The recalibration of Mercedes-Benz’s production plans is as a result to the response to the investment in EV technologies outperforming actual market demand. As state by US News, this decision underscores the intricate challenges automakers face in transitioning to electric mobility. CEO Ola Kaellenius further underlines the brand’s dedication to evolving combustion engine technologies to meet future demands, with a significant product lineup refresh planned for 2027, boosting the brand’s relevance well into the 2030s.
This strategic move has been well-received by investors, as evidenced by a 5.9% increase in the company’s stock price, further supported by a significant 3 billion euro share buyback program. However, Mercedes-Benz continues to tread cautiously in its outlook for 2024, stating concerns about slower economic growth and persistent supply chain disruptions.
The challenges faced by Mercedes-Benz
The company has accepted that these supply chain challenges, especially component shortages, are most likely to affect first-quarter sales. However, Mercedes-Benz anticipates sales of electrified vehicles to maintain a steady proportion of 19-21% of total sales. Amidst these challenges, the company reported a robust adjusted return on sales of 12.6% in its car division for 2023 and expects a slightly lower range of 10-12% for cars and 12-14% for vans in 2024.
Mercedes-Benz’s strategic realignment isn’t focused on just maintaining the status quo, but on increasing its investment in sustainable technologies, with a focus on electrification and digitalization. By the end of the decade, new EV models are expected to hit the market, and the company is also investing in digital services and autonomous driving technologies, acknowledging these as key drivers for future growth.
The development and future of Mercedes Benz
The company’s approach to electrification has always been practical, as it acknowledges the slower-than-expected demand for EVs. Mercedes-Benz had initially promised to go fully electric by 2030, but the revised plan means that they will continue to produce internal combustion engine (ICE) cars well into the next decade. The company is keen on dividing its EV goals, with pure electric models and hybrids expected to account for up to 50% of sales by 2030.
Mercedes-Benz’s CEO also mentioned that the company will not move away from ICE cars ‘artificially,’ stating that these vehicles will continue being manufactured as long as there is still high demand of the product. The development of electrified powertrains, such as the M252 engine functioning as a range-extender, is one to be looked out for, especially as it could enhance EV driving range while still relying on fossil fuels.
More so, next-generation Mercedes EVs are expected to utilize the Modular Mercedes Architecture (MMA), designed to accommodate both EVs and ICE cars. This strategic approach will pave way for the company to adapt to market demands and technological advancements while still offering diverse range of vehicles to its customers.
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Mercedes-Benz delays electrification goal, beefs up combustion engine line-up (Reuters)
