Mercedes-Benz has reversed course and is shipping production of the A-Class compact sedan back to its plant in Rastatt, Germany from Mexico, supply chain and dealer sources told Automotive News in Detroit. And the move will undoubtedly affect some Canadian suppliers with operations down south.
Two years ago, Daimler kicked off production of its newest North American model at its US$1 billion joint-venture factory with Nissan in Aguascalientes, Mexico.
Mercedes' focus at the Mexico assembly plant, known as COMPAS, is now the GLB, a compact crossover that launched in the U.S. last year.
In a communication with A-Class suppliers this month, obtained by Automotive News, Daimler said: "The current dynamic development of the automotive market under the influence of the pandemic requires constant monitoring and adjustment of production strategies.
"Therefore, we have decided to focus on the X247 [GLB] project at COMPAS and discontinue the V177 [A-Class] production in Mexico."
Flavio Volpe, head of the Canadian Automotive Parts Manufacturers’ Association, told Automotive News Canada the decision will affect Canadian companies to some extent. He said several suppliers work on the program, “but volumes are low.”
“They won’t be surprised and will likely be participating int he Daimler replacement programs,” Volpe said.
A Daimler spokesman late last week confirmed the production move from Mexico, saying the decision will give Mercedes additional capacity for crossovers.But the production shuffle suggests an expensive miscalculation by Daimler on America's appetite for compact sedans.
At the end of 2015, when Daimler would have been orchestrating the North American production plan, compact sedans made up 12.7 per cent of the total light-vehicle market in the U.S. That market share was down to 8.4 per cent last year.
"I think Mercedes misread the market and underestimated just how badly demand for small luxury sedans would fall," AutoPacific analyst Ed Kim said.
“Sedans versus sport utility — the question really is answered by the market,” Volpe said. “Suppliers supply demand, no matter the configuration.”