Acknowledging the company has “not yet lived up to (its) full potential,” Daimler AG Chairman and Mercedes-Benz brand boss Ola Kallenius outlined a new strategy for the German automaker emphasizing six strategic pillars that include driving down costs 20% by 2025, pushing up profits, putting more of an emphasis on sub-brands and taking a lead in the development of both luxury electric vehicles and in-car software.
The new strategy means Mercedes will add even more battery-electric vehicles than previously announced – and that these will include products for both the ultra-luxurious AMG and Maybach brands. Among other things, the automaker revealed Tuesday, it has four new battery-electric vehicles, or BEVs, coming next year based on a “new large” architecture. It also is developing a new “electric first” architecture, dubbed MMA, for compact and medium-sized cars.
“In recent years we have done many things right: design, product engineering, brand rejuvenation, sales growth. As a result, we have put Mercedes back on top again. But we have not yet lived up to our full potential in terms of turning volume success into profit growth,” Kallenius said in a statement outlining the new Daimler and Mercedes strategy. It is, among other things, meant to “unlock the full potential of our unique sub-brands, AMG, Maybacj, G and EQ,” he added.
The Mercedes-EQ sub-brand is designed to be all-electric and is in the process of rolling out the brand’s first BEVs, including the EQB and EQC crossovers. But Thursday’s announcement shows that the automaker plans to seed all of its brands with electric-drive technology going forward.
While all-electric technology originally was used in small, green-focused products, the technology is proving to have significant potential in premium and performance segments. Electric-drive systems are inherently smooth and quiet, especially since most eliminate the need for multi-gear transmissions.
Electric motors, meanwhile, can deliver tremendous levels of power, while reaching maximum torque the moment they start spinning. New battery technology is beginning to minimize concerns about range, and luxury buyers are less impacted by the price premium for BEVs, according to industry analysts.
“With this new strategy we are announcing our clear commitment to the full electrification of our product portfolio and our determination to ensure the business is fully carbon-neutral, in line with our Ambition 2030 target,” Kallenius said.
Among the BEVs touched on during the investors’ meeting, four will be based on the large EVA platform, including the S-Class equivalent sedan, the EQS due into showrooms next year, followed by the E-Class-like EQE, the EQS SUV, and the EQE SUV.
The platform is likely to be used for some upcoming Maybach and AMG models, as well.
The dedicated modular MMA platform apparently will service smaller vehicles, such as a next-generation EQC. The automaker promises this “”no-compromise” platform will yield the “longest-range EV ever.”
Mercedes also announced the new Vision EQXX program aimed at building vehicles with “spectacular” range and performance.
During a presentation to investors, Kallenius described the need to reemphasize the sort of vehicles that Mercedes was initially known for, such as the vaunted S-Class sedan flagship. While the brand has significantly expanded sales volumes with entry-luxury models like the A- and B-Class, he said, “This is not where the main thrust should go, we should not become a competitor of the volume makers,” he said during a virtual meeting presentation.
If anything, Mercedes will downplay its emphasis on sales growth, the CEO said, while pressing to create more profits by driving down costs at least 20% by 2025 and pushing up margins.
That was echoed by Chief Financial Officer Harald Wilhem, who told investors, “We will pursue higher portfolio profitability, we will steer by contribution margin, we will move (the) existing portfolio margin up and move capital to luxury and high-end products.”
One way to get there is through an emphasis on design for manufacturing. The new S-Class, for one, will require 25% less time to assemble than the outgoing model.
On the electric vehicle side, Daimler is pushing to drive down costs, especially when it comes to the batteries that typically comprise the most expensive part of a BEV. The automaker wants to get battery costs down to around 100 euros, or $118, per kilowatt-hour by 2025. That would be at least a 20 to 30% reduction from current pricing – though some competitors hope to get down to as little as $70 per kWh by then.