Mercedes-Benz's Strategy Shift: Profit Concerns and Delayed EV Targets
TLDR; Mercedes-Benz is shifting away from EVs due to cost, profitability, and market demand, aiming to extend the lifespan of internal combustion engines and hybrids.
💰 Mercedes-Benz Shifting Strategy
Mercedes-Benz is retracting its EV deadlines due to profitability concerns, focusing on internal combustion and hybrids instead.
Their CEO, Ola Källenius, stated that cost parity for EVs is years away, and they are shifting their goals accordingly.
The company's net profits fell 21% to 3.4 billion in the fourth quarter, leading to a strategic shift to protect profitability.
Mercedes-Benz is not committing to a fully battery electric lineup in the near or long-term future, signaling a significant change in strategy.
📉 Slow Growth and Profit Concerns
Sales of fully electric cars are set to grow at the slowest rate since 2019, impacting Mercedes-Benz's profit expectations.
The company anticipates a potential 10% drop in profits this year, attributed to reduced demand and high borrowing costs.
The economic outlook, supply chain challenges, and trade tensions are also weighing on the company's performance.
Mercedes-Benz is raising its average price by 2% to about $80,000 and increasing spending on research and development for future technology.
🔙 Delayed EV Targets
Mercedes-Benz has pushed back its EV targets, with EVs expected to account for half of the sales in the second half of the decade, rather than in 2025.
The company's battery electric and plug-in hybrid vehicles' share is expected to remain between 19 and 20% for 2024, with heavy investments in the next generation.
The variable cost for the platform is anticipated to be 30% lower, and the company plans to introduce 15 new models this year to compete with Tesla and BYD.
🌍 Global Market Challenges
Mercedes-Benz's CEO mentioned that Europe is not ready for an all-electric lineup by 2030, citing customer hesitance due to reasons such as a lack of charging infrastructure and appealing electric models.
The company is also facing challenges in China, with slower economic growth, supply chain bottlenecks, and trade tensions impacting the auto market outlook for 2024.
The European Union is conducting a probe into China's trade practices to address unfair advantages favoring Chinese autos over imported companies.
🚗 Market Performance and Competition
Sales of fully electric cars are expected to grow at the slowest rate since 2019, impacting the entire industry, including Mercedes-Benz.
Other automakers, such as Audi and Genesis, have also adjusted their EV rollout strategies, reflecting ongoing challenges in the market.
Mercedes-Benz aims to introduce 15 new models this year to keep up with competitors like Tesla and BYD, while also facing increasing average prices and R&D spending.