vehicles that are not just technically impressive but emotionally engaging and aesthetically stunning.

Secondly, Mercedes must revitalize its brand storytelling. The company has a rich heritage of innovation and luxury, but it needs to translate this legacy into a narrative that speaks to the clients of today and, importantly, tomorrow.

The brand storytelling needs to permeate every aspect of the brand, from product design to customer interactions. Today, frankly, I don’t know who Mercedes-Benz is.

To make matters more complex, the sheer array of sub-brands, including Geländewagen, Mercedes-AMG and Mercedes-Maybach, each with a distinct take, take away from the clarity of brand values.

Furthermore, Mercedes needs to rethink its approach to the Chinese market. This doesn’t mean simply adapting existing strategies but developing a deep understanding of Chinese luxury consumers and creating products and experiences tailored to their unique preferences and values without giving up on the German heritage of the brand.

The company also needs to focus on elevating the perceived quality of its vehicles. In the luxury segment, even small details matter enormously.

Mercedes needs to ensure that every touchpoint with the brand, from the feel of a button to the user interface of its infotainment systems, exudes quality and thoughtful design. Lastly, Mercedes-Benz must embrace a more agile and forward-thinking approach to luxury.

This means being willing to challenge industry conventions and take calculated risks. The luxury automotive sector is ripe for disruption, and Mercedes has the heritage and resources to lead this change rather than react to it.

The challenges Mercedes-Benz faces are significant, but they also present an opportunity for reinvention. By reconnecting with its core identity as a luxury innovator, revitalizing its brand storytelling, focusing on true quality and design excellence and embracing a more agile approach to luxury, Mercedes can not only overcome its current challenges but set new standards for what luxury means in the automotive world.

The road ahead may be challenging, but with bold vision and decisive action, Mercedes-Benz can reclaim its position in automotive luxury.

Luxury Unfiltered is a weekly column by Daniel Langer. He is the CEO of Équité, a global luxury strategy and creative brand activation firm, where he is the advisor to some of the most iconic luxury brands. He is recognized as a global top-five luxury key opinion leader. He serves as the executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at New York University, New York. Dr. Langer has authored best-selling books on luxury management in English and Chinese and is a respected global keynote speaker.

Dr. Langer conducts masterclass management training on various luxury topics around the world. As a luxury expert featured on Bloomberg TV, Financial Times, The New York Times, Forbes, The Economist and others, Mr. Langer holds an MBA and a Ph.D. in luxury management and has received education from Harvard Business School. Follow him on LinkedIn and Instagram, and listen to his Future of Luxury Podcast.

Share your thoughts. Click here

Luxury Unfiltered: Reclaiming luxury leadership when client expectations shift

Condé Nast names new editorial lead at Vogue France

Kering announces fourth sustainability awards in China

Bugatti Home introduces new collection in Paris

Loro Piana explores Rio de Janeiro in spring/summer 2025 campaign

Top luxury campaigns of 2024: Miu Miu, Summer Reads

Off the Cuff: A Q&A with Assouline’s Alex Assouline

IWC Schaffhausen celebrates Mercedes-AMG collaboration with new watch

Richemont closes 2024 with 10pc revenue boost

Christie’s names next CEO

The Peninsula announces art partnership with The Victoria and Albert Museum