New A-Class won't be 'cut-price'

The Mercedes-Benz A-Class will be affordable, but not cheap, when it arrives in Australia. That's the crux of the matter, according to the prestige brand's Senior Head of Corporate Communications, David McCarthy.

Mr McCarthy, in conversation with motoring.com.au yesterday, was responding to our story from last week, in which local Volvo boss Matt Braid defended yet to be announced pricing for that company's new V40. Mr Braid said that Volvo would be "reluctant" to match the pricing of the new Mercedes-Benz A-Class (pictured) in the event that Benz priced the entry-level variant as low as $35,000. In essence, the Volvo chief implied that Mercedes-Benz would have to pare back the equipment list for the A-Class to achieve that target price. Needless to say, Mr McCarthy wasn't prepared to wear that.

"This is not a cut-price Benz; it will be very well equipped, it will offer a great range of models and engines — and [Volvo has] good reason to be worried," he said. According to the Benz spokesman, the company is not shifting features to the option list rather than making them standard, and nor is the A-Class a loss leader.

"We're charging what we believe is a reasonable price for the car. If you look at C-Class... E-Class... CLS; you look at every single model that we've released in Australia in the last six years, we've had a price/value strategy that balances profit with volume. The person who wins in this, ultimately, is the customer.

"[global Daimler boss Dieter Zetsche] says 'A' is for 'attack' — but I can assure you, the car is profitable."

While a central tenet of Matt Braid's argument was that the V40 is a quality car — and must be priced accordingly — Mr McCarthy sees it another way. Volvo, says the Benz exec, is citing quality to justify an inflated price for the V40, and that's a strategy that poses its own challenges for the Swedish brand.

"What is more dangerous for a brand, putting more value in a car? Or trying to talk up the price?" he asked rhetorically.

"[Matt Braid] is trying to talk up his price, because he sees that the profit and [sales] volume equation is a lot more difficult for them. They've got to spread their costs across a lot fewer units..."

VFACTS recorded combined sales of just 696 units of C30, S40 and V50 Volvo cars for 2011. By contrast, Mercedes-Benz sold over three times that number (2211 units) of the previous generation B-Class. When the A-Class arrives in the local market, it should sell in at least similar numbers — if not better. But Volvo has high hopes for the V40 too, and if the small hatch can achieve the same sort of sales success as the A-Class, it makes Mr McCarthy's argument moot.

But while the Benz spokesman passes no explicit comment on forecast sales for the V40, he is convinced that the A-Class will hit the local market with one immediate advantage over the V40: the three-pointed star on the grille.

"[Customers] want a badge and a brand that they know and that they can trust — and reflects how they see themselves," Mr McCarthy said. "This is why a lot of brands have trouble getting traction, because they're not perceived as a prestige brand. It takes many decades... it takes a whole generation of people, for that to change.

"If you asked people out there what is their perception of Volvo, it wouldn't be 'exciting', it wouldn't be 'great value', it wouldn't be 'fantastic design'. Now all of those features are present in their cars, but the overwhelming perception people would have is 'dull but safe'. They don't want to get away from 'safe' — and nor should they. They've got a fine history, but they've got to get away from the 'dull'.

"This car [the V40], like some other recent models, will help them with that."

That the Volvo MD is worried the A-Class might be a keenly-priced rival to the V40 also indicates Matt Braid expects the Volvo to be a worthy competitor to the Benz. Can anyone recall the last time a Volvo could legitimately claim to be a real alternative to a Benz as an all-round package?

Does that mean Volvo has improved that much, or is it not also true that Benz is a much less exclusive brand these days, as it has expanded into other segments? Up until the advent of the original W201 in the mid 1980s, the smallest Benz money could buy was the W123 generation of mid-size car that later came to be known as the E-Class. Since then, Benz has moved into segments based on smaller footprints — C-Class first, followed by A-Class and B-Class. With each successive move into a more affordable segment, Benz has become a more accessible brand.

"Where this car [new A-Class] is positioned is pretty close to where the outgoing model was positioned," Mr McCarthy responded. "We've played in this segment for a very long time. So, in terms of the question, does this move us downmarket? No... it's not a cheap Benz, it's a Mercedes-Benz in a market segment that is growing and a market segment that we need to be in  — and we're playing with more than one hand of cards.

"At the price point... that is still an aspirational vehicle for many people. The Golf starts at around 21 grand... and goes up to about mid forties. We're slap-bang in the middle of that segment. When you analyse the figures, something like 50 per cent of Golfs are over 35 grand, so we're giving those buyers a choice..."

Regardless of one's point of view; whether or not Benz can convey a quality image with the new A-Class at the price point set for the car, it's increasingly apparent that Matt Braid's worst fears are confirmed, the A-Class will kick off at around $35,000. David McCarthy all but said as much when he told motoring.com.au that the entry-level variant of the new A-Class would be priced around the same as the last base model of A-Class to be sold in Australia in 2009. That was the A170 three-door, priced at $35,500.

Postscript: The A-Class was launched globally overnight and the price of the entry-level model in the UK is £18,945, which would equate to $29,280 in Australia (before our taxes and import tariff).

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