At Gadget Show, Mercedes Announces Plans to Pursue Generation Y

Getting your first car used to be a big deal. It offered danger, excitement, and most of all freedom. Today all that comes over the Web—and, thanks to smart phones, into the palm of your hand. Who needs a car?

That kind of thinking may explain why Mercedes-Benz plans to introduce a new line of automobiles next year that offer a bit less car and a lot more Internet.

At the Consumer Electronics Show in Las Vegas last week, Mercedes-Benz USA’s chief executive, Steve Cannon, announced that in 2013 the automaker will be launching a tier of cheaper, compact vehicles, designed from the ground up to offer technology that makes Generation Y feel at home. “We are reengineering our entry point into the brand,” Cannon said. “These younger buyers will be more price-sensitive and place a higher value on the connected experience.”

That’s a major shift for a brand whose logo is mostly a status symbol among baby boomers and whose lowest tier of models is the C-Class, at prices that start around $35,000. But, Cannon said, the company’s “ability to succeed” now depends on accommodating consumers in their late 20s and early 30s, for whom life without smart phones is unthinkable.

Mercedes has released few details about the new models, not even the name. Cannon would say only that they’ll be lower in price than the C-Class and that an updated vehicle communication system unveiled at CES would be central to their design, along with other technical features designed to accommodate smart-phone users. Mercedes’ global director, Dieter Zetsche, gave a keynote speech at the gathering, which this year featured more automakers than ever before. Ford, Kia, and Audi all appeared, to show off their software, connectivity, and apps rather than their horsepower.

The communication system that Mercedes launched at the show is an Internet-enabled update of the automaker’s existing system, mBrace. Called mBrace2, it will, like its predecessor, live on a screen high on the car’s console and offer GPS navigation and a concierge service to help with everything from breakdowns to hotel reservations. A 3G cellular Internet connection powers simplified (and relatively clunky) versions of apps including Yelp and Facebook.

For smart-phone-addicted consumers, Mercedes has also built a phone app that will offer car owners many of mBrace2’s services when they’re away from the car. They can use the concierge, send directions to the vehicle before a trip, and receive notifications about the car’s location and speed when someone else is using it. “It’s an app that puts Mercedes in their pocket all of the time,” said Cannon. “The goal is to build a link between ‘me on the go outside my car and inside the car.’”

Although that link may help sell cars, the company doesn’t expect to turn a profit on the technology itself. The projected cost of a full subscription to mBrace2 is $280 a year, but Cannon says, “We’re not looking to make money, just for it to cover itself.” Next year’s new tier of models[B1]  will have an entry-level feature, called Push UI, that will allow owners not ready to pay for mBrace2 to plug in their phones and use some of their own apps on the car’s built-in display.

Automakers may, however, be following Generation Y into hazardous territory. In December, the National Transportation Safety Board recommended a ban on all use of mobile devices while driving, including hands-free devices. One board member compared the use of phones in cars to driving while intoxicated. Although the board said devices hardwired into cars should be permitted, car salesmen might nonetheless have reason to worry.

“We have to be very careful, because we need to know what we do is safe,” says Cannon. “If we don’t find a way to do this safely, then they [regulators] will put a ban on it.”