Mercedes-Benz releases new strategy, All in "Electric + Smart"

On October 6, Mercedes-Benz announced a new strategy, which is all about electric and intelligent. Its new strategy includes launching two pure electric platforms and self-developed car operating systems, and ultimately achieving the established profit target.

Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG, said: "In recent years, we have made the right decisions and progress in many areas, including design, product development, brand renewal and sales growth. Thanks to this, the Mercedes-Benz brand has once again won the top spot in the luxury car market. However, in the process of turning sales growth into profitable growth, we have not yet fully realized our potential, which is why we have reorganized and released a new strategy."

Ola Källenius

Ola Källenius also said: "We are committed to creating the most desirable automotive products in the world. To achieve this goal, we will leverage the advantages of our luxury brands, further enhance our economic value, and strengthen the positioning of our product portfolio and product lineup; we will fully unleash the unique potential of our sub-brands, including Mercedes-AMG, Mercedes-Maybach, Mercedes-Benz G-Class and EQ electric technology brands; our new strategy aims to reduce non-core activities to focus on advantages in key areas - electric vehicles built on dedicated platforms and our own automotive software; we will cut structural costs and achieve substantial and sustainable profitability."

The new strategy released by Mercedes-Benz today echoes the "Vision 2039" it announced a year ago. At that time, Mercedes-Benz stated that it would be committed to a clear plan for the electrification of its entire product lineup and its determination to achieve full carbon neutrality in its business.

After the "Vision 2039", Mercedes-Benz has finally taken an important step on the track of electrification and intelligence.

Two pure electric vehicle platforms support the future all-electric lineup

At this strategic upgrade meeting, the most important content was Mercedes-Benz's announcement of "ALL IN" electrification. Mercedes-Benz announced that it will release 4 new pure electric products based on the upcoming large-scale pure electric model EVA platform. Among them, EQS is the first representative of this pure electric model platform, which will be launched in 2021, with a WLTP electric range of more than 700 kilometers. Next, there will be three models, EQE, EQS SUV and EQE SUV, to be launched one after another. In addition, AMG, Maybach, and G-Class cars will also provide electrified products. Starting in 2025, Mercedes-Benz will launch more electrified models based on its second new exclusive electrification platform-the MMA modular platform designed for compact and mid-size cars, to further improve its electric product lineup.

Mercedes-Benz EQS will be launched in 2021

At the same time, Mercedes-Benz has improved a series of supply chain relationships for its upcoming intensive electric vehicle product lineup.

Among them, the new generation of motors will be independently developed by Mercedes-Benz and equipped with precision inverters and high-voltage technology; the battery will be developed by combining self-development with cooperation. CATL, Farasis Energy, and Sila Nano, a battery material company located in California, are all important strategic partners of Mercedes-Benz. Currently, Mercedes-Benz is accelerating its progress in battery technology. New production materials and production processes will effectively improve battery life, reduce charging time, and optimize production costs.

In addition, Mercedes-Benz also announced the next steps in the development of electrified products by announcing the "EQXX Vision" technology project. Mercedes-Benz's goal is to create electrified models with excellent energy efficiency and endurance performance. At present, Mercedes-Benz has deployed a cross-functional and cross-domain automotive engineering team in Stuttgart to explore breakthroughs in electric endurance and energy efficiency performance; at the same time, this plan has also been supported by experts from Mercedes-Benz F1 High Performance Powertrain Co., Ltd. (HPP) in the UK, who not only brought professional insights into motors, but also brought a development speed as fast as racing. Although the "EQXX Vision" is a technical project, we expect its innovative results to be quickly applied to mass-produced models.

MB.OS operating system is expected to be released in 4 years

In the field of intelligence, the first goal that Mercedes-Benz needs to achieve is to make all new cars connected to the Internet. Mercedes-Benz's goal is: users are happy to own a Mercedes-Benz car and are satisfied with establishing a long-term or even permanent relationship with the brand. Now, Mercedes-Benz will focus on services to accessories business, and more importantly, from OTA remote wireless upgrades to subscription services, striving to achieve stronger user loyalty, higher repurchase rates and rapid recurring revenue growth. By 2025, Mercedes-Benz will have 20 million fully connected vehicles, and the continued growth of the connected business will also bring important profit opportunities in the future.

In the field of software, Mercedes-Benz announced that it will develop its own automotive operating system. The MB.OS operating system will be developed internally by Mercedes-Benz and is expected to be released in 2024. Through this operating system, Mercedes-Benz will be able to retain control over all vehicle architectures and user interfaces. The development of its own software can help vehicles achieve faster and more frequent updates. It will be designed around an upgradeable architecture to control future R&D costs.

Markus Schäfer

“Mercedes-Benz is committed to leading the development of electric mobility and automotive software with its intelligent electrification platform strategy and its own software development strategy,” said Markus Schäfer, member of the Board of Management of Daimler AG responsible for Group Research and member of the Board of Management of Mercedes-Benz AG and Chief Operating Officer. “To achieve this ambition, we will do it our own way and inject real luxury into electric and connected mobility. We will use internal technology development and external strategic cooperation to jointly create outstanding products. Taking into account the high degree of platform compatibility, controlled investment planning and the continuous decline in battery system costs, we plan to achieve significant marginal benefits on the new model architecture platform from 2025. By 2030, when electric models account for more than half of new car sales, our investment in internal combustion engine models will be rapidly reduced, and the number of traditional internal combustion engine models will be reduced by 70% by then.”

Strive to achieve double-digit profit growth in 2025

Mercedes-Benz said that the practice in 2020 proved that the company's current break-even point was too high and further action was needed to meet the challenges of future transformation. To this end, Mercedes-Benz will implement important new measures before 2025 to reduce the cost base and improve the industrial layout.

Specifically--

By 2025, fixed costs will be reduced by more than 20% compared to 2019 by cutting expenditures, adjusting production capacity and reducing personnel costs; capital and R&D expenditures will be reduced by more than 20% compared to 2019; and variable costs will decrease by 1% net annually compared to 2019 by increasing and extending material cost savings targets.

Mercedes-Benz pointed out that the above targets do not include the possible impact of the increase in the proportion of electrified models.

Under the guidance of the new strategy, Mercedes-Benz will adjust its marketing strategy and improve its performance through more reasonable combinations and pricing, better product lineups and increased recurring income. These adjustments, coupled with practical actions in cost control and industry layout, will promote a structural improvement in profitability.

The ultimate goal is that Mercedes-Benz hopes to maintain mid-to-high single-digit growth under unfavorable market conditions by 2025, and achieve double-digit profit growth in a strong market environment.

So, do you think the comprehensive turnaround plan proposed by Mercedes-Benz is timely?