by Jez Spinks

BMW Australia has questioned rival Mercedes’ pricing strategy with its A-Class hatchback, believing it has been unnecessarily aggressive.

The smallest Mercedes (main image) was launched with a $35,600 starting price earlier in 2013, with all models including the base generously equipped.

It forced Audi to introduce an identical entry-level price for its new-generation A3, and subsequently BMW with its 1 Series. BMW also announced revised prices and increased specification across the 1 Series range.

BMW Australia boss Phil Horton said that while Benz’s move to get more buyers into its brand was helping to grow the luxury car market, he believes the company’s margins will be hurt by the weakening Australian dollar.

“[Mercedes] have been aggressive with positioning of the A-Class, and the support they’ve put behind B-Class and C-Class,” said Horton.

BMW 1 Series hatch

“They’ve set their stall out. They have been more aggressive than needed. They’ve stuffed [the A-Class] full of kit.

“Spec adjusted, that car was positioned below a [VW] Golf. Clearly it’s a very single-minded attempt to push into areas where brand hasn’t been before.

“We put a lot of spec with 1 Series… we have to respond to what happens in the competitive market.

“With premium cars, don’t think they have never been more affordable in Australia as they are now.”

Horton said the base A-Class was easily a $40,000 car. He added it also wasn’t ideal for customers that there is a waiting list if they want an A-Class and is surprised Mercedes didn’t anticipate demand by increasing production levels of the model.

Horton said all manufacturers were now putting in more equipment as standard, but says the 15 per cent reduction in the Australian dollar in recent times will put a lot of pressure on those companies – such as Mercedes – putting more equipment in cars.

He says the increasing affordability of luxury cars have the potential to eventually double sales in the premium segment locally.

  • Suqsid

    Hahaha. Typical ‘prestige manufacturer’ attitude..
    Mr. Horton must be upset that he’s had to rid BMW Australia of it’s precious profit margins from the lowly 1 Series. And clearly the strategy is working for Mercedes because their sales are up and there is high demand for the A-Class. And i’m sure that they are still making a generous profit from Australian buyers, no doubt.

    Sure, they have been getting away with it until now, and people are willing to pay for a ‘prestige’ car, especially if it means they have a little bit of Luxury Car exclusivity. I’ve always believed that BMW, Audi, Merc-Benz et. al. purposely keep prices high in the Australian market not just because of “import taxes” or LCT, but because it reserves their cars for the upmarket, business man-type which they enjoy having as a customer base because it lets the Average Joe aspire towards their brand, even if they are not worth the money we pay for them. The people who run the Australian arms of these respective companies need to understand that pricing people out of the market for a nice European car of their choice (should they choose to buy one) is the wrong attitude to have..

    • Sumpguard

      Absolutely ! The fact is the new A class is a far superior styled vehicle into the mix. That 1 series is frigging awful just like most of BMW’s range now.

      Smart move by Merc. Make it affordable to the masses and introduce a whole new range of people to your product. Hilarious that BMW have responded this way publicly. Hit a nerve?

      Telling your direct rival how they should price their cars. GOLD !!

      • $29896495

        You gotta laugh at this guy. Comments above totally on the money. ACCC might like to look at this too. It smacks of collusion.

      • Zaccy16

        i agree sumpguard, its great that mercedes is pricing its cars more realistically, i like the BMW 1 series and it drives very well but its dumb to respond like this to a rival brand having competitive prices and cars!

    • F1orce

      I see tons of Toyota Kluger Grande models on the streets and they’re easily more expensive than base model Mercedes, Audi, BMW etc

      • Suqsid

        You’re comparing apples with oranges here. A Kluger Grande more expensive than a base model A-Class or 1 Series? Sure. However, one would rarely cross shop those models; someone looking for a Kluger probably has a family/kids/shopping/pets to cart around. Thus, they would be looking at a Kluger-equivalent model from BMW, Mercedes or Audi would be the X5, ML-Class or Q7 respectively, and those model are definitely priced higher than a top-of-the-range Kluger.

        • F1orce

          What about the X1, X3, Q3 etc?

          • Suqsid

            Does the X1, X3, Q3 etc. have 7 seats? Are they considered ‘large’ SUV’s? The answer to both questions is No. Ergo, they are not in the same segment, and my above mentioned point stands.

    • Troutman

      Even if Mercedes were not making a profit on the base A Class, sometimes there is a long-term strategy to woo new buyers in the hope that they will progressively upgrade to more profitable C and E Class models in a few years.

      • Hugo

        I’m sure they are making a profit. The A180 starts at twenty thousand pounds in the UK, which is… well, just about exactly what this sells for here. (Albeit that’s a driveaway price in the UK…)

        Well done, Mercedes-Benz, for giving us a car that’s actually reasonably priced for once. Now, if you’ll just follow suit with the C class, I’ll buy one.

        • $29896495

          What would really show they mean business is if Merc dropped their price to 29,900 drive away. Bring down all the other prices accordingly. Otherwise, realistically, it is just a marketing exercise. It would be fun to hear what this joker has to say then.

  • Golfschwein

    Sour grapes!!!

  • George Gallan

    Oh please BMW – you all rip off Australian customers off senseless. Old chestnut I know, but you cannot claim that MB will be losing money – what they lose on their mega mark-up they will gain in volume – simple.

    • fjkl

      But they haven’t been gaining volume. A class sales are obviously up, but other models are down. BMW sell as many cars here are Merc, sometimes more (unless you include all those Vans Merc sells).

      I find it odd that BMW feels they need to come out and say this, but obviously Mercedes could’ve charged more money since they can’t meet demand.

      • zahmad

        But in the future, with more people introduced to the brand, the more sales increase when they decide to upgrade to the next level i.e. C-Class etc. Most brands seems to have forgotten about this and the germans are well known for this strategy….

        • jghj

          But Merc aren’t really selling more cars than BMW. didn’t you read the comment you are commenting on?
          So if Merc is getting more new customers from similar sales figures, that means they’re losing old customers which in turn means they have lower brand loyalty – which in turn suggests those new customers are less likely to buy again compared to a BMW customer.
          It does make sense that Merc has lost a lot of traditional customers considering the lemons they sold with the first gen M class, A class and a general drop in quality/reliability from a few years back. So they would need new customers to keep the sales going and whether or not those customers stay with the brand or whether or not the momentum of attracting brand new customers continues will remain to be seen.

          • Jacob

            But hopefully Merc will outsell BMW this year, now that we have price parity with England on the A-class.

    • Zaccy16

      exactly, This BMW rep must have been off his head to say these sorts of comments, lower starting price equals more cars sold, and a new generation of people that can afford your cars

  • George Gallan

    Plus A-class looks great, 1-series looks like a bucket. I’d rather buy Kia than the 1-series and lets not even talk about that ugly A1 Audi. MB is on a winner.

  • Daniel

    I can’t believe he actually said this publicly. Why should they have such huge profit margins? It’s a product with competition, we are not your minions who buy whatever you throw at us. The 1 Series isn’t even that well equipped…what a d**k.

  • The Realist

    oh boo %$^&ing hoo

    The high volume, low margin model seems to be working well for Mercedes in Oz and good on them for taking charge.

    It’s simple BMW. Sell more cars at slimmer margins and you will be no worse off than you were before.

    about time i say

  • Glass Houses

    BMW’s have always been ripoffs. Can hack it Mr.Horton? Mercedes are eating you alive and you know it. You could learn from Mercedes.

    • rku

      BMW sell around the same number of passenger cars here as Merc, sometimes more. So what’s to learn?

      • $29896495

        He’s afraid of what will happen once this filters deep enough into the market. At that point sales will lift. BMW will be lefty floundering.

        • Sumpguard

          …and by making stupid statements acknowledging the opposition’s cars are “too cheap” he is helping them get there.

        • jdjh

          The original A class & M class were lemons with a range of quality problems and when they were working, the interior wasn’t particularly well put together and the handling not great.

          On their other models Merc started using air suspension around 2000. Those airbags commonly go at around 5-10 years and require about $5000 replacement. The models with airbag suspension are the most expensive ones with a huge profit margin, so Merc probably needs to sell 20 A class’ to make the same profit as one S class & no one who had to fork out that much money on the suspension will buy another one.

          Now THAT has been filtering through. So Merc needs to attract new customers with cheap pricing to replace old ones who were stung by a lapse in traditional Merc quality.

          That said, BMW seems to be lipping in the quality/satisfaction surveys, so maybe that will bite them soon (also this Horton comment won’t help), but I highly doubt BMW will be left “floundering” just because Merc is offering better value on one particular model range.

          I’m not sure what the pricing thing is about anyway.

          Both 1 series and A class start at $35K.
          Merc A180 only has 90KW/200NM and is FWD.

          BMW 116i has 100KW/220NM and is 100kgs lighter and RWD.
          Winner for me is BMW 116i, more power, less weight, RWD, same price.

          ‘m guessing the merc has more standard electrical trinkets, but I don’t care about that and you can probably get all those on a top end Hyundai i30 or Ford Focus anyway.

          • $29896495

            You make valid points. Personally I don’t like the looks of either of them. They aren’t up market cars, back in Germany they are run of the mill Focus competitors. It’s the “spin” which sets them apart here. What the BMW guy might be worried about, is the potential for a price war. 35K for a car the size of a focus with very little in it isn’t cheap. It’s less expensive. They still need to be 10K cheaper for what they are. Then that would high light the grossly over priced cars in the rest of the line up.

          • rtuy

            You’re always trying to claim that BMW/Merc are just run of the mill cars back in Germany.
            Focus competitor?

            Here are the German prices for the base Focus 5 door:
            E14,900 = A$22,000
            Here is the German price for a base 114i 5 door:
            E22,700 = A$33,600

            Same price difference in Germany as there is in Australian between Focus and 1 series. A $11,600 price difference is huge in this area of the market and doesn’t really lend them to them being competitors.

          • $29896495

            Which Focus 5 and which 114i

          • $29896495

            Just another note. People like you make me laugh. defending the high prices. Several months ago you were probably on here defending 60K or 70K for something. You want to go pay high prices do it be a fool. The rest of us have woken up.

          • sfjg

            Haha, sour grapes because you were proven wrong about the Germany pricing and market placement?

            1 series is priced and marketed with the same placement in Germany as it is in Australia when compared to Focus as can be seen by the German prices
            So you’re wrong there.

            1 series sells in reasonable numbers for a prestige hatch so prices do not “need” to be 10K cheaper. This isn’t a not-for-profit organisation, it’s a big, greedy, profit hungry business. So why would they “need” to make a big price cut on a product that is making a healthy profit at existing prices?
            So you’re wrong there too.

            “which Focus and which 114i”….?
            That question is about as dumb as one from F1orce.

  • Rocket

    Crazy what some pay for a badge to impress their friends…….

    Rolls Royce and Ferrari are true luxury brands.

    • Mr Merc

      Right on the money. You’d expect the ultimate product from BMW, but its rarely on par with a a KIA for ownership experience, maybe its a Holden – Ford thing, but you’d never catch me dead driving a BMW or a VW~Audi, I’m a Merc man, just prefer their engineering, except for the crud of the mid 90’s to 2005, had Lexus then, but back to Merc now. Just avoid the high tech untested stuff.

      • adf

        I think you’ll find that RR is BMW and Bentley is VW/Audi. All the latest Rolls Royce design comes straight from BMW and all of Bentleys design comes straight from Audi/VW.

        Buy a new Bentley Continental and you’re getting a redressed VW Phaeton W12.
        Buy a Rolls Royce Ghost and you’re getting a redressed BMW 760iL

    • Jonno

      Correction, mate! Rolls Royce (& Bentley) are true luxury cars. Ferrari (& Lamborghini) are “Look at me, I’m rich!” type cars. In recessions & economic busts, you’ll see loads of Ferraris for sale!

  • TomW

    Ha ha. You can also hear the sense of betrayal, can’t you? You’d get the same response from the head of one of the big four banks if one of the others started cutting mortgage rates without the Reserve Bank prompting it.

  • Sam

    I dont know abot the rest of you, but when I hear a BMW boss say that Mercedes have priced one of thier models too cheaply, it only makes me want to go buy one! When you think about it, he is right, the A-Class is great value. A Mercedes for the same price as a Toyota 86, nice!

    • Dave W

      You mean you get the base model of a FWD hatchback with a 3-star badge for the price of Toyota’s top variant RWD sports coupe.

      Without the premium badge, the base A180 is only a $30k car at most, along the line of something like the Corolla Levin which are just as well equipped.

      I think you’re better off buying the top end model of something like the 2014 Mazda 3 SP25 and still keep some change. Unless you got the money, in which case you’ll be getting the higher end A200 or A250 sports anyway.

      • $29896495

        ave is right, they are still over priced. Just demonstrates by how much.

        • Dave W

          Can’t really blame them when the consumers have more money than brain.

          One more thing. Base model of a premium brand is for those wannabes who want to raise their social status but can’t really afford the real deal.

          • sam

            Thats just ignorance Dave. I hope youre not inferring me in that ill conceived stereo-type. I own a shed full of cars. 3 of them are Mercedes.

          • Dave W

            Are they base models? lol

          • $29896495

            Have to agree with you Dave.

      • Zaccy16

        i agree, the mazda 3 sp25 will be a great car!

  • F1orce

    Mr Horton is making a fool out of our intelligence.

    • quivive

      No. Our intelligence is making a fool of Mr Horton.

      • lfjl

        Almost. When you say “our” that means everyone involved is included but F1orce cannot be included in anything related to intelligence.

  • Mick

    Boohoo BMW.
    Learn how to hedge currency risk properly (like Daimler have) and you won’t have these problems.
    At the same time learn how to fix your electric power steering too.

    Anyway well done Mercedes. A and CLA Class are now priced fairly. Hopefully the C Class will continue the trend when the next one launches.

    • WISE

      I think it’s the other way around…MB have taken the risk of riding the wave of the high AUD & introduced the A class at such a low price.
      However, with the recent fall of the AUD (as much as 15% or more). it is definitely going to eat up MB’s margins…So I feel it’s MB who did not hedge their currency risk properly…they never saw the quick fall of the AUD coming & now they would have to pay the price..!!
      I won’t be surprised if MB cut down the value of A Class in the coming months by either jacking up the price (unlikely) or silently reducing the standard equipment..

      It’ll be interesting to see how MB attempt to reverse the hit on their margins resulting form the recent fall in the AUD.

  • Monster

    So BMW is officially saying the A-class is a great buy? OK

    • Hugo

      Honestly I don’t think the A-class is a great buy. Reviews suggest that it’s pretty crummy to drive and nothing particularly special on the interior. I wouldn’t spend $35,000 on a front-wheel-drive 85 kW hatchback.

      It’s still a huge worry for BMW, though.

  • ffforever

    BMW…in the latest wheels test, the 335i M spec was beaten by Lexus IS 350, don’t think it has ever happened before. BMW has lost its way as a company that makes driver’s cars and it’s all about profit now. Very sad..

  • Jonno

    BMW got to come off its high premium horse & be realistic for once. The automotive industry is under siege with Europe & USA, 2 big car markets having economic problems all at once. Sticking to a premium pricing gets you nowhere if you’re competitor decides to undercut you. 5 decades ago, BMW was trailing in MB’s wake when MB was the premium brand while BMW was the Johnny-come-lately & MB’s little brother domestically. If they don’t realize that the dynamics of the car buying market has changed, BMW will be trailing behind the slipstream of MB like 5 decades ago. Customer is king!

  • Peter

    I dont know about the rest of the range, but with the A250 Sport you wouldnt have one unless it cost over $60K driveaway (with sat nav and leather) and while I really like the look of them from the outside (the inside isnt much chop when you are in it), it is not a lot of car for the money. If BMW think that they are underpriced then the BMW product must be overpriced indeed.

  • Mark Tracey

    MB can price their car where ever they want, BMW is afraid that they may have to be more aggressive in their pricing to compete. The free market at its best, we may all get a better deal on one of these.

  • Drizzle

    I think that the A-Class has really turned this segment on its head, Mr Horton should be trying to promote that the BMW 1 series is a superior drive being the only RWD car in the segment as opposed to making comments that MB has positioned themselves too low. Its really interesting that this sort of commentary has made the media.

  • Homer

    Bimmer, Audi Merc, VW are all overpriced. Peugeot isn’t. It goes to show that some Aussie accepts price gouging by the Germans. S****d.

    • $29896495

      You’ve probably noticed, but some idiots actually defend the Euro price gouging. (They could be dealer of course)

  • Robbo

    Haha sucked in BMW, even dumber they put a press release out like sooky lala’s saying “it’s not fair no one wants our ugly over priced hatch”. What’s next? Press release that cries that the public think the upcoming Cooper is an embarrassment and we should stop saying bad words about it? What losers, hard life not being so super rich anymore ripping off Australians.

    Maybe someone should remind BMW when the new MINI was launched there was a 7 month wait, they didn’t step up supply instead raved how it was holding value so well.

  • Arthur

    I cannot believe he said that. It sounds like a free ad for Mercedes coming straight from the BMW Australia boss. Very bizarre.

  • gti

    Through experience the overall german cars are great to drive but make sure you do have the warranties or they will bite very painfully.

  • Ben Carter

    BMW are joking right? Hopefully the new a class kills off the woeful 1 series. Nice idea, a rear drive hatch, but grossly over priced, catastrophically ugly except for the cute coupe and poorly specced. BMW are rubbish, my mate bought an X3 and it looks like a burnt wart, sounds like a tractor and shudders like an anorexic in the snow! If you’re a Euro snob and it makes you happy well good luck to you, but the new A Class will hopefully herald a new era in Aus where we will no longer be ripped off for decent euros

  • jsdfhj

    For me, the 1 series offers far better value anyway. I’m guessing the Merc offers more standard gadgets but I don’t care about gadgets – most of which you can get on a high end Focus or Hyundai these days anyway.
    Looking at what’s important to me:

    A180 $35K. A FWD 1395kg hatch with 90KW200NM

    116i $35K A RWD 1290kg hatch with 100KW220NM

    The A45 was announced at $74,900 whereas the BMW M125i is $64,900 plus I’d prefer a 3.0 BMW straight six cylinder over anyones heavily boosted 2.0 four cylinder anyway.

    That said, the styling of the 1 series is a bit of a issue.

    • g11

      What?Are you talking about M135i? Even M135i will be trashed by A45 AMG with no doubt. Just reading/watching the reviews on the internet.

      • Popper

        Are you saying the BMW is rubbish, therefore?

        You’re not making too much sense.

        I think the BMW is as good, in its way, and that’s the one I’d get.

      • F1orce

        The A45 AMG is just an ugly looking overboosted 4-banger. Nothing special, has been the case with Subaru’s & Evo’s for years.

  • For Te Rd

    Absolutely disgusting comment from BMW and makes me furious. Shows to you the level of arrogance these people go. You been ripping us off for years and years and now that someone trying to fix things, you end up with such pethetic comments. You all dam* know your cars aint worth the price u used to ask.

  • Phlegm

    Suffer BMW and Audi!

  • MisterZed

    $35,600 is aggressive?!?! In the US, the kind of money gets you a C250.

    • Peter

      but then you’d own a C250