The US consumer looking for a $24k 110hp car with cloth seats is not walking onto a Mercedes lot. Mercedes and BMW have always been luxury here, and for a long time there was a price premium simply for the exchange rate and tariffs. It would take a lot of advertising to make Mercedes a middle market brand and it would hurt their luxury image. Considering the number of not wealthy people I see financing or leasing “aspirational” cars like E-class Mercedes or BMW X-series, this isn’t really hurting the breadth of their market.

Different buyer preferences. Different needs.

Of course, it helps that most low-powered cars sold in the EU will have manual trans, where all US MBs are autos...

Also, US buyers will run the AC a lot more, and AC eats a lot of power...potentially as much as 15-20HP... that's a lot more noticeable with a tiny engine.

Still I doubt if it is actually justified, considering in India a similar size car is perfectly serving its purpose with a 60 to 70 HP engine.

The same reason Apple Doesn't sell an iPhone Zero in the US with a single core processor and 64MB of RAM.

The US is a mature product.

High end brands don't sell sub-lowend products.

But then it means that Americans are overpaying by buying capacity they don't really need. This is something I'm always wondered at, as in the 3rd world even well-off people try to minimize their expenses.

But we do need it. Look at traffic on our highways. You need power to safely merge in many places.

Tell that to the people who won't buy that car.