Why Mercedes is turning itself downside up

What does a luxury push mean for the new S-class, AMG and entry-level cars?

Last year was a tough one for luxury goods makers and the German car industry. But the company that truly unites both –?#Mercedes-Benz –?is immersed in an upmarket push to turn its sales mix on its head.

The strategy is to throttle back on entry-level cars in favour of growing its top-end range with more AMGs, Maybach versions and limited-run Mythos models and boosting lucrative customisation with bespoke paint and upholstery in its Manufaktur programme. What’s behind Merc’s push to posh?

‘It’s value over volume,’ Mercedes-Benz chairman Ola K?llenius tells me, a strategy that Ford and Renault are following in the mid-market as Chinese rivals attack the budget end. They dream of Mercedes’ top-end prices –?only cars with an average selling price beyond €100,000 qualify –?as Benz strives to grow revenues, boost resilience when the economic going gets tough and create a war chest to fund electrified and autonomous tech.

In 2024, 281,500 Mercedes transacted at luxury prices, 14 per cent down on the prior year due to China’s sluggish economy and increased domestic competition, plus underperforming EV sales. Nonetheless the stretch goal is to grow this to 400,000 units by 2026.

’If you talk about volume and revenue size, we are the biggest top-end producer in the world,’ says the chairman. ‘Needless to say, we want to stay there. So we’ll make sure that the next S-class, whether it's electric or combustion, will be the best car in the world.’

That statement is not all executive sales patter. The S-class genuinely is the Mo Salah/Taylor Swift of the limousine world, and its model family –?S-class, GLS SUV and the EQS electric saloon and SUV –?are Merc’s biggest volume luxury group. That means the stakes for its 2029 replacement are incredibly high.

Mercedes introduced a standalone ‘electric S-class’, the EQS, in 2021. But with European electric car adoption at half the take-up analysts originally expected, car companies’ dreams of phasing out combustion cars for EVs have turned into nightmares.

‘Whenever the next S-class comes, if you don't believe that the market is 100% electric at that point, you have to [offer] both electric and high-tech electrified combustion versions –?without compromise. This is certainly one of the lessons learned from the first generation electric vehicles.’

The EQS is as long as an S-class, but without the need to accommodate a combustion engine more occupant space can be packaged between the wheels. However the EQS’ teardrop shape to smooth airflow compromises rear headroom. And that’s something which many S-class customers –?used to working and relaxing in chauffeur-driven opulence –?won’t sacrifice.

‘You don't want to have a very big car that's smallish on the inside, and you want the performance to be uncompromised. Hence, the only solution that we think is viable is that you have two platforms [in future].’

Two chassis drives up cost, though K?llenius says economising can recover some of this and today’s costliest investments lie in the electronic system, engines and EV batteries. But there will no longer be two model names and two separate designs: Mercedes is phasing out the underperforming EQ models, so it’ll be an S-class Electric in future, following the G-class’s template.

And what of Mercedes’ other top-end lines? Motorsport-inspired AMG sales benefited from the first full year of the GT coupe ($106,000 base price in the US). And AMG is going electric in 2026: a four-door coupe and an SUV are in the final stages of development on a dedicated high-performance architecture (AMG.EA). Both will use axial flux motors from British engineering firm Yasa: Mercedes liked its high power from a small motor design so much it bought the company. These EVs will provide some lightning-fast opposition for Porsche’s zero emission Taycan and Macan.

Maybach was resurrected as Mercedes’ answer to BMW’s Rolls-Royce division two decades ago: it’s now the three-pointed star’s most opulent trim level. The first electric Maybach, a version of the EQS SUV with more chrome than Google, a champagne chiller/glasses and leather seats the envy of a private jet, is on sale. The first Maybach SL roadster follows this year with the refinement levels turned up to 11.

And Mercedes is rolling out plenty of special editions to squeeze every dollar from customers seeking individuality. It’s announced 200 AMG GT ‘Motorsports Collectors Editions’ with F1 racer-inspired paintwork, plus the SL is being rebodied into a speedster, with no windscreen or roof but an F1-style rollover hoop to protect customers. Just 250 PureSpeeds –?riffing on some of Benz’s great heritage racing cars, hence the Mythos title –?will be built. Then there are colabs with fashion houses such as Virgil Abloh and Moncler.

All this top-end activity –?75 per cent of investments are at the top end and in ‘core luxury’ which houses the C- and E-class and their SUV spin-offs –?has ramifications at Mercedes’ entry point. Sales of the most affordable Mercs will contract by 25 per cent; the barely profitable A-class hatchback won’t be replaced.

‘We have taken a very careful look at which of the models have been successful globally, which models [fit] the Mercedes brand promise and are a step into a C-class, E-class or maybe even an S class,’ says the chairman.

The launch that will dominate Mercedes’ year is the new CLA coupe, based on the all-new MMA architecture designed electric first (though available with four-cylinder petrol hybrids too). I’ve got up close and personal with the car for T3 and it’s one of the most exciting EVs of 2025, with twice the electrical energy of previous Mercs and a stepchange in charging speeds and efficiency –?its claimed range tops 466 miles.

The new CLA coupe will be followed by a sleek estate version, replacements for the GLA/GLB SUVs and a new C-class and GLC SUV. ‘We are now preparing for the biggest product offensive in our company’s history; from 2025-2028 it's just going to be one vehicle after the other,’ says Ola K?llenius.

And, as befits Mercedes premium push, prices of entry level cars will rise by 20 per cent. It’s all about the luxury, dahling.