Mercedes-Benz rules out on compromise on pricing despite stagnant market

SATURDAY, FEBRUARY 15, 2025
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Mercedes-Benz rules out on compromise on pricing despite stagnant market

Luxury carmaker saw a 30% year-on-year decline in sales in 2024

 

Mercedes-Benz Thailand is standing firm against price cutting despite a significant drop in sales, as luxury car brands struggle in a stagnant market.

 

The German luxury carmaker saw registrations fall to 9,189 units in 2024, a 30% decline from the 12,000 vehicles sold in 2023. Nevertheless, the company's leadership remains resolute in avoiding the kind of price wars seen in Thailand's electric vehicle (EV) sector.

 

"We believe our cars and our brand should be sold at the right price with the right ambition," said Martin Schwenk, president and CEO of Mercedes-Benz Thailand. "If we make the car overly aggressive in pricing, we damage every owner's position. We damage the brand."

 

This stance comes as Chinese EV manufacturers slash prices dramatically. Great Wall Motor reduced the price of its Ora Good Cat by up to 270,000 baht in January, while GAC AION cut 166,000 baht from its AION Y Plus model.

 

"Price wars will be prolonged, aggressive, and more widespread," warned Siam Commercial Bank's senior analyst, Tita Phekanonth, who anticipates discounts will spread to conventional petrol and diesel vehicles.

 

Martin Schwenk Martin Schwenk

 

The broader Thai automotive sector is under significant pressure. According to Krungsri Research Center, auto production is forecast to drop by 2.5-3.5% annually from 2024 to 2026, with domestic sales having plunged 26% last year – the lowest level in 15 years.
 

 

Despite these headwinds, Mercedes-Benz aims to exceed 10,000 units in sales by the end of 2025. The company plans to launch three Mercedes-AMG models at the Bangkok International Motor Show this year and is introducing an "EV Worry-Free Package" for its electric vehicles.

 

The package includes monthly instalments starting at 45,000 baht for the EQE 350 4MATIC SUV Electric Art model with no initial down payment, plus a free first and last instalment.

 

Customers will also receive free charging for one year and a 10-year or 250,000-kilometre battery warranty.

 

Thailand's EV market, the largest in Southeast Asia, is expected to see strong growth in 2025. The Electric Vehicle Association of Thailand (EVAT) forecasts a 40% increase in sales to over 100,000 units, reversing last year's 8% decline.

 

Mercedes-Benz rules out on compromise on pricing despite stagnant market

 

This growth is partly driven by Thailand's national incentive programme, which requires local production of 1.5 vehicles for each imported vehicle to qualify for tax breaks. Chinese manufacturers including BYD, Great Wall Motor, Changan and GAC AION have invested more than 102.7 billion baht in local production facilities.

 

Failure to meet these local production requirements could result in penalties of up to 400,000 baht per car, according to Suroj Sangsnit, EVAT president and executive vice president of SAIC Motor-CP.
 

 

While acknowledging the challenging economic environment, Schwenk remains cautiously optimistic about the financing situation.

 

"Regarding the financial institutions' stringent lending conditions, we believe that customer loan approvals will not be more difficult than last year," he said. Mercedes-Benz works closely with its own leasing arm, which accounts for over 50% of sales.

 

The company is also expanding its service network, having increased its Authorised Service Centres to 41 outlets with 26 Certified Body & Paint Service Centres nationwide. This year will see the introduction of a Service Select Loyalty Programme for existing customers, offering special deals on maintenance and StarParts.

 

Putthi Tulayathun, vice president and customer services director, noted significant growth in their service packages last year: "MBSP package sales increased by 12%, MBTires sales surged by 84%, while Digital Extras purchases through the Mercedes-Benz Store grew by 86%."

 

The company continues to implement its "Retail of the Future" business model, maintaining standard pricing for all models nationwide. It's also rolling out the MAR20X (Mercedes-Benz Retail Experience) concept focusing on customer touchpoints, people and process, digitalisation, and architecture. Currently, 50% of authorised partners have adopted this approach, with plans to reach 60% this year and over 90% by 2027.

 

Putthi Tulayathun Putthi Tulayathun

 

Customer engagement remains a priority, with planned activities including a classic car road trip in partnership with Mercedes-Benz Club Thailand, 18 driving events featuring on-road and on-track test drives, and the return of the "MercedesTrophy" golf tournament after a five-year hiatus.

 

Looking ahead, Mercedes-Benz will unveil a van concept car developed on the VAN.EA (Van Electric Architecture) platform globally in 2025, before its actual sale in 2026. This platform is specifically designed for fully electric luxury personal vans, with spacious cabins comparable to limousines.

 

"Our investments and dedication reflect our strong confidence in Thailand's automotive industry," Schwenk said. "We recognise the immense growth potential and strong market presence. Mercedes-Benz is committed to delivering luxury experiences through premium services and exclusive customer engagements."

 

The Automotive Industry Group of the Federation of Thai Industries remains cautiously optimistic about domestic car sales in 2025, citing factors including increasing EV production, growing tourism, robust exports, and government stimulus measures. However, challenges remain, including strict lending practices, high household debt, and sustained high cost of living that continue to erode consumer purchasing power.
 

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