July 12, 2024

The Chief Mag

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Mercedes-Benz adjusts strategy to address challenges in the EV market

2 min read

Mercedes-Benz Group is preparing to introduce many new models over the next two to three years as it addresses the shortcomings of its first generation of battery-powered cars. The company will also increase investment in its profitable fuel-burning vehicles, acknowledging ongoing demand for these models. CEO Ola Källenius emphasized the need for flexibility into the 2030s while maintaining the goal of being carbon-neutral by 2039. Mercedes remains committed to offering electric versions of its entire lineup this decade but must ensure its combustion-engine cars remain competitive.

Additionally, Mercedes has lagged behind rivals like BMW, whose EV lineup faces criticism for high prices and design flaws. The automakers’ battery vehicle sales fell 9% in the first quarter to 50,500 units, compared to BMW’s 82,700 vehicles. The EQS, launched in 2021, has underperformed with poor sales and design issues that have deterred customers, particularly in China. This led Mercedes to revise its target from exclusively selling EVs by 2030 to achieving around 50% EV sales by then.

Next year, the next generation of vehicles will be introduced on new platforms, starting with the entry-level CLA coupe and, later, the GLB SUV. Källenius demonstrated the spaciousness of these models during a preview in Sindelfingen. Mercedes also plans to release an electric compact version of the G-Wagon in 2026. The CLA will be available in both battery and combustion engine versions, featuring advanced driving assistance systems and computing power.

Despite the focus on new EV models, Mercedes will continue to generate significant profits from combustion-engine cars. The company also seeks savings in purchasing and reducing fixed and non-essential costs. Mercedes may unlock up to €10.5 billion by selling its remaining stake in Daimler Truck Holding AG, which was spun off in 2021. The lockup period for Mercedes’ 35% holding expires at the end of the year.

Daimler Truck’s stock has risen significantly since it began trading separately from Mercedes, highlighting its strong market performance. Mercedes is also pausing two of its three joint European battery plant developments with Stellantis NV and TotalEnergies SE to reassess production in light of slowing EV demand. The company will match its capital allocation to the rate of EV adoption.

Geopolitical tensions are adding to the challenges of the shift to EVs. The European Union plans to impose tariffs on China-made electric cars, potentially affecting Smart models produced in China through Mercedes’ partnership with Zhejiang Geely Holding Group Co. Källenius cautioned against triggering a trade conflict, noting the significant scale of imports from China to Europe.

By adapting its strategy and balancing investments between EVs and combustion-engine vehicles, Mercedes-Benz aims to effectively navigate the evolving automotive landscape and meet customer demands.


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