Daimler “spend money” to speed up the electric transformation.

After Volkswagen and Audi announced that they would invest tens of billions of euros to promote the transformation, Daimler’s board of supervisors recently approved an investment plan for the transformation of electrification and digitization.

From 2021 to 2025, Daimler will invest more than 70 billion euros in R & D, real estate, factories and equipment to accelerate the transformation of electrification and digitization. Most of the investment will be used for Mercedes Benz passenger car business, and the other part will be used to support Daimler truck’s plan to accelerate the realization of zero emission transportation.

The board of supervisors of the company expressed “full support” for the relevant strategic line and business plan. In addition to the launch of Mercedes Benz brand new strategy in October, Daimler has almost reached an agreement on the transformation plan.

Some people in the industry believe that Daimler’s choice is in line with expectations, because in the face of strict emission regulations, high R & D costs, heavy performance pressure and rising rivals, Daimler does not have much choice.

“Internal and external troubles”

The 70 billion euro investment is a key decision made by Daimler under the “domestic and foreign troubles”.

In 2019, due to the high fines and litigation costs brought by the “emission gate”, Daimler’s profit level and rate of return on sales decreased significantly. At the beginning of 2020, with the spread of the epidemic, the production and sales of automobiles were at a standstill for a time, which made the financial performance of the company worse. At the same time, under the pressure of electrification and digital transformation, the German automobile manufacturer still needs to maintain high R & D expenditure. On the whole, Daimler’s business situation has been seriously tested. Data show that in the first three quarters of this year, Daimler’s net profit was 420 million euros, down 85% year on year, and its operating income was 107.68 billion euros, down 14% year on year.

In November 2019, Daimler announced a restructuring plan, which plans to eliminate more than 10000 jobs worldwide by 2022, in order to save 1.4 billion euros in human costs for transformation. In July 2020, some media reported that Daimler’s cost reduction plan may be further expanded, which will lay off more than 30000 people worldwide and close some factories to reduce fixed costs by 22%. Kang LinSong, chairman of Daimler’s board of directors, also made it clear that the company decided to further reduce costs and prepare for electrification and digital transformation.

However, the radical layoff and reorganization program has caused the antagonistic relationship between the management and the trade union within the company, and the negotiations on factory closure and labor agreement have been stalled for a time.

Daimler also faces fierce competition from emerging electric vehicle companies and is still in the position of catching up. Tesla continues to maintain its technological and market advantages in intelligent electric vehicles. According to evsales data, as of October 2020, Tesla sold 352800 electric vehicles, while Mercedes Benz only sold 89600. In the Chinese market, ideal one and Wellcome ES6 occupy a leading position in the new energy SUV market.

In addition, the EU’s stringent carbon emission regulations have also prompted Daimler to transform to electrification in order to avoid high fines.

Zhang Xiang, an auto industry analyst, believes that both Daimler and Mercedes Benz are relatively conservative and backward in digital transformation, and the software ecology of intelligent networking is not rich enough, whether compared with Tesla, new car making forces, or with China’s local auto companies. Today’s young users are very concerned about the intelligent and personalized interaction between people and vehicles. If Daimler fails to seize this transformation opportunity, the brand and market will face the risk of decline.

“Elephant turn”

The finalization of the 70 billion euro huge investment plan seems to mean that all forces of Daimler have reached an agreement, and the company’s transformation is expected to be on the right track.

Mercedes Benz passenger car business will be the focus of the transformation of the whole group. In October 2020, the Department released a new strategy to strengthen Mercedes Benz’s position as a luxury brand, enhance its product portfolio positioning and optimize its product matrix, and accelerate the development of the brand in the fields of electric drive and automotive software.

In terms of technical route, Daimler and Mercedes Benz put forward the development strategy of “electric first”, and will release four new pure electric products based on the upcoming large pure electric vehicle EVA platform. In 2025, they will also launch MMA electric exclusive platform for compact and medium-sized vehicles.

In terms of fund allocation, Daimler also has a clear plan. Daimler chooses self-development in key core businesses such as automotive operating system, pure electric platform and motor; while in other major but non core technology fields such as hybrid power system, fuel cell system and shared travel, Daimler tends to share the cost through cooperation, which is conducive to reasonable allocation of limited funds and financial stability.

At the same time of expanding investment, Mercedes Benz brand needs to continue to cut expenditure. By 2025, fixed cost will be reduced by more than 20% compared with that in 2019; capital and R & D expenditure will be reduced by more than 20% compared with that in 2019, so as to improve structural profitability.

As the company’s largest passenger car market and profit source, China is placed in a crucial position by Daimler. Kang LinSong has repeatedly stressed “firmly expand investment in the Chinese market.”. Recently, BAIC Foton and Daimler truck reached an agreement to promote the localization of heavy truck models. In terms of electrification, after the introduction of Mercedes Benz EQC pure electric SUV in 2019, the models developed based on EVA pure electric platform will also be launched in China in 2021 and realize local production.

According to Kang LinSong, Daimler will reduce the size of the company in the next five years to become an intelligent electric vehicle company that mainly relies on software services for profits.

Analysts believe that Daimler’s signal of transformation is more clear and unified than that of Volkswagen Group, which has experienced massive but repeated setbacks. On the one hand, the board of supervisors expressed its support for the company’s strategic line, which will help the management led by Kang LinSong to carry out the company’s restructuring smoothly; on the other hand, the Daimler trade union and the management agreed to set up a transformation fund, which also eased the antagonistic relationship between the two sides to a certain extent.

Editor in charge: yyx

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