Why Mercedes' S-Class Got a $1 Billion Makeover

Mercedes' S-Class

With a Tesla model outselling the luxury sedan in early 2013, the longtime favorite of A-listers like Demi Moore and Tiger Woods is fighting for market share with upgrades like a hot-stone-massage seat option.

This story first appeared in the Aug. 23 issue of The Hollywood Reporter magazine.

All you need to know about the brutally competitive luxury automobile category is this: The new 2014 Mercedes-Benz S-Class rear seats not only have a hot-stone-massage option but their own app to control seat movement. That should give an idea of just how much luxury is compulsory these days to sell a plausible luxury sedan.

The new S-Class, which launches in September and will most likely be priced at $95,000, is the latest edition of the car that has been Mercedes-Benz's flagship for 41 years and has a deep penetration among Hollywood and pro sports -- Tiger Woods and Demi Moore have been spotted in them. But lately, the S has been challenged for the hearts, minds and driveways of Hollywood by the $78,800 Audi A8 L, the $91,000 BMW 750Li and especially the $83,570 electric Tesla Model S P85. The latter, considered a midsize car despite its price, outsold the larger German model in America in the first quarter of 2013, with 4,900 units delivered compared with the S-Class at 3,077.

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"For 20 years, I was a very happy Mercedes-Benz owner," says Paul Kiesel, a Beverly Hills entertainment attorney. "I had an S-600 but found it much too big and not particularly fun. It was a tank." Four months ago, Kiesel forsook his latest Mercedes and bought a Tesla.

It's drivers like Kiesel that Mercedes must win over if the S is to remain relevant. The car is far from unpopular -- even in its current and somewhat dated form, the S-Class remains the No. 1 full-size luxury sedan in America, with year-to-date sales of 6,788 units. Says Steve Cannon, CEO of Mercedes-Benz USA, "It's the flagship of the entire industry."

Nonetheless, according to Roderick Bridge, an auto analyst at S&P Capital IQ, Mercedes spent more than $1 billion revamping production to give the S-Class its first serious redesign since 2006, and the differences are startling. "I think the new S-Class is going to bring in a lot of the Rolls-Royce and Bentley buyers," says Mark Barsoomian, general sales manager at Mercedes-Benz of Beverly Hills. "That's what Mercedes-Benz is shooting for in a lot of ways."

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Where the previous S was all Teutonic efficiency, the 2014 is all about technology and safety, with a major emphasis on luxury. "Luxury was the strongest driver for innovation," says Hermann-Joseph Storp, the car's design engineer.

The new S-Class is larger than ever at 17.2 feet long (the Tesla is almost a foot shorter) and has a more imposing presence, with its longer hood, domed roofline and gently slanting rear reminiscent of the Bentley Mulsanne. (Mileage should be close to the current model's 19 mpg city/21 highway.) Mercedes deepened the sedan's hallmark design cue, the "dropping line" that descends from front to rear and creates a convex-concave effect over the entire flank of the vehicle. Inside, the S is stuffed with some of the most over-the-top technology available, including a system that scans the road surface with a stereo camera and instantaneously adjusts the suspension. The front cabin evokes a Gulfstream's cockpit, with an immense interactive screen nested amid the usual burled wood accents; the rear compartment evokes the snug luxury of a Lufthansa first-class cabin with foldout tray tables, exotic wood inlays and more Nappa leather than a Milan menswear workshop.

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All of which delivers the car into the future without jettisoning its luxury-liner backstory. "You can immediately recognize that it's a Mercedes," says Hans-Dieter Futschik, one of the designers. "That way, our customers don't have to get used to the new car and have an idea about the quality from the start." (Mercedes claims it has more than 20,000 preorders.)

While the previous S came in hybrid and diesel options, a plug-in hybrid version of the new S is available only in Europe. When that model -- though not a pure electric like the Tesla -- makes it to the U.S. as expected, it will be a major salvo in the green luxury-car wars.