Mercedes-Benz’s parent company, Daimler, today announced plans to slash 20 percent from its operating costs by 2025, while slashing its model lineup and tipping its range towards electric vehicles (EVs).
The move, which puts thousands more Daimler jobs in danger, is a key platform in board of management chairman Ola Källenius’s drive to guarantee at least high single-digit profitability even in difficult years, like 2020, and double-digit growth in good years.
Revealed in a turnaround strategy document (that isn’t being called a turnaround strategy document) the plan calls for Daimler to reposition Mercedes-Benz as a luxury brand, like Bentley or Rolls-Royce, instead of its traditional premium positioning alongside Audi, BMW, Jaguar and Lexus
Daimler had already indicated last November that it would cut 10,000 jobs by 2022 from a workforce of 300,000, then suggested another 10,000 in cuts in June this year.
“We have not yet lived up to our full potential in terms of turning volume success into profit growth,” Källenius admitted.
“That’s why we have refocused and are launching our new strategy. We intend to build the world’s most desirable cars.
“It’s about leveraging our strengths as a luxury brand to grow economic value and enhancing the mix and positioning of our product portfolio.
“We will unlock the full potential of our unique sub-brands – AMG, Maybach, G and EQ. Our strategy is designed to avoid non-core activities to focus on winning where it matters: dedicated electric vehicles and proprietary car software.
“We will take action on structural costs, target strong and sustained profitability,” Källenius reiterated.
He also insisted the brand was committed to becoming carbon neutral by 2039, which seems an odd figure, especially as the higher volume Volkswagen Group has a target almost a decade earlier than that.
While not announcing which models would be slashed from the Mercedes-Benz lineup, it is presumed the weaker-selling, lower-end models would be at risk in a move upmarket.
The new strategy promises four new EV models off Daimler’s large Electric Vehicle Architecture (EVA), starting from next year. The new EQS will be the first off the dedicated EV architecture, delivering a WLTP (European) range of more than 700km.
There will be a secondary, EV-first push for the compact- and medium-segment Mercedes-Benz Modular Architecture (MMA) platform, but not until 2025.
There will also be stand-alone EV models for the high-performance Mercedes-AMG brand, its ultra-luxury Mercedes-Maybach brand and its off-road Gelanderwagen (G-Wagen).
It is also developing a new generation of electric motors in-house, and claims to be making significant advances in battery technology with its partners CATL, Farasis and Sila Nano.
New materials and production processes will increase range, reduce charging time and cost, Mercedes-Benz claimed, all while driving down its capex, R&D and fixed costs as Källenius drives the break-even point of the company lower.
Its ambitions are high, at least in its announcements, with R&D board member Markus Schäfer insisting it was striving for “nothing less than taking the lead in electric drive and car software.
“We will do this with an intelligent electric platform strategy and a proprietary software development approach.
“And from 2025 on, we are targeting strong contribution margins for all new architectures thanks to high commonality and controlled investment, and ongoing falls in the cost of battery systems.
“While we will expand the electrified portfolio towards a share of more than 50% of global sales by 2030, our investments in combustion engine development will decline quickly and the number of combustion engine variants will fall by 70% by 2030.”
Källenius was forced to move quickly from the poisoned chalice handed to him by former Chairman Dr Dieter Zetsche, who left a raft of investigations in to diesel cheating, pricing collusion and buried costs behind him.
He stopped building sedans in the US this year, trading their capacity for high-selling, high-profit SUVS, and he merged Daimler’s fuel-cell development with Volvo’s. Volvo is owned by Geely, whose founder Li Shufu owns 9.7 percent of Daimler’s stock.
He also ended an autonomous driving development alliance with arch-rival BMW.