TUSCALOOSA, Ala. (TheStreet) -- Mercedes Chief Deiter Zetsche says he is "relaxed" about retaining the No. 1 spot as the top U.S. luxury automaker in 2014 as the first American-made sedan rolls off the assembly line in Tuscaloosa, Ala. But for Zetsche, building the C-Class, which has moved upmarket with its latest redesign, in the U.S. may just be the start of the German automaker's ambitious plans to deliver even smaller, less-expensive Mercedes to the masses.
The Vance, Ala. plant, just outside of the City of Tuscaloosa, is the only Mercedes plant in North America and until this summer, it was the main producer of several SUVs including the GL-Class, M-Class and R-Class. The redesigned C-Class is the first sedan Mercedes has ever produced stateside. Zetsche, speaking exclusively to TheStreetTV at the Alabama plant said, "it was about time . . . to have our best-selling sedan in America being built for Americans, in America."
In 2013, Mercedes, a division of Daimler-Chrysler (DDAIY) , sold 88,251 Cs in the U.S. For the first half of 2014, sales were down 28% as customers waited for the arrival of the new model. The new cars started arriving in dealer showrooms in mid-August and so far, the reaction from customers has been positive. "Many people treat it as the small S-Class which many people perceive as the best car in the world," according to Zetsche.
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The C-Class, priced at a little more than $41,000, is about $1,000 more than the previous year's model. "We do think these vehicles warrant a premium and that is expressed in our pricing," said Zetsche. Raising the price, along with moving production to Alabama has also improved the automaker's profit margins. Zetsche declined to say by what percent, but he did say it makes very good economic sense to start C-Class production in Alabama.
As for more sedan production on the way to the U.S., Zetsche did not rule out the possibility of building more sedans in the U.S. down the road, but before that, there will be another as yet unnamed SUV that will be built in Alabama starting in 2015. When production of the new SUV starts, it will bring total production of the Alabama plant closer to 300,000 cars and SUVs a year. In 2013, the Alabama plant produced 185,000 vehicles. Zetsche says 300,000 is the ideal production output for a plant. As for what happens once the plant hits that goal, Zetsche was mum on the possibility of a second plant.
While it may be a while before the higher-end E-Class or S-class are manufactured on U.S. shores, Zetsche is excited about a new joint venture Mercedes announced earlier this summer with Renault Nissan that will develop the architecture for a new assembly plant in Aguascalientes, Mexico. Zetsche says its compact car lineup is "expanding rapidly and for the next generation we need even more capacity and there is none in North America." The plant is expected to start production in early 2017.
And, while the automaker is busy behind the scenes planning the launch of a new SUV in 2015 and the compact car lineup in a few year's time, right now, Zetsche has a bird's eye view of luxury spending around the world. In China, Mercedes has seen a double-digit growth rate and he expects the growth momentum their to continue. In Europe, Zetsche said he expects the economic recovery to continue, but at an even slower pace than in the first half of 2014. Globally, he said, "The overall picture looks pretty bright but of course there are some clouds in the sky and we have to see how they will develop."