Daimler CEO: ‘Streamlining the Portfolio’ Necessary for Mercedes-Benz
Still in the midst of a $1.4-billion restructuring plan that aims to cut 10 percent of its workforce, Mercedes-Benz is reconsidering what its product lineup should look like moving ahead. While most of the doomed models will be chosen due to lackluster demand (e.g. X-Class pickup) plenty will be nixed as a result of tightening emission laws. Mercedes parent Daimler issued two profit warnings in 2019 after the luxury brand was fined $960 million in an emissions-cheating settlement. Like many automakers, it was also hemorrhaging cash through its investments in electrification.
An apt analogy for the automotive industry’s stampede toward EVs would be lemmings hurling themselves off a seaside cliff — but not because of the popular misconception that the critters are intentionally committing mass suicide. When lemmings collectively off themselves, it’s the result of migratory behavior gone awry. They simply bunch up and move in a singular direction, largely unaware of the consequences.
However, automakers have to contend with social pressures the little rodents are not subjected to. Environmental regulations in places like Europe and China have effectively forced the hand of many automakers hoping to sell their wares in any meaningful volumes without incurring massive fines. This leaves automakers like Daimler in a bit of predicament, as they lose money on costly development projects that they’ve effectively been forced into. It’ll definitely influence which models/trims Mercedes-Benz places beneath the axe.
Daimler board member Markus Schaefer addressed the issue on Tuesday, telling reporters that cost-cutting would likely encourage the company to reduce the number of variants in Mercedes’ lineup, while platforms and powertain options were further consolidated.
“We will review our current lineup and the idea is streamlining the portfolio,” he said.
According to Reuters, a number of the products slated for elimination would be the result of those tightening emission rules, making note of the Euro 7 exhaust standards. “The question is how many engines you take through the gauge, through Euro 7,” Schaefer explained. “Of course the four-cylinder has more chance to make it than the V-12 to pass the gate.”
Separately Daimler CEO [Ola Källenius] said the automaker has “no issues” securing electric vehicle battery cells, and is ramping up battery production to meet high demand for plug-in models.
“There is such a high demand for plug-ins, we are ramping up battery production as we speak,” [Källenius] said on the conference call.
Daimler plans to add electric vehicle capacity this year and next year.
[Källenius] said demand for plug-in hybrid models is driven in part by German companies guiding employees who get company cars as a benefit to choose electrified models.
Europe also has government incentives in place to encourage plug-in purchases, with Germany offering sizable tax breaks for buying electric — something Källenius said helped raise demand immensely. European passenger vehicle registrations rose 1.2 percent last year (moving roughly 180,000 more cars than in 2018). About 75,000 of the total sales were EVs, representing a 121-percent increase over the previous annum and providing a silver lining for the industry.
Still, it’s hardly a bed of roses. It’s long been rumored that German manufacturers are having serious problems with their battery suppliers, with Mercedes said to be butting heads with LG Chem. Daimler denies that the situation resulted in lowered production targets for the EQC electric crossover. However, LG Chem was also believed to at the center of Audi’s delay on the E-Tron and a production stall of Jaguar’s I-Pace. Regardless of what is causing the battery supply issue, the Germans are now seeking to lock down the raw materials necessary for battery production for themselves; meanwhile, no one is discussing scaling back EV development programs.
They’re in it to win it … or lose it, if the market dictates that outcome.