At its annual shareholder conference in October 2020, Mercedes announced that, in 2030, more than 50% of sales would be electric cars only. They then stated that in 2030, they will only sell electric vehicles where market conditions allow. And a few days ago they backtracked, announcing that the target of only selling electric cars from 2030 is unrealistic.
At the general meeting of shareholders on 6 October 2020, Mercedes announced that in 2030 more than 50% of sales would be electric, in 2039 Mercedes would become carbon neutral, and it would electrify the Maybach and G-Class sub-brands.
Then came the EU decision to ban the sale of new models with combustion engines from 1 January 2035, and Mercedes revised its strategy, announcing that from 2030 it would only sell electric cars where market conditions allow. Mercedes seems to have been caught up in the wave of optimism adopted by several manufacturers.
Only a few days ago, Ola Kallenius, Mercedes CEO, came back and opined that perhaps there was too much optimism in the industry. Taking into account the latest developments in the market, Kallenius said Mercedes will continue to develop high-tech thermal engines.
The change in strategy is likely the result of several factors, such as the high production price of electric models, the challenges regarding the real range of electric cars, the reduction or cancellation of subsidies for electric vehicles, and the slowdown in the development of charging station infrastructure.
After years of competing with BMW for the position of the largest premium manufacturer in terms of sales, with the advent of the Covid pandemic and chip crisis issues, Mercedes has focused more on profit margins than on ever-increasing production figures.
They decided to narrow the compact model range, dropping a successor to the A-Class and B-Class, and expanded the development of the luxury sub-brands Maybach and G-Class.
But sales of electric models, especially the expensive ones, are not going great, especially in China, but also in other regions of the world, and besides, there are no more problems with the funneling of CIPs and components at the moment.
That’s why Mercedes announced to the dealers in January 2024 that it will focus more on affordable models and less on electric models to maintain the sales level. That’s why Mercedes will prioritize the more affordable models in the compact and mid-range (C-Class, GLC).
Also, to meet demand, Mercedes has informed US dealers that it will increase the availability of S-Class, GLC, and GLE models with Plug-In Hybrid powertrains.
Mercedes will not give up on electric models as they still represent a good opportunity. In other words, Mercedes believes that electric cars have good long-term potential but will now focus on a more flexible approach that puts profitability first and will adjust production to today’s market realities.
This decision could affect the long-term Mercedes electrification plan, but on the other hand, you can’t sell what the market doesn’t want. It is very difficult to strike a balance between environmental protection and profitability.
The luxury electric models in the EQ, EQE, and EQS range as well as their SUV derivatives, EQE SUV and EQS SUV, are much more expensive than the equivalent E-Class/S-Class and GLE/GLS versions respectively, with the lower quality materials and poor access to the interior in case of EQE/EQS compared with E-Class/S-Class.
Seems to me Mercedes is more interested in keeping one sided government policies and politicians happy more then its share holders and costumers. You definitely listen more to them and the reason money is being lost is because of this.
So why would I invest anything in a company that obviously doesn’t care of my opinion?
Dear David,
I agree with you. They overestimated the potential of electric cars and they push hard electric car production, neglecting the ICE models. In the coronavirus period when CIP crisis hit hard car industry, Mercedes decided to prioritize very expensive cars with high margins. Now, when there is not anymore a CIP crisis and after the incentives for electric cars were reduced or eliminated they realize that people still want ICE cars and changed their strategy because otherwise they will not meet the sales targets. So, I think they realize that between the electric dream and customer demand is a big difference and decide to push ICE cars to not affect sales and, in the end, dividends to the shareholders.