By on September 13, 2017

Concept EQ, Exterieur Concept EQ, exterior

Everyone’s doing it. It’s as popular as the fidget spinner and Pokémon Go crazes all those years months ago. In a rush to signal their environmental bonafides and display their dedication to the Next Big Thing, luxury automakers are tripping over themselves in an effort to promise an all-electrified model lineup as soon as technology and finances allow.

This time, it’s Mercedes-Benz. The world’s oldest car brand doesn’t want its rivals cashing in once governments around the globe start turning off the fossil fuel taps. So, earlier this week, Daimler CEO Dieter Zetsche stepped up and made a promise we’ve heard ad nauseum as of late: every model in the brand’s lineup will soon sport some form of electric propulsion, be it a hybrid setup or full-on battery electric powertrain.

For Mercedes-Benz, this means 50 hybrid or EV models, including at its irrelevant-to-Americans Smart brand. The move isn’t without a steep cost, however — Daimler is bracing for a slashing of vehicle profit margins. In some cases, the green collected from green cars could be half that of a gasoline Benz. What to do?

“In the beginning of the cycle we believe that we will have to face a significantly lower margin,” said Frank Lindenberg, vice president of finance and controlling at Mercedes-Benz Cars, in an investor meeting this week. He added, “We are still aiming for a 10 percent return on sales, but have to be prepared for a kind of transition, with a corridor of 8 to 10 percent.”

First off, the company must find savings to offset the hit. The automaker’s Fit for Leadership 4.0 streamlining plan targets $4.8 billion in savings by 2025, which Mercedes-Benz’s parent feels should compensate for the lost profitability. It should also make up for increased investment in production and R& D.

Expenditures on plant investment and R&D at Daimler’s car division (which earns the bulk of the company’s revenue) rose from $4.28 billion and $5.59 billion, respectively, in 2015 to $4.97 billion and $6.78 billion last year. The forecast for 2017? $6.18 billion and $7.25 billion. Expenses at Daimler’s other commercial divisions are predicted to stay flat, or just barely budge. Moving past this year, the company plans to find nearly $1.2 billion in savings in R&D, a similar amount in fixed costs, and the rest in product costs.

Part of the automaker’s plan, Reuters reports, has to do with production. With the brand’s first fully electric vehicle, the EQC utility vehicle (based on last year’s Concept EQ and scheduled to start production in 2019), Mercedes-Benz can’t simply dive into EVs on a hope and a prayer. In an investor call this week, the company used the electric SUV as an example.

Sharing a platform with the dino juice-powered GLC, the EQC will also share its assembly plant. Daimler implies production will start out slow, ramping up if and when consumers demand more. If the electric SUV turns out to be an instant hit, well, the company’s profit hit arrives sooner than planned.

By 2025, EV profitability should be on par with conventional cars, Daimler claims.

Going by last year’s sales figures, Mercedes-Benz’s largest growth markets are Europe and China, both of which are keen on legislating away gasoline and diesel. It makes sense for Daimler to pursue a cautious electrification plan. Still, European suppliers who have long depended on Daimler for their livelihoods aren’t too happy about any of this.

Surely there’s other ways of being nice to the planet (while keeping jobs away from China), they’ve implored.

“We need to provide a sensible transition period that doesn’t give unwanted gifts to our Chinese friends,” said Roberto Vavassori, president of the European Association of Automotive Suppliers, after Daimler’s announcement. The organization doesn’t want to see massive quantities of batteries sourced predominantly from Asian nations. Vavassori estimates automakers would send $5,000 to $8,000 to China for every electric car produced in Europe — revenue diverted from European businesses.

Suppliers make up 5 million of the roughly 12.6 million auto industry-related jobs in the European Union.

[Image: Daimler AG]

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28 Comments on “With Mercedes-Benz Going Electrified, How Does the Company Avoid Tanking?...”


  • avatar
    brandloyalty

    Given the contribution to climate degradation caused by fossil fueled cars, the manufacturers have a simple choice: make their cars cleaner or see the use of the cars restricted. The better choice is obvious. Lower profits are not inevitable if all the manufacturers are required to make the transition to cleaner cars in unison. Higher profits will go to those who do it better.

    • 0 avatar
      Higheriq

      “Higher profits will go to those who do it better.”

      And they will be made possible by the saps who buy into fallacies like climate degradation caused by fossil fueled cars.

      • 0 avatar
        brandloyalty

        “And they will be made possible by the saps who buy into fallacies like climate degradation caused by fossil fueled cars.”

        How I wish the climate change deniers would volunteer to pay the cost of the additional damage resulting from the overall delay in heading off climate degradation, caused by their ignorance and stubbornness. Now go sit over there with the flat earthers.

    • 0 avatar
      28-Cars-Later

      Whats telling is a many multi-billion dollar worldwide industry is evidently powerless to buy influence within the very narrow politicriminal class to prevent it’s own demise. Oh and this nonsense will be the death of quite a few of them, maybe five major world players will still stand by the end. Ghosn and Sergio predicted a major industry consolidation to leverage economies of scale, perhaps this was why.

      “Lower profits are not inevitable if all the manufacturers are required to make the transition to cleaner cars in unison.”

      In inflation-adjusted figures? Profits will be lower. In non-inflation adjusted figures? Perhaps. Will likely depend on the cost of materials used and if they decrease. Labor costs should in theory decrease as workers age out and robots replace them, but the existing Tier II equivalents may demand Tier I treatment too making those savings moot. In either case, don’t look for retail prices to fall in inflation adjusted figures. Just like real estate, stagflation is here to stay until the bombs fall.

      Be sure to tip your local basement dwelling snake person.

      • 0 avatar
        brandloyalty

        “Whats telling is a many multi-billion dollar worldwide industry is evidently powerless to buy influence within the very narrow politicriminal class to prevent it’s own demise.”

        Your suggestion the car industry has never bought influence in government is laughable. The car industry is not going to disappear. Transform, yes. Disappear, ridiculous. In fact changes are happening because competent companies and competent governments agree on what must happen.

        “Labor costs should in theory decrease as workers age out and robots replace them,”

        Do you have any idea of the labor costs of an F350 compared to a Tesla? Maybe the Tesla has a lot more work in engineering design work compared to snapping plastic parts onto steel. Which labor scenario bodes better for the economy of the future?

        • 0 avatar
          28-Cars-Later

          “Your suggestion the car industry has never bought influence in government is laughable”

          The industry’s influence is apparently laughable if they cannot inject sense into this. There are a whole host of marques which will not survive this “transition”.

          “In fact changes are happening because competent companies and competent governments agree on what must happen.”

          There is at least one oxymoron in there, but I disagree in saying the industry as a whole wants this. They only “want” something to increase their profits, and an even more expensive to produce car is not going to help in this regard.

          Big ticket items have already significantly outpaced wages, now add in a *minimum* $35,000+ USD golf cart? Banksters are offering eight year car loans now. I read the other day about a 100 year bond in Austria. What this madness shows is customers on the whole do not have liquid capital to spend. But sure let’s put transportation out of their hands to create our Elysium and damn the automotive industry which will contract as a result.

          “Which labor scenario bodes better for the economy of the future?”

          Whats funny to me is you think there’s a future.

  • avatar
    Hummer

    Was there anything interesting at the Frankfurt auto show? Frankly this has been the most disappointing selection of cars I’ve ever seen. Lots of jelly bean EVs aren’t what dominates the market and likely never will. These manufacturers are digging a nice hole for themselves. I bet in 20 years we’ll have half the automakers we do today as half of these companies are putting so much money into financial deadends they’ll be bankrupt in no time.

    Sure one or two Hybrid/EVs for people who like that are great, but what about cars for the mass population?

  • avatar
    stingray65

    First the politicians ban coal to save the planet, but tell us solar and wind are clean replacements. End result: unreliable power supply and double the price of electricity. Then the politicians ban gasoline and diesel cars to save the planet, but tell us electric cars are clean replacements. End result: unprofitable automakers and 50% more expensive cars. What will come next to save the planet: banning meat, pets, jets, sex? End result: nobody makes any money, nobody has a job, nobody has a pension, and nobody has any fun – perhaps a new slogan will arise: better dead than green.

    • 0 avatar
      thelaine

      A lot of Euros have stopped reproducing, so maybe a sex ban is unnecessary.

      Electric cars are better than ICE cars in very limited circumstances, kind of like solar power’s limitation. Hydrocarbons will continued to dominate, regardless of what delusional Euros decide to ban next. People in other places do not want to be poor and are burning hydrocarbons as fast as they can be pulled out of the ground. Catastrophic Global Warming is a first-world religion. Poor people will pretend it is real if you give them money. Otherwise, they will burn coal, as they are doing amounts that increase every year. China, India, and other nations are building coal plants as fast as they can. Coal is not dying. Quite the contrary.

      If the Euros have an air quality problem, they need to limit diesel, rather than encouraging it. As it stands, nations like Germany are making their air quality marginally worse by banning nuclear and switching to coal. Better for the US though, since we can sell it to them.

      Magical thinking by utopians eventually results in disaster. For the Romantic Germans it is irrelevant, since their immigration policy will kill them long before their energy policy makes them poor.

      • 0 avatar
        brandloyalty

        Are you the product of a Russian troll farm or is there Koch money in your pocket?

        Electric cars are already better for most things cars are used for, and gettung better.

        People in other places have realized burning coal is the fast track to ruin, not wealthy.

        I see you have given up your claim that coal is the fastest growing energy source.

        Coal plants are not being built as fast as possible. Hundreds are being decommisioned. Renewables are the fastest growing energy source. Do an internet search for fastest growing energy source.

        Euros are not encouraging diesel, they are banning it.

        Germany is switching to renewables, not coal.

        Immigration in Germany is not the problem US media claims it to be. Go and see for yourself.

        • 0 avatar
          thelaine

          Oh my God BR, do you work for George Soros, or are you the product of a Maoist reeducation camp?

          Do you see how absurd that sounds? What is the point?

          I never said coal was the fastest growing energy source, so you must be thinking of someone else. I did summarize, quote, and cite an article in the infamous, Koch-funded, Breitbart-owned alt-right New York Times. Not one person claimed the information in the article was false.

          Poor people need hydrocarbons so they can stop being poor. The economic miracle of the industrial revolution was built on hydrocarbons. Poor people around the world want some of that sweet, sweet obesity epidemic. Hydrocarbons plus capitalism is the best anti-poverty remedy ever discovered in human history. Money talks and bulsht walks. Hydrocarbons are king.

          https://www.nytimes.com/2017/07/01/climate/china-energy-companies-coal-plants-climate-change.html?mcubz=0

          “The frenzied addition of coal plants underscores how the world is set to remain dependent on coal for decades, despite fast growth in renewable energy sources, like wind and solar power.”

          “When China halted plans for more than 100 new coal-fired power plants this year, even as President Trump vowed to “bring back coal” in America, the contrast seemed to confirm Beijing’s new role as a leader in the fight against climate change.

          But new data on the world’s biggest developers of coal-fired power plants paints a very different picture: China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

          These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald, an environmental group based in Berlin. Many of the plants are in China, but by capacity, roughly a fifth of these new coal power stations are in other countries.

          Over all, 1,600 coal plants are planned or under construction in 62 countries, according to Urgewald’s tally, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 percent.

          The fleet of new coal plants would make it virtually impossible to meet the goals set in the Paris climate accord, which aims to keep the increase in global temperatures from preindustrial levels below 3.6 degrees Fahrenheit.
          Continue reading the main story
          Related Coverage

          Electricity generated from fossil fuels like coal is the biggest single contributor globally to the rise in carbon emissions, which scientists agree is causing the Earth’s temperatures to rise.

          “Even today, new countries are being brought into the cycle of coal dependency,” said Heffa Schücking, the director of Urgewald.

          The United States may also be back in the game. On Thursday, Mr. Trump said he wanted to lift Obama-era restrictions on American financing for overseas coal projects as part of an energy policy focused on exports.

          “We have nearly 100 years’ worth of natural gas and more than 250 years’ worth of clean, beautiful coal,” he said. “We will be dominant. We will export American energy all over the world, all around the globe.”

          The frenzied addition of coal plants underscores how the world is set to remain dependent on coal for decades, despite fast growth in renewable energy sources, like wind and solar power.”

          • 0 avatar
            brandloyalty

            Equating whatever Soros does to the Koch brothers’ funding of scores of organizations spewing false information about climate change etc. is a false equilvalency.

            Your posted information omits even a reference to what anyone can find by doing an internet search for fastest growing energy source. The reality for coal vs renewables is very different from your claims.

            Part of the reason that is so, is that you have made a serious and fundamental error transposing information from Urgewald. Urgewald has the numbers you quote, but each one refers to a “unit” of new coal generation. This means a boiler. A coal power plant can, and usually does, comprise more than one “unit”. So you have vastly exaggerated the numbers by substituting the word “plant” for “unit”.

            Did you do this on purpose? I don’t know. But I do know that every time I check information posted by people like you, I find errors, trickery and lies.

            Meanwhile, something for you to read:
            thinkprogress.org/holcomb-coal-plant-is-a-long-shot-9a71b500b37e/amp/

          • 0 avatar
            thelaine

            This is a DIRECT QUOTE from the article, which you obviously refuse to read. If you had, you would see that it was not my words, but facts stated in the article. Even your pedantic retort regarding “boilers” has nothing to do with me. It is a DIRECT QUOTE from the article which you are trying to dispute even though you have not read the article.

            Here is a suggestion Brand: Read The Article. It will make it easier for you to construct a counter-argument. In the meantime, people will keep burning hydrocarbons as fast as they can get them out of the ground and there is not a dmnd thing you or thinkprogress, or your paymaster Soros can do about it.

            “But new data on the world’s biggest developers of coal-fired power plants paints a very different picture: China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

            These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald, an environmental group based in Berlin. Many of the plants are in China, but by capacity, roughly a fifth of these new coal power stations are in other countries.

            Over all, 1,600 coal plants are planned or under construction in 62 countries, according to Urgewald’s tally, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 percent.”

          • 0 avatar
            brandloyalty

            It would help identify what you make up and what you quote if you used both opening and closing quotes. You omitted the closing quotes on the claim I cited, making it appear to be your creation. It remains that you posted misleading information here. 1600 coal plants are not proposed or under construction. 1600 “units”, which basically means boilers, are proposed or under construction. Coal “plants” usually comprise multiple “units.

            The claims you repeat have other problems.

            One is that the number includes both proposed units and those under construction. “Proposed” might mean as little as a single piece of paper filed. How many of these plants will actually be built? Maybe your depiction of the situation is worthless without that bit of information. In the face of rapidly declining costs for sustainables and the rapidly rising sentiment against dirty power sources, the tide is turning against energy from coal. To suggest all of these plants will be built is simply hysteria. As for many of the ones that will be built, can you say: “stranded assets”?

            Raw numbers fail to factor in the degree to which cleaner and more efficient new coal plants are replacing older dirtier ones. Which, though replacement with sustainabiles is far better, is still a net gain.

            Your accusation that Soros pays me is a childish lie. I have no vested interest in these matters other than having to share the planet. Now, you seem to have unusual expertise in this area. What is your vested interest?

            I repeat that anyone impressed by your comments or quotes about the growth of coal, do an Internet search for: “fastest growing energy source”.

          • 0 avatar
            thelaine

            It would have really helped if you had read the article and did not expect to be spoon fed information like a diaper-clad toddler. (What is with you spoiled, lazy millenials?} Then you wouldn’t worry about quotation mark placement. Did I mention that your arguments are invariably pedantic and miss the main point? You just nibble at the broccoli and never take a bite of the steak.

            My Soros accusation was sarcastic, numbnuts. I was making fun of you for having accused me of being on the payroll of the Koch brothers. Do you remember doing that? How could you possibly have missed that? Has anyone ever told you that you lack self-awareness?

            If you like clean coal, you are in good company. Everyone likes clean coal! You still have not rebutted the point of the article. Where did it say they were shutting down hundreds of old coal plants (units? burners? oy..} and replacing them with new, clean coal plants? If you have now actually read the article, we need to move on to your comprehension problem.

            You realize that when you start from a tiny, tiny base, “fastest growing” means little. Do you understand this? It would be more instructive if you understood the percentage of energy India and China get from solar, wind, hydro, tidal, geothermal, wood, cow dung {and whatever else you consider to be an energy source that will not cause the melting of the ice caps and the murder of sweet, harmless polar bears} all put together, compared to hydrocarbons. Your brain will explode.

            Here is something else to ponder: why do the Germans pay some of the highest electric rates in in the West? Hint: think “renewables.” I know, I know, cost is no object when you are fighting for gaia’s life. Also, costs are coming down! Why, at Mahrishi University, they have developed a way to make fuel out of compressed wheatgrass!

            The truth is the truth, Brand. Hydrocarbons created the world you live in and they are by far the most important reason you were not born on a dirt floor with a single-digit life expectancy. Do not curse them. Thank God for them.

            Your beliefs are a delusion. If and when you finally grow to adulthood, you will come to understand this. There is a place for alternate energy sources, especially nuclear, but if you live to a ripe old age, hydrocarbons will still overwhelmingly rule. This is also true for your children, and also for their children. The world is awash in oil, coal, and natural gas. Be grateful.

    • 0 avatar
      brandloyalty

      More likely: “green or dead”.

    • 0 avatar
      healthy skeptic

      >> First the politicians ban coal to save the planet, but tell us solar and wind are clean replacements. End result: unreliable power supply and double the price of electricity.

      Maybe you’re joking? Coal is getting phased out mostly because of market forces. And solar and wind might be somewhat unreliable in supply, but they are dead reliable when it comes to fuel costs–zero! Tomorrow or 20 years from now…still zero. If you’re a utility, that matters.

      • 0 avatar
        brandloyalty

        Irregular sources such as wind and solar are smoothed out by hydro and storage batteries. This is a complete non-issue with as much credibility as the claim buyers of used hybrids would soon face a $8000 battery replacement.

        And even without output smoothing, windmills proved useful in Holland some time ago.

    • 0 avatar
      ect

      stingray, the cost to generate electricity from land-based wind installations is now lower than for coal-fired thermal plants. Solar is still more expensive, but not by as lot, and the price of solar panels continues to decline, even as efficiency rises. Quite apart from environmental issues, coal is simply not cost-competitive any more, and that trend is continuing.

      • 0 avatar
        28-Cars-Later

        Figures on volume of electricity produced by a wind farm by X units?

        Solar doesn’t produce much given the size of farms. Wind I’m not sure about, but I do know it is only feasible in areas with certain environmental conditions. I doubt either will ever generate sufficient amounts to replace fossil fuels, especially in the current deployment paradigm (dedicated farms). A decentralized model placing solar/wind on individual properties may present a more attractive proposition. Maybe.

        “Quite apart from environmental issues, coal is simply not cost-competitive any more, and that trend is continuing.”

        Nat gas blew it and nuclear out of the water in terms of cost.

  • avatar
    healthy skeptic

    >> With Mercedes-Benz Going Electrified, How Does the Company Avoid Tanking?

    This headline answers its own question. EV == no need for tanks.

  • avatar
    brandloyalty

    News that offshore wind is now cheaper than nuclear. But I’ll bet they didn’t include the astronomical but unknown cost of nuclear fuel disposal and accidents.

    • 0 avatar
      sportyaccordy

      It’s nowhere near as reliable or consistent though. Until we get a way to store GWhs of electricity with ease uncontrollable electric sources like wind and solar will have to remain secondary. We are nowhere near the point where we can flip the switch and transition off of fossil fuel.

    • 0 avatar
      brandloyalty

      Since you don’t seem to read all the pists before commenting:
      “Irregular sources such as wind and solar are smoothed out by hydro and storage batteries. This is a complete non-issue with as much credibility as the claim buyers of used hybrids would soon face a $8000 battery replacement.

      And even without output smoothing, windmills proved useful in Holland some time ago.”

  • avatar
    brandloyalty

    http://www.thinkprogress.org/holcomb-coal-plant-is-a-long-shot-9a71b500b37e

    “the economic case for building a new coal-fired power plant in the U.S. has essentially evaporated — even without accounting for the costs of carbon pollution and the health impacts that stem from burning coal.”

    “utilities are increasingly choosing to invest in renewable energy instead of coal simply because it is cheaper.”

    “A March report from Moody’s Investors Service found that in the 15 states with the best wind resources, new wind generation now costs significantly less than existing coal-fired power plants.”


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