Bloomberg News

Mercedes Plans First AMG Compact Car

June 12, 2012

Mercedes Plans First AMG Compact in Performance-Car Push

A Mercedes-Benz AMG car during a media preview of the New York International Auto Show. Photographer: Daniel Acker/Bloomberg

Daimler AG (DAI) will offer an AMG version of the Mercedes-Benz A-Class compact to attract younger customers in an effort to boost sales of the high-performance brand by 50 percent.

The A 45 AMG will debut in the first quarter next year, marking AMG’s first compact vehicle, the Affalterbach, Germany- based Daimler unit said today. The model is part of an expansion of AMG, Mercedes’s high-performance brand, to increase sales to more than 30,000 vehicles by 2017 from around 20,000 now.

“Our goal is to build the most dynamic, most powerful and at the same time most efficient four-cylinder series production compact car,” Ola Kaellenius, head of Mercedes-AMG, said at an event marking the brand’s 45th anniversary in Affalterbach. “Mercedes-AMG plans to make a significant contribution to the growth of Mercedes-Benz Cars.”

Mercedes, the world’s third-largest maker of luxury vehicles, is expanding AMG’s lineup to 30 models from 22, including at least three compacts and additional versions of the S-Class flagship. The new high-performance cars are aimed at boosting Mercedes’s appeal with younger, sportier customers in a bid to surpass Bayerische Motoren Werke AG (BMW) in sales by 2020.

Performance Booster

AMG adds horsepower and sportier styling to Mercedes models and represents the top of the luxury brand’s offerings. The 630- horsepower S 65 AMG starts at 230,384 euros ($288,200) in Germany, compared with 71,876 euros for the S-Class’s 204- horsepower base model. AMG’s engines bear the signature of the engineer that assembled them.

The high-margin cars add prestige to Mercedes, which targets sales of 1.6 million cars and sport-utility vehicles by 2015 from 1.28 million last year. Kaellenius said that AMG will contribute “over-proportionally” to Mercedes’s goal of raising its operating profit margin to at least 10 percent of sales by next year.

“As an image carrier and to strengthen the Mercedes brand, AMG is quite important,” said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt, who estimates the unit’s margins at 15 percent to 20 percent. “The potential is there. Customers like high-performance cars.”

To support the expanded lineup, AMG will increase its network of outlets to 350 by 2017 from 270 now. The company sees opportunities to grow in China, Russia, Korea and Brazil, Kaellenius said. AMG, which competes with BMW’s M and the Quattro unit of Volkswagen AG (VOW)’s Audi, opened its first stand- alone store in Beijing in April.

BMW’s M

“We enjoy a dominant position with most of the M products we produce and that is something we intend to keep,” Ian Robertson, head of sales for the BMW brand, said in a Bloomberg TV interview in London today. “The M brand will continue to have the success that it’s enjoyed in the past.”

AMG will premiere the SLS AMG E-Cell, an electric-powered version of the gull-wing supercar, at the Paris Motor Show in September, with deliveries to start in 2013. The model will pay off by introducing new technology, even if it struggles to make a profit, Kaellenius said.

The brand also plans to offer more all-wheel-drive vehicles, Kaellenius said today. The technology will be standard on the A 45 AMG. The model will have an “attractive” price and be targeted at customers between 30 and 45 years old, younger than a typical AMG driver, the executive said.

With the new entry-level models, “we can reach people who could only dream of an AMG car so far,” Kaellenius said, adding that compacts may make up 20 percent of sales by 2017.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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