Daimler Says EVs Less Profitable Than Conventional Vehicles…Also World Is Round
Daimler is not only preparing its manufacturing sites for new EQ electric cars, but it also looks on how to finance the transition to EVs, a reality that brings lower margins.
Mercedes-Benz Generation EQ
The German manufacturer expects that at least at the beginning, electric cars will only be about half as profitable.
One of the ways to offset lower revenues/profits will be to find savings on the cost side – some €4 billion ($4.8 billion) by 2025 according to the company is possible (€1 billion from fixed costs and €1 billion from R&D and €2 billion mainly from product costs).
Frank Lindenberg, Vice President of Finance and Controlling at Mercedes-Benz Cars (and least favorite man to all the engineers no doubt), said at an investor event in Sindelfingen, Germany:
“In the beginning of the cycle we believe that we will have to face a significantly lower margin. For some vehicles half of the margin of the vehicles they replace.”
“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,”
From 2025, prices of electric vehicles should reach parity with internal combustion equivalents, the question is whether or not profit margins will then increase (or continue to fall).
smart electric drive cabrio
Interestingly, Daimler – unlike Tesla – is departing from vertical integration, and will make fewer parts in-house (which also will help to lower investment costs). Reuters reports:
“One way for Daimler to lower costs would be to purchase a larger proportion of electric components from suppliers rather than making substantial parts of the car in-house, Chief Executive Dieter Zetsche said.
“Our vertical integration could be reduced significantly,” he said. “In-house production is almost irrelevant to the customer,” he added, noting many compact Mercedes models were sold with Renault engines, without prompting complaints.”
By 2022, every Mercedes-Benz model will have an electrified version (at least 50 hybrids or all-electric cars in total).
Recently, the smart brand went all-electric in U.S., and will eventually offer only electric cars globally by 2020, so it seems the current generation of combustion smarts, will be the last.
source: Reuters
Categories: Daimler, Mercedes, Smart
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47 Comments on "Daimler Says EVs Less Profitable Than Conventional Vehicles…Also World Is Round"
Dieter’s comments can be easily taken as, “more Chinese content”.
I can see all ICE OEMs going to China production to increase EV margins.
This would be a given if China proceeds on its course to mandate 100% EVs.
GM is already with you, CT6 PHEV is produced there along with some Buicks…Those who regulate get the worm…
According to Reuters article, batteries cost between $5k-$8k from China currently !
https://uk.reuters.com/article/autoshow-frankfurt-suppliers/update-1-build-batteries-or-lose-jobs-auto-bosses-tell-europe-idUKL5N1LU3LK
Say what you want – he’s not lying. Vertical integration doesn’t save you money and could have huge risk. Also EV’s are based on a lot of commodity components. The only real innovation at this point is driving the cost of cells down and inverter efficiency. Autonomous vehicle development is big but it’s not EV only technology and can be applied to any vehicle type.
This is the delemma legacy makers face in this transition.
The real dilemma they face is that a tech company with the brightest CEO in the world that is attracting the best talent in the world is coming after them at a furious pace.
…using a kind of crowdfunding formula.
Considering the observed (lack of) intelligence of most CEOs that’s a fairly low bar.
Other than V.I. which is entirely separate than alternative fuels, you are correct…The lowest Spark EV’s MSRP was still double of the lowest priced ICE Spark for that MY…
The key to profitability is to only offer fully autonomous technology to EVs…Outside of Tesla, most likely these vehicles will have expensive roof mounted equipment arrays and therefore they should be selling the fully autonomous $100K Chevy Bolt to ride sharing/fleets first as they perfect the tech…
Paris and London are trying to ban private autonomous car because of traffic jams of cars that are not being driven by it’s owners https://t.co/gx7TnxeSd8
Vertical integration is expensive if you plan to produce car at compliance levels. When you’re all in it pays to make things yourselves, rather than leave it up to the whims of your supplier.
Abandoning “vertical integration” is a sword whose opposite edge includes:
-Lack of supply contracts (batteries, etc)
-An open door for others to buy their way in, like:
-the next Tesla
-Deutsche Post (vans)
-Workhorse (trucks)
Workhorse got a bump, the other day, because it was made known how many power trains they’ve ordered from TM4. It may not be what the customer is aware of, but when a competitor gets to go to the same supplier he can then go to the customer and say, “See, we did the same thing, only cheaper”.
And with less vertical integration
you loose opportunities to be more profitable and innovative (which would lead to more profit, too). To me it’s a declaration of bankruptcy from Daimler. Concerning the components you need to build an BEV they already lost the race and gave up.
They try to sell their ICE cars as long as possible and then the rats leave the sinking ship.
The idea of outsourcing is that the competing suppliers make things cheaper than you can because of the scale they operate on.
With that as a background, does it really hurt you if someone else gets a good deal too? Let say you don’t outsource. It doesn’t stop your competitors from doing so. So they can still get the better deals, you’ve only stopped yourself from doing so.
Call a waambulance for Dieter! Wake up Rip Van Winkle time to live in the world you polluting scam diesels have created. Consequences are something capitalist enterprises are particularly bad at handling. Next they will ask for government assistance to help with this tough transition… the government faced with job losses will socialize the losses and pad the profits for the corporate psychos… sheesh. If they had only started this process in the early 90s it could have been done by now.
EV’s less profit margin. Tesla’s profit margin is twice of the industry’s average. Someone is lying or just inefficient.
Even if we could impart the same altruism to Mercedes as Tesla deserves, their customers won’t “charge a car”.
Here’s a clue!
Iceland – Built as it is on a volcano, Iceland has tapped the earth’s natural warmth to supply 85% of the country’s housing with heat. Between geothermal and hydropower, the electricity supply is 100% renewable energy.Jul 9, 2012
Tesla’s not even remotely close to being profitable so that’s a pretty bizarre comparison. Maybe by some cherry picked metrics their vehicles are more profitable, but in the end the bottom line is what matters.
Mo said:
“EV’s less profit margin. Tesla’s profit margin is twice of the industry’s average. Someone is lying or just inefficient.”
That isn’t a fair comparison. Until Tesla put the Model 3 into production, it made only “premium” cars. Other small auto makers which make only premium cars also average higher profit margins.
Larger auto makers can afford to trade off a higher profit margin for volume sales of lower-priced cars. Tesla can’t afford to do that… yet. But if it keeps growing the way it has been, it should be able to do that within, I would guess, less than a decade.
The reason there wasn’t any complaint about having Renault engines in the compact models of Mercedes is most likely because customers were not aware if it ?
They are now though !
Many also are not aware that a number of Audi’s have Skoda engines in them too.
Wrong, Audi, Skoda, Seat, all have the identical VW engine, including DD-Software!
It’s gonna be ugly, especially if you consider that the expectations of some current Tesla owners is that they will have their cars for 20 years or longer.
So less profit and less replacement, a double whammy!
Then recycle or reuse large amounts of the vehicle.
You can already keep a gas car for 15+ years, few people do. Regardless of whether the engine is fine, the dings and wear and tear add up. You’ll never find a 15 year old car in pristine condition. I highly doubt most Tesla buyers will still be driving their car in 20 years. Maybe some are telling themselves that to try to justify the cost (which is beyond their normal price range), but in reality I doubt it holds true.
When you outsource a great majority of your product components, your final product is less differentiated from the competition who is using the same vendors.
I wonder if they will get that three pointed emblem made in China, too. It will look really nice when the chrome starts peeling!
I wonder which is more expensive to build at this point, a nice BEV with 200 miles of range, or a strong PHEV with 40 to 50 miles of range?
Good question.
GM outsourced the entire EV powertrain to LG Chem for the Bolt EV, which might indicate they expected it to cost more than their in-house development of the Volt.
On the other hand, GM expected the Volt to sell a lot better than it actually is, but they intentionally limited production of the Bolt EV, so they knew the latter would have a higher per-unit cost.
So actually, GM outsourcing so much of the Bolt EV probably isn’t an indication that BEVs are more expensive to make.
You’ll be surprised how many flat-earthers are still out there.
and convex earthers!
There is a cool solution however.
Cheap, personal, electric aircraft – go see for yourself, no need to theorize 🙂
Then we only have to worry about the moon bases 😀
Nah, the flat-earthers have an explanation for that. The atmosphere distorts light in such a fashion that it creates the optical illusion that the earth’s surface is curved, when you get high enough into the air.
Of course, the entire space program is a hoax, because you can’t actually orbit the flat earth!
Honest, would the flat-earthers lie to you?
😀
FLAT- “spread out like a carpet” [rectangular?]- koran; perfect word of allah, impossible to be wrong!
What! The world is round?? I’m sure they still think it’s flat!
Poor Poor Daimler!
Sir Terence David John “Terry” Pratchett, OBE (28 April 1948 – 12 March 2015) was an English author of fantasy novels, especially comical works. He is best known for his DISCWORLD series of 41 novels.
The turtle agrees…
“…many compact Mercedes models were sold with Renault engines, without prompting complaints.”
Well I’m shocked, SHOCKED I say! Why, next you’ll be telling me that today, most car buyers make buying decisions on such things as style, comfort, and luxury features… rather than on whose logo happens to be on the engine hidden away under the hood.
/snark
Of course there aren’t any prompting complaints. Renault has the best engines, unlike Mercedes…
Oh I’m so worried their profit margin may only be 10% . Service is half of their profits and are almost none with an electric. No transmisdion, no exhaust, 2,000 less parts in the motor, no oil changes, very little brake wear.
Mmmmmm sounds great to the planet.
No problem for Daimler, not long ago they sold there Tesla shares for $780 million, that should be a good start!
I guess Tesla is gonna buy Daimler soon.
In other words:
We give up! We will let the chinese build cars from now on. They are profitable and we are not anymore.