Daimler CEO: ‘Denza’s future depends on success of latest model’

Daimler AG’s CEO Ola Kallenius has declared that the latest Denza crossover’s success will determine the Chinese electric-car brand’s prospects following years of lackluster sales. Denza is a joint venture with Chinese electric vehicle maker BYD Co. Ltd.

“The cash investment is behind us,” Källenius told reporters last week.  “Now we look at how Denza develops, and then we’ll make decisions.” The demand for Denza EV products has been very low in China lately. This has raised concerns, especially at Daimler. Until now, BYD refuses any comment.

Ten years

Daimler and BYD started Denza a decade ago, reacting to the Chinese new-energy vehicle market’s growth. While sales have taken off, there’s also fierce competition in price-sensitive volume segments, posing a challenge concerning profitability.

“We hold the view that only EVs geared toward the higher end of the market make economic sense,” said Arndt Ellinghorst, an analyst for Sanford C. Bernstein, in a note.

Important decisions

Since he arrived at the top of Daimler, Swede Ola Källenius has already made some serious decisions. Apart from cutting costs all over the group (also by letting people go), he recently announced the group would split up, and Daimler’s truck division would go IPO on the Frankfurter stock exchange before the end of the year. The car division gets the Mercedes-Benz name again.

Daimler has also already started a joint-venture in China to manufacture its small, electric cars from Smart. The Smart factory in the north-east of France has recently been sold to Ineos (to build the Grenadier) and will produce current Smarts until the models are phased out within one or two years.

All moves are clearly part of a plan to make Mercedes-Benz and Daimler trucks more profitable. In Mercedes’ case, this means selling more luxurious cars with even more sophisticated and luxurious options.