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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.