Perhaps it isn't so hard to notice the deluge of new products from Mercedes-Benz. At the 2018 Geneva Motor Show, Mercedes-Benz and its high-performance arm AMG unveiled or displayed several new models. With this aggressive onslaught, the premium carmaker is seemingly not running out of new products.
But this aggressive product onslaught also meant that the premium carmaker is virtually releasing a new vehicle into a new niche. Sooner or later, Mercedes is going to run out of niches to fill. In fact, it appears that Mercedes has two products in every niche, an overlapping strategy that might confuse even its own customers. Could this mean that Mercedes has already exhausted new ideas?
This question was answered by no other than the chief executive of Mercedes’ parent (Daimler AG), Dieter Zetsche. In an interview with Top Gear, Zetsche remarked that there aren't many niches left for Mercedes to fill. This is practically an admission that Mercedes is reaching a cul-de-sac when it comes to filling in niches with new products.
Zetsche also indicated that by having more than one product in a niche, one model cannibalizes the sales of the other model. He remarked that each time a new car is launched, it has some ‘substitution aspects’ to the existing portfolio in a niche.
Nonetheless, Daimler’s big boss isn't really worried about a certain product eating away the sales of another Mercedes offering. This is because, as Zetsche said, the impact of cannibalization is higher on its rivals – something that Mercedes is actually aiming for.
Mercedes really doesn’t mind if its own products in a certain niche cannibalize each other, as long as these offering also eat away the volumes of other premium carmaker. This formula has been proven effective for Mercedes in the past years, as the carmaker has been able to erode sale from fellow German luxury auto companies BMW and Audi to increase its own volume.
As proof, Mercedes was able to wrestle away from BMW the throne of the largest selling premium carmaker in world in 2015. Mercedes also managed to successfully defend its global sales crown from its main rivals in 2016 and 2017.
Nevertheless, Zetsche admitted to Top Gear that customers might find the overlapping model lines confusing, and this level of fragmentation might mean that value is not added anymore. Mercedes-Benz is now trying to enter completely new blank space, like the world of luxury pickups with its new X-Class. Zetsche noted that despite having few niches left to fill, Mercedes-Benz will stay creative and innovative.