Mercedes maps out push to lift profits during EV shift

Automotive Industry

Source: Automotive News Europe, 2020-10-06

Mercedes-Benz, which has fixated for years on leading the auto industry in luxury-vehicle sales, will rethink its ambitions and restructure operations to be more profitable in the midst of a costly shift to electric cars.

Daimler's main division will aim for a return on sales in the mid to high single-digit range by 2025, even if market conditions are unfavorable. Its ambition will be to earn a double-digit profit margin if the environment is strong.

"We have not yet lived up to our full potential in terms of turning volume success into profit growth," CEO Ola Kallenius said in a statement ahead of Daimler’s capital markets day on Tuesday 6 October. "We will invest where we can win, grow more intelligently, and reshape our industrial footprint."

Investor confidence in Daimler gradually improved in recent months after the automaker navigated the unprecedented industry slump triggered by COVID-19 better than feared. But electric-car leader Tesla zoomed past all traditional manufacturers to become the world's most valuable automaker while Daimler and others wrestle with revamping their legacy operations.

Daimler said it will cut fixed costs, capital expenditure and research and development costs by more than 20% by 2025 compared with 2019 levels as part of a strategy overhaul of its Mercedes cars business.

EV push

Mercedes has flanked its full-electric EQC SUV with a plug-in minivan called the EQV. It plans to start output of the compact EQA hatchback later this year and rolled out a fresh version of its flagship S-Class last month.

The S-Class sedan will get a fully-electric sibling called EQS next year, which will be based on the company’s first dedicated electric-car platform.

Profits from large luxury cars will be key to financing restructuring costs aimed at making Mercedes more efficient. The brand has outsold luxury-car rivals for years, but returns have slumped below the level of mass-market peers such as PSA Group.

Earlier this year, Mercedes stopped building sedans in the U.S. to focus on more profitable SUV's, combined its fuel cell development with Volvo Trucks, and halted an automated development alliance with BMW.

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