Mercedes-Benz is no longer focused only on large, elegant luxury cars. Here are three reasons its small car strategy is paying off...

SINGAPORE - At first glance the new GLA-Class is a small, rugged crossover, a Mercedes rival to the Audi Q3 or BMW’s X1. But within Mercedes-Benz itself the GLA is only latest member in a family of five small cars that form a key part of the brand’s strategy to overtake Audi and BMW by 2020.

It’s spun off the platform that currently supports the -Class, B-Class and CLA-Class, and adds an SUV-type vehicle to the range. Mercedes’ names for them is NGCC, or New Generation Compact Cars.

Later in the year, Mercedes is expected to unveil the CLA Shooting Brake, a sporty station wagon that will complete the NGCC family.

But why so much emphasis on small cars from a brand that made its name with large, elegant and luxurious models? Because it’s a strategy that’s working. Here are three reasons Mercedes’ gamble on compact cars is paying off...

Volume is growing

Last year, Mercedes sold around 371,000 of the A-Class, B-Class and CLA-Class in total. The GLA and CLA Shooting Brake are expected to bump that up to 500,000 a year. That would make the five car family bigger by volume than say, Alfa Romeo and Volvo combined.

Parent company Daimler’s overall sales are up anyway: January to April figures grew 15 percent to 507,000 units. The small Mercedes cars accounted for about a quarter of that.

Profits are up
Daimler’s first-quarter profits have more than doubled from the same period a year ago to 2.07 billion Euros. Okay, much of that is down to the success of the new S-Class and the revamped E-Class. But by spreading the cost of one platform and one engine family over five models (not to mention, sharing loads of parts between them), Mercedes can expect the NGCC models to help it bank in big bucks.

New cars, new buyers
Mercedes head Dieter Zetsche has said that in the US, 80 percent of CLA-Class customers are new to the brand. Globally the conquest sales rate for the new GLA is expected to be 70 percent.

There’s a similar effect at work here. The cheapest Mercedes here is the A 180 (at $142,888 with COE), but it’s selling so well that it has a five-month waiting list. Many of the people in the queue are new to the brand. “You don’t expect someone with a C-Class to buy one as his next Mercedes,” says an insider from Daimler Southeast Asia.

If Mercedes can retain those new buyers (and upgrade them to a C-Class, E-Class and so on), it should bode well for the company’s goal to recapture its luxury crown.