Mercedes-Benz to invest €60B to be Electric Only

Daimler says using standardized battery platforms and scalable vehicle architectures – with advances in battery technology – will contribute to a reduction in the variable costs of vehicles. This of course sounds like the plan of all major automakers.

Daimler AG’s Supervisory Board today approved the Mercedes-Benz Business Plan for 2022 to 2026. This means that Mercedes-Benz will transform to a fully electric connected car company. After the Daimler Truck spin-off, Mercedes-Benz will focus on growth opportunities in the passenger car and van businesses. By doing so it is hoped that the German luxury can work for leadership in the area of electric drives and car software at a time when the entire industry is pursuing the same aim. (Shareholders Vote to Spin-off of Daimler Truck, Rename Daimler AG to Mercedes-Benz Group; Daimler Truck Receives Investment Grade Ratings)

The Supervisory Board agreed to  an investment plan for the years 2022 to 2026 of more than €60 billion. Mercedes-Benz claims it will reduce capital expenditures, research and development expenses for the electrification of the product portfolio and digitalization processes, including steps towards automated driving, albeit at an admittedly high level. Needed to do this is an increase net revenues per vehicle. In addition, a gradual shift toward a direct sales model, which includes control over pricing, is being sought. Rising revenue from digital services will further support results.

“Our goal is technological leadership in the automotive luxury segment and in the area of premium vans while remaining committed to our ambitious margin targets,” said Ola Källenius, Chief Executive Officer of Daimler AG and Mercedes-Benz AG . “Mercedes-Benz has what it takes: a clear strategy, a highly qualified and motivated team, as well as strong support from the entire supervisory board. With the most desirable cars we want to grow profitably and create sustainable value for our customers, employees, shareholders and partners.”

Mercedes-Benz is preparing to go all electric by the end of the decade, wherever market conditions allow. Against this background, the Supervisory Board supports existing measures to consistently increase efficiency and to lower fixed costs, as was communicated during the Mercedes-Benz Strategy Update on October 6, 2020 and reiterated on July 22, 2021. At the same time, the investment plan for 2022 to 2026 remains in line with the goal of cutting capex and research and development spending by more than 20% between 2019 and 2025 and to reduce it more beyond then.

The key to achieving this is prioritization of future investments by focusing on electric mobility. The company expects that the use of standardized battery platforms and scalable vehicle architectures – together with advances in battery technology – will contribute to a reduction in the variable costs of vehicles. The proportion of battery costs in a vehicle is expected to decrease significantly this decade. This of course sounds like the business plan of all major automakers.