Here’s Why Daimler Is Looking To Offer Electric Versions Of All Mercedes-Benz Models

by Trefis Team
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Recently, at the company’s investor day in Germany, Daimler AG‘s Chief Executive Dieter Zetsche announced that  its luxury brand, Mercedes-Benz, will offer electric versions of all its models by 2022. The company will offer 50 electrified versions of passenger cars under this brand which will be a mix of both hybrid and fully electric variants. With a focus on clean energy and Chinese regulators looking to make it mandatory for automakers to have electric cars in their portfolio, demand for these versions is likely to increase in the coming years. China is the single largest market for Mercedes-Benz and with a huge growth potential in the region, it appears that the company is gearing up to meet the proposed regulatory requirements in the country. China has been examining ways to reduce pollution in its cities and clean energy vehicles is one of the key ways in which this goal can be achieved. The country is looking to make it mandatory for automakers to ensure that at least 8% of their sales in the country are via electric cars and  recent reports suggest that the country might eventually ban the sale of new petrol and diesel engine cars.  Other governments are considering similar regulations and the UK and France are likely to make electric cars mandatory by 2040. As automakers look to navigate this changing landscape, we believe Daimler’s efforts to ensure that all Mercedes Benz models have electric versions will be critical for its growth in China and other important markets.

Competing Effectively With Tesla

As battery prices decline rapidly, electric cars are likely to become more affordable akin to cars run on diesel and petrol. Currently, Tesla is the most prominent player in the luxury electric cars segment.  However Daimler is confident of competing effectively with Tesla by “beating its manufacturing and procurement costs, ramping up production faster and having better quality,” according to Max Warburton, analyst at Sanford Bernstein.  However, the margins of electric cars will be lower than cars which run on gas and Daimler is looking to meet this challenge by increasing its savings target. The company’s “Fit for Leadership 4.0” plan targets a savings of $4.8 billion. These savings can offset that higher research and development (R&D) spend and lower margins of electric cars.

As most countries look to tackle the growing pollution in cities, electric cars are likely to dominate urban markets in the next few decades. China is the fastest growing market in the world for new energy vehicles (NEV) and by 2025 the market for NEVs in China will grow to 6 million units per year of which 4 million vehicles will be all electric. This trend is pushing automakers to focus more on electric vehicles and might change the market share breakdowns going forward. Companies with a better and cheaper technology who are able to produce these cars faster are likely to emerge as winners.

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