Mercedes-Benz Re-Prioritises Petrol Car Production Due To Low EV Demand
Mercedes-Benz Group AG (MBG) is re-evaluating its ambitious electric vehicle (EV) goals due to weaker-than-expected sales of its luxury electric models. The company now plans to continue producing petrol and hybrid vehicles alongside EVs "well into the 2030s" to prioritise profitability.
This shift comes after disappointing sales figures for Mercedes' high-end electric vehicles such as the EQS and EQE sedans. These models were central to CEO Ola K?llenius' strategy to boost profits through premium car sales. The company's profit margin dropped to 9% in Q1 2024, falling below its long-term target range.
Market Challenges & Lagging EV Sales
Mercedes isn't alone in facing challenges with EV adoption. Government subsidy reductions and a lack of robust charging infrastructure continue to deter some potential EV buyers. The company also finds itself behind its luxury car rivals in the EV transition. During Q1 2024, Mercedes' EV deliveries fell by 8%, while BMW experienced a 41% increase in electric vehicle sales.?
Focus On High-Margin Cars
This strategic adjustment marks a significant change from K?llenius' initial plan, "The Economics of Desire," which focused on high-end car sales and was unveiled in 2022. Back then, Mercedes was experiencing high order volumes due to pandemic-related supply chain disruptions.
The revised strategy aims to increase sales of Mercedes' most expensive models, including AMG performance cars, Maybach luxury vehicles, the G-Wagon SUV, and the EQS, by up to 60% by 2026. This strategy also seeks to lift the company's operating margin to around 14%. However, Mercedes has already cautioned that margins are likely to decline further in 2024.
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