Mercedes gets cold feet about electrification timing

Mercedes-Benz is lagging behind its target for EV sales and seems to have axed its electric target for 2030. Instead of the 20% or more envisaged, battery-electric cars only accounted for 12% of total sales last year.

Mercedes sold 240,668 BEVs in 2023. That’s a 73% growth and can be seen as very positive. Still, the result was assessed differently internally: “The Group is below target for electric sales by at least 168,000 vehicles,” the German specialized newspaper Handelsblatt reports.

Financial results

The net benefit of Mercedes-Benz has slightly decreased by 1,9% to €14.53 billion in 2023, even though turnover grew by 2,1% to €153.22 billion. Total sales volumes have slowed down, especially in the fourth quarter of last year.

While the company has decided that it would focus more on the high-end luxury segment of the car market because of the far more significant margins per vehicle sold, it noticed that the slight increase in sales that is left (+1.5%) is due to the lower sales segments (+4% more cars sold).

The margin for passenger cars fell to 12.6% (2022: 14.6%), while the margin for vans rose from 11 to 15.5%. In addition to EV sales being below plan, supply chain problems also weighed on the car manufacturer in 2023.

Because supplier Bosch was unable to get to grips with production problems for 48-volt batteries for mild hybrids, Mercedes failed to build some 100,000 units of the new GLC and EV as planned. At the same time, expenditure on research and development “for future platforms and technologies, particularly for MB.OS” increased.

Mercedes CEO Ola Källenius stays prudent in his forecast: “We are living in challenging times. We feel the effects of inflation and increased interest rates, and in the Chinese market, we have to deal with a few structural challenges.”

“Other unexpected developments could occur due to geopolitical events or commercial strategies.” Källenius cites the Ukrainian war, the rising tensions between China and the US, and the deteriorating relations between Europe and China as possible causes to worry about.

That’s why the CEO expects a relatively ‘flat’ year in 2024, with a lower profit margin (around 10%), especially on cars. Where ‘Ambition 2039’ is concerned, a total carbon-neutral company by then, nothing changes, says the boss.

EV target for 2030 canceled

As a result, Ola Källenius has now canceled his own electric target for 2030. In 2021, the Swede announced the goal of selling only purely electric new cars from 2030 “if market conditions allow”. These market conditions aren’t allowing for a big change-over so soon.

Consequently, the new direction in the financial results announcement sounds completely different: “The company expects xEV sales to reach up to 50% of overall sales in the second half of the decade.” In other words, Källenius has buried the ‘electric only’ target and halved its original expectations.

Mercedes refers to BEVs and PHEVs as ‘xEVs’. That means, instead of almost 100% BEV share in 2030, the manufacturer assumes that the total share of BEVs and PHEVs will account for no more than half of all sales by the decade’s end. An explicit BEV share is no longer mentioned.

ICE stays into the thirties

The new statement of the Stuttgarter car manufacturer now reads: “The company plans to be in a position to cater to different customer needs, whether it’s an all-electric drivetrain or an electrified combustion engine, until well into the 2030s.”

It now sounds like the strategy of competitor BMW, which has always refused to name a year for the end of the combustion engine and wants to fulfill customer wishes with different technologies.

While BMW also has (limited) fuel cell plans, for example, Mercedes does not mention FCEVs. The company is also much more cautious regarding the end of the combustion engine with the phrase “until well into the 2030s”.

It is unknown whether the target, also announced in 2021, of only introducing all-electric platforms from 2025 still stands. Should this be true, combustion-powered Mercedes cars would be based on aged platforms in the 2030s.

But the future will be electric

Mercedes now wants to achieve the electric target of 20% in the current year instead of 2023. “The xEV share is expected to remain at approximately 19% – 21% of new car sales,” the Mercedes press release states. So instead of 20% pure BEVs, the Stuttgart-based company now includes plug-in hybrids again. That should increase the percentage quite a lot.

The xEV share will be an essential forecasting indicator for the manufacturer. “This will replace the current CO₂ emissions KPI for the new car fleet in Europe and reflects the global activities of the Mercedes-Benz Group,” says Mercedes.

Even if the boardroom is now much more cautious, the course is set for the electric future: “The starting point will be next year with the all-new electric CLA. While the upcoming models will set standards in improving efficiency and charging time, the company believes that the battery costs per kilowatt hour can be reduced by more than 30% in the next few years thanks to optimized cell and module design, improved vehicle integration, further development of cell chemistries (e.g., NMC, next-generation LFP), cell updates during the lifecycle and continuous improvement agreements with suppliers.”

Mercedes has high expectations about its next-generation EVs, announced in September last year with this CLA Concept /Mercedes-Benz

CEO Källenius does not comment personally on the new EV and xEV targets in the press release. He is quoted as follows: “Mercedes-Benz continued its transformation in 2023, developing new cutting-edge electric and digital innovations while scaling electric vehicles and delivering solid financial results. In other words, the team again came through to execute our strategy in challenging times, delivering the eSprinter and the new E-Class.”

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