By on November 13, 2020

Daimler Chairman Ola Källenius went against the grain on Thursday by admitting the company he’s been tasked with overseeing will become significantly smaller in five years. That’s normally not the kind of thing you want to telegraph to shareholders via the media but he’s convinced this is the best course of action for the business.

“The next five years we will become a smaller company,” Källenius told Reuters. “We will have a fundamental change in the industrial footprint on the powertrain side.”

The future of Daimler apparently involves a half-decade metamorphosis into a services-focused software company that just so happens to build vehicles. But the vehicles won’t be those internal-combustion jobs that you grew up around. Instead, they’ll be hyper-efficient electrics from Mercedes-Benz as it re-imagines luxury within the strict confines of environmental sustainability. As a byproduct, Daimler will need fewer employees to help manufacture automobiles.

From Reuters:

Jobs will disappear because it takes less time to build an electric car than a conventional gasoline or diesel version.

That’s because an electric car’s battery and motor have only 200 components, compared with at least 1,400 parts found in a combustion engine and transmission, according to analysts at ING.

The shift away from fossil fuel requires the automaker to double down on efficiency so it can free up resources to build electric and self-driving cars, Kallenius [sic] said.

“We are hiring a lot of new software engineers, experts in battery chemistry, electrification,” he explained.

Making Daimler smaller also fits with a new era where luxury no longer defines itself through opulence and excess but also through sustainability and efficiency.

Traditional luxury is becoming passé now that Daimler knows splendor is incomparable with green movement. But its a concerning decision when we’ve yet to see any automaker other than Tesla showcase that EVs can reliably turn a profit. Even there, the American manufacturer gets a sizable financial boost from selling carbon credits to established firms with deep pockets and an inability to adhere with regulatory mandates.

Assuming governments around the world stay the course and continue doubling down on emissions fines and incentivizing EV purchases, Daimler might be on the right path. However it’s just one company of sea of manufacturers who are all attempting to do the same thing at a time when electric development programs are extremely costly and the vehicles themselves are failing to reach parity with their gas-driven ancestors at the necessary pace. What happens five years from now when there’s more direct competition in the electrified segment and the market is still dragging its feet with low adoption rates?

Källenius said this may not matter since Daimler will have an entirely different business model. Mercedes-Benz has been toying with the notion of selling fully equipped vehicles that have to have features unlocked via in-app subscription purchases (something we’re skeptical of benefiting consumers). But it thinks it can make money by implementing these changes and other digital services (customer data acquisition, new infotainment options, assisted driving packages, partnered advertising, etc.) offering recurring sources of revenue when it releases its new vehicle operating system in 2024.

“Think about it like an iPhone,” Källenius explained, noting that even more services could be added via over-the-air software updates and vehicle connectivity.

“You can add to it,” he said. “That’s the beauty of it.”

Mercedes-Benz sees China as the next growth market and will be directing most of its efforts to sell vehicles there. This may include allocating future production efforts inside the country and catering vehicles to the market’s taste.

“If we have individual models which reach a critical mass in China … that’s possible,” Källenius said, noting that production plans had not yet been finalized. “It depends on how the market develops.”

[Image: Franz12/Shutterstock]

 

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46 Comments on “Reinventing the Wheel: Daimler Intentionally Becoming a Smaller Company to Facilitate Tech...”


  • avatar
    ToolGuy

    “…Intentionally Becoming a Smaller Company”

    –>”I meant to do that.”

  • avatar
    Cicero

    I wonder how much the Krauts plan to charge for an air conditioning subscription.

  • avatar
    Boxerman

    Hello broker, sell all daimler stock.
    Seriously I’ve never read so much BS in my life.

  • avatar
    SCE to AUX

    They are scared to death.

    The mfrs who are adopting EV programs are finding themselves crushed by regulators, and way behind Tesla’s lead in this field. Tesla has the lead in EV efficiency, economies of scale, material sourcing, their own charging network, and customer appeal.

    Every EV is now compared to its Tesla counterpart. Even better-built EVs (which is probably most) fall down in terms of value or performance. More affordable EVs are probably money-losers, my Ioniq EV being one of them. It has superb build quality and is quite efficient, with great ergonomics, but it’s surely a turd on Hyundai’s balance sheet.

    With this announcement, Daimler must believe that the regulators will continue winning the day, despite sustained market interest in ICEs. The Biden Administration will try to parrot what Europe/CA is doing. Already, Tesla is close to surpassing M-B sales in the US market, and M-B’s portfolio is ill-prepared for new mandates that will force it to change.

    • 0 avatar
      Lorenzo

      Good take. The Euro-masters are hell-bent on eliminating cars and putting everyone on mass transit, possibly including electrics. They might keep a few electric car makers just for the elite to get around in. As usual, the elites don’t realize what a hit the Euro-economy will suffer, and haven’t thought out where the extra electricity will come from. Wherever there are elites in charge, predictable results will be “unexpected”.

      • 0 avatar
        ThomasSchiffer

        Lorenzo is correct.

        The EU is a socialist-communist [eco] dictatorship which is destroying not only the automotive industry, but countless other industries (and businesses) with their insane eco-terror and fantasy CO2-limits.

        • 0 avatar
          stuki

          Not “The EU.” The West.

          Read between the lines of the nonsense this clown is spouting, and it basically boils down to the same old drivel which has completely and utterly destroyed the Anglo (and most other Western) countries since the end of Bretton Woods: We’re not going to build anything to make money. But instead sit there like idle, incompetent dunces, while central banks and regulators hand the fruits of other people’s labor our way.

          Germany did avoid the worst of the nonsense for a bit longer than the rest, but ever since the ECB tripled down on theft-and-redistibution-and-that-only, even Germans are now “making money of their homes” as they sit there decaying in the rain, and from their “investments” which they know nothing out of the ordinary about. Like retarded children watching CNBC and believing any of it. It would be comical, if it wasn’t so sad, how many German nationals are now “Investors”, “VCs” and siilar shorthands for half literate know-nothing-do-nothing-perform-nothing-becasue-they-aren’t-competent-to-do-anything dunces parading around Silicon Valley (and Niki Beach on Ibiza out of all places…) Hardly different from their already stick-a-fork-in-them-dead-and-good-riddance Anglo cousins.

          Germany needs to get the heck out of the EU, as of a decade ago. At the latest. And stay there. Get their Mark back (if they absolutely insist on being too ignorant to simply use Gold) and stop the massive transfers from the competent to the utterly incompetent, which is all that central banking, bailouts, supports, financialization blah-blah is shorthand for. The longer they delay doing so, the more of this abject drivel, with the direct effect this has on their future livelihoods, they’ll have to endure. Daimler was/is one of the world’s great industrial organizations. A key pillar in one of the world’s greatest industrial ecosystem. And now it’s being reduced to a bunch of childbrains wanting to “make money off tax credits.” Like little know-nothing-manchild-Elon does. Pretty bloody sad.

      • 0 avatar
        Funky D

        Not sure how much mass transit is really going to work in a COVID world. They didn’t think this one trough (as usual!).

    • 0 avatar
      2manycars

      The only reason Tesla has been able to exist is through armed robbery – the “carbon credit” scam, where they can pull the bandito bit on other companies. If someone gave me a Tesla I would give it back.

      I have no interest in “going green” and refuse to do so. It was nonsense 50 years ago and is still nonsense today. The dirtbags pushing the green agenda will not be able to get rid of fossil fuels in my lifetime. They’ll probably make it more expensive to run an ICE car but I’ll stick with it even if it becomes more expensive than running an electric just out of spite for the greens and the power-mad regulators. (Heck, I’m still using incandescent lighting and will not even change that.) The “greens” can go pound sand as far as I’m concerned. Biden and his henchmen can go pound sand.

      As far as all the crazy technology being pushed, my idea of the ideal new car would be a Studebaker Scotsman.

      • 0 avatar
        SCE to AUX

        You make it sound as if Tesla invented the carbon credit scam; they didn’t, but of course they benefit from it. Mfrs like FCA seek out Tesla, not the other way around.

        Yes, Tesla would be slightly negative recently without that income, but they would have survived. Soon it won’t matter.

        You don’t have to be a tree-hugging D to ‘go green’. For me, it simply means using less energy and wasting less. In the EV – as you know – it also means smooth, quiet, instant torque and almost zero maintenance. In 24k miles on my EV, I did have to replace the windshield wipers once.

        It’s hard to maintain a lifestyle designed just to spite others – it’s expensive and emotionally draining. And frankly, the lesson is lost on them. Lighten up; a few LED bulbs won’t kill you, and they’ll last longer, too.

        • 0 avatar
          Luke42

          “For me, it simply means using less energy and wasting less.”

          I’m continually surprised that the rural old school wisdom of “waste not wont not” isn’t more widely embraced.

        • 0 avatar
          28-Cars-Later

          “Tesla would be slightly negative recently without that income, but they would have survived.”

          Elon has the Konami Code, this by now should be obvious to all.

  • avatar
    dwford

    I am not looking forward to this future

    • 0 avatar
      Luke42

      Having actually driven an EV, I’m pretty stoked. Between great NVH and great low-end torque, it’s hard not to be excited.

      I always wanted to live in the future!

      • 0 avatar
        ajla

        “Between great NVH and great low-end torque”

        That’ll be a great thing in many vehicles. Not so great in some other ones.

      • 0 avatar
        RHD

        But that makes you an “elite”, Luke. The below-50%ers will make fun of you online, while they fall for the Fox propaganda like pike on a Rapala.
        The future can be awesome, even if those who want to live in the past fight it kicking and screaming.

  • avatar

    So Daimler Benz invented automobile with ICE and now wants to become the Tesla and Apple wannabe? Inventors of BEV and smart phone. In this case Daimler Benz has to move HQ to Silicon Valley. Isn’t it too late? Old companies die, new companies replace them. Regarding no opulence statement- they go from one extreme to another. Tesla is the inventor of no opulent luxury. So they ape Tesla down to interior details? How about new ideas?

    No-opulent MB gives the rare opportunity for Cadillac and Lincoln to take luxury market back.

    • 0 avatar
      SCE to AUX

      I believe Tesla’s no-opulent luxury is merely a function of economics, not taste.

      The Model S and X are lean, but because of the volume anticipated for the Model 3, Tesla made it bare bones so they could sqeak out a little profit.

      I suspect any low volume EV with a nice interior is probably a money loser.

    • 0 avatar
      stuki

      German industry used to be able to make things. Just like industry once did even in America. Way back, a long, long time ago.

      That was before the ECB decided to transfer control of all economic resources earned by said industry, to illiterate halfwits in FIRE and “Legal” rackets, as well as to Brussels. With Germans, like Americans before them, who should have cared enough to nix it, instead being naive enough to go along for the robbing.

      So now the Germans are increasingly unable to make things as complimecated as ICEs competitively anymore. Since their still considerable capital, are now increasingly ran by rank idiots. Like this guy. Who is little differet from his colleagues at Cadillac. Who thinks Cadillac is a coffee shop combined with a handbag store. That’s what being ran by rank idiots, enriched, hence enabled, by massive wealth transfers from the more competent people who do still bother building and designing useful product, will do to a company. And then on to a country. Until you end up like some laughingstock cum Dystopia, little different from the current-day Anglo countries.

  • avatar
    watersketch

    If Mercedes was known for its software and interface issues then Yeah I would be all in on this. But all the Mercedes I have been in are good at 3 things: the engines are awesome, the seats are comfortable and the safety features are top-notch.

    Enertainment/Navi/Interface – not so hot.

  • avatar
    raynla

    There is a term for this!
    Its called…The Tesla Effect

    • 0 avatar
      28-Cars-Later

      I disagree, Tesla has been successful despite all of the financial failures it consistently encountered. The real auto mfgs do not have access to the black magic behind the Tesla marque, they will fail trying to emulate it.

  • avatar
    raynla

    There is a term for this!
    Its called…The Tesla Effect

  • avatar
    raynla

    Its called…The Tesla Effect

  • avatar
    el scotto

    I’m an American, my laptop doesn’t do double dots over vowels or accent agouts. In Europe gas is 8-10 $ a gallon, big engines are taxed and a Ford Fiesta, or VW Golf is considered a fine family car. Here in the Land of the Free and including our polite neighbors to the north, the preferred vehicle is a four door family sedan. Well, OK a four door pick up or SUV/CUV. Priced for what the buyer considers a sensible price. This is where the Mercedes CEO has lost his d*mn mind. Electrics, for now, are the equivalent of Stan Smiths or Air Jordans all the cool kids are wearing them. Electrics have not reached outlet mall shoe prices. Four door ICE vehicles are the bread and butter of the automotive world. That’s what drives the automotive market, not some hand wringing CEO.

  • avatar
    Steve Biro

    I haven’t been interested in any Mercedes in perhaps 40 years. So let the cool, rich kids have their overpriced EVs – which, by the way, remain not ready for prime time despite recent advances. And, until they are, I and many others won’t be buying them from any brand. I think the automakers are in for a nasty surprise.

    Meanwhile, on a separate matter: “Traditional luxury is becoming passé now that Daimler knows splendor is incomparable with green movement.”

    Shouldn’t that be “splendor is incompatible with the green movement”? Two mistakes within three words. Guys, you have to edit your pieces. It’s one of a number of issues that keeps this site from being taken as seriously as the automotive heavyweights.

  • avatar
    SCE to AUX

    “not ready for prime time” = The most common criticism of EVs.

    It depends on the need. A pickup is “not ready for prime time” in my household because a FWD minivan better suits my needs – namely, a perfect combination of hauling people, goods, towing, and roof rack capability, with better gas mileage than a truck. Until a truck can do those things, I won’t be buying one from any brand.

    Somehow, Tesla (as representative of EVs) actually is ‘ready for prime time’ with more buyers than Volvo and Porsche combined, for example.

    • 0 avatar
      mcs

      “not ready for prime time”

      That can have a lot of meanings. I live in an upscale suburban area and it’s surprising how many you see. When I’m out and about, I’ll see one every few minutes. In my part of the world, they are definitely prime time. I’m sure if I went to other areas, EV ownership would be more difficult.

      It’s tough to say if a vehicle is primetime ready or not. There are a lot of different living situations and a spectrum of vehicles to match. EV ownership is great for some situations, bad for others. Chevy suburbans are great for some, but not practical for others. Miatas are great for some, but not practical for others – and on and on.

  • avatar
    SaulTigh

    I wonder if big business is going to find that, just like the pollsters, that the tastes of coastal elites and the twitterati are not going to sell in the numbers that they think?

  • avatar
    Funky D

    When I was 25, I aspired to a BMW or Mercedes and wouldn’t even think about a Lexus.
    If I were 25 now, I would pretty much be the opposite.

    THAT is what you should be worrying about, Herr Källenius.

  • avatar
    Snooder

    The title is a bit clickbaity, I think.

    From what I read of the press release, it looks like they aren’t planning to sell less vehicles or make less money.

    They just mean “hey, you know those angry union assholes? Yeah we probably gonna need to pay less of them going forward.”

  • avatar
    amca

    Hey, have full with the “put all the eggs in the China basket” strategy there, guys. This will lead to tears, guaranteed.

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