A German press report last week revived speculation that Daimler is thinking small, planning to position a Mercedes model above the Smart in 2016, with technology to be based on the flexible A-class architecture and with engines from Renault.
The story, in the German weekly Focus, followed a report in AutoBild last month that Mercedes is considering a subcompact car range badged as X-class models that would include a crossover and a minivan priced below 20,000 euros, or about $26,200.
Luxury European automakers, traditionally reluctant to link themselves to segments known for bare-bones econoboxes, now face a buying public more accustomed to luxury that comes in a smaller package. Oil prices and global fuel economy regulations have changed the game, too.
"This is the exact same discussion we had when premium brands moved into the compact segment," said Ulrich Winzen, Polk's chief analyst in Germany. "The days when you could have destroyed a premium brand's image with a subcompact are over in Europe."
The subcompact segment was the last remaining bastion untouched by German premium brands until Audi launched the A1 in 2010.
Said a Daimler spokesman: "We've never made a secret about the fact that every once in a while we examine whether there is room below the A class for another Mercedes."