Daimler was set on Wednesday to release the new model of its Mercedes-Benz S-Class luxury sedan, which it hopes will help the German automaker to get back to profitability next year after the coronavirus crisis slashed demand for high-end vehicles.
Daimler has released a new S-Class every seven years for decades but this year’s launch of its most profitable model happens to be more important for the company as it battles the fallout from the coronavirus crisis and an expensive switch to electric cars.
“The S-Class is an important driver of image and, measured by the margin, the largest source of profits,” says Frank Schwope, an analyst at Norddeutsche Landesbank.
CEO Ola Kaellenius is heading a cost-cutting drive after Daimler reported a 30% decline in second-quarter revenue and a loss before interest and taxation of 1.68 billion euros ($2 billion).
Kaellenius flagged signs of a recovery in demand in July, especially for top-end Mercedes-Benz models and electric vehicles, and analysts have also pointed to a strong rebound in China, the most significant market for Mercedes-Benz.
Daimler could sell 95,000 S-Class cars next year, with prices at over 100,000 euros ($118,000) each could contribute over 2 billion euros to the company’s results, estimates Daniel Schwarz, a car expert at Bank Mainfirst.
The automaker does not detail the profitability of different models, but analysts estimate the margin on the S-Class at 15-20% of sales.
The S-Class should benefit from being the latest premium model on the market as its rivals with BMW’s 7 Series and Audi’s A8, which were released in 2019 and 2017.
Daimler is also due to introduce the electric version of the S-Class called the EQS next year, although analysts warn that will not be the same money-spinner for the automaker.
The S-Class provides some comfort for workers concerned about their jobs after coronavirus crisis and the switch to electric vehicles – it will be produced at a new factory located in Sindelfingen in southern Germany, near Daimler headquarters.
The factory cost 730 million euros and over 1,500 workers will work on an ergonomic assembly line, which the automaker says will be 25% more efficient than its previous location.