At the company’s investor day in Sindelfingen, Germany, Daimler, Mercedes-Benz’s parent company, clarified its plan to electrify its vehicle lineup and the expected impact on its bottom line.
The German automaker fears that Mercedes’ new all-electric ‘EQ’ brand will hurt profits.
When talking about the first vehicle under the new brand, an all-electric SUV on the same line as the Mercedes-Benz GLC, Frank Lindenberg, Vice President of Finance and Controlling at Mercedes-Benz Cars, said that early production will have a strong impact at first (via Reuters):
“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,”
But they hope to mitigate the impact by producing both the electric and gas-powered versions at the same plant and adjusting the production based on demand.
As production increases for EVs, the cost should fall and Daimler aims for cost parity around 2025.
In preparation for it, Mercedes wants to have an electric version of each model available by 2022.
That seems to be the new industry-favorite way to present their electrification plans with Jaguar recently announcing that they will add electric powertrains to all new cars by 2020 and Volvo has similar plans for 2019.
Mercedes is expected to bring to production its first all-electric ‘EQ’ vehicle in 2019 and unveil the second vehicle of the brand in Frankfurt this week.
The problem with this sort of announcement that focuses on electric models being made available is that it doesn’t really tell us much about the production volume.
Electric versions of existing gas-powered cars have been offered for years, but they have been mostly associated with low volume compliance cars.
With this said, Daimler’s mention of adjusting production capacity of both powertrain versions at the same plant based on demand is encouraging. It should mean that the automaker is prepared to make the electric versions in more significant volumes if needed.
If anything, the admission that electric vehicle cost could reach parity with gas-powered car cost by 2025 is the biggest news.
At that point, if the infrastructure followed, there will be no reason not to buy EVs since they are much less expensive to operate and Daimler will have to dedicate its vehicle production to the electric models.
It will be interesting to follow since, in the next few years, Mercedes could go from virtually no all-electric vehicles to only electric vehicles.