Although the vaunted Mercedes brand still commands a price premium of roughly 5% over luxury rivals, that's far too little to cover the yawning cost spread it has with the likes of BMW, Audi, and Lexus. "A long hard road lies before us. Our costs in every part of the production chain are clearly higher than those of our best competitors," Zetsche said in a Sept. 28 letter to employees. While auto makers don't reveal the actual numbers, industry experts estimate the cost of producing a car at Mercedes now runs $2,400 to $3,000 higher on average than at No. 1 luxury carmaker BMW. Ferdinand Dudenhöfer, director of the Center For Automotive Research in Gelsenkirchen, figures the gap represents 7% to 10% of total production costs on average. mercedes insiders say the difference runs up to 22% on some models, such as the trouble-plagued E-Class. "Mercedes' whole mantra has been: `We build the best luxury cars in the world -- at any cost,"' says Morgan Stanley analyst Adam Jonas in London.
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