New Mercedes-Benz strategy announced - targeting structurally higher profitability

  • New Mercedes-Benz strategy for the car business unveiled today at a virtual investorand analyst conference.
  • The new strategy will enhance the Mercedes-Benz brand’s luxury status, raise the productportfolio’s positioning and mix, pursue significant growth for sub-brands AMG, Maybach,G and EQ and accelerate the development of electric drive and car software.
  • Mercedes-Benz confirms its full commitment to electrification across all products andsegments, unveils new dedicated electric architectures, and announces multiple newelectric product launches.
  • Four all-new electric vehicles on new large EVA architecture set for launch from 2021.
  • New electric products coming for AMG, Maybach and G.
  • New »Electric first« MMA platform in development for compact and medium sized cars.
  • Expanded cost reduction plans unveiled that will drive down capex, R&D and fixed costs inabsolute terms and will improve the industrial footprint.
  • Financial ambitions sharpened: lowering break-even point, targeting higher profitabilityand strong cash conversion rate.

Mercedes-Benz has announced a new strategic course that will pursue profitable growth in the luxury segment and target leadership in electric drive and car software. “In recent years we have done many things right: design, product engineering, brand rejuvenation, sales growth. As a result, we have put Mercedes back on top again. But we have not yet lived up to our full potential in terms of turning volume success into profit growth. That’s why we have refocused and are launching our new strategy. We intend to build the world’s most desirable cars. It’s about leveraging our strengths as a luxury brand to grow economic value and enhancing the mix and positioning of our product portfolio. We will unlock the full potential of our unique sub-brands – AMG, Maybach, G and EQ. Our strategy is designed to avoid non-core activities to focus on winning where it matters: dedicated electric vehicles and proprietary car software. We will take action on structural costs, target strong and sustained profitability,” said Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG at a virtual investor and analyst conference titled »Mercedes-Benz Strategy Update« on October 6, 2020. Källenius also said “with this new strategy we are announcing our clear commitment to the full electrification of our product portfolio and our determination to ensure the business is fully carbon-neutral, in line with our Ambition 2039 target.”

The new Mercedes-Benz strategy is a comprehensive program that has been designed to power the company forward technologically and financially. It has six pillars:

Think and act like a luxury brand

Luxury has always been part of the soul of Mercedes-Benz. Going forward, the brand will see a renewed focus on luxury, making it an integral part of all products, customer interactions and digital technologies. Mercedes-Benz will reshape its product portfolio, brand communications and its sales network to deliver a true luxury experience - a luxury experience that will be electric, software-driven and sustainable.

Focus on profitable growth

Mercedes-Benz will take actions to improve and recalibrate its market strategy. These will focus on optimizing the balance between volume, price and channel mix to ensure improved contribution margins from the current and future portfolio. Mercedes-Benz will also focus its product development resources and capital on the most profitable parts of the market and the segments in which it competes, in order to ensure structurally higher profitability.

Expand customer base by growing sub-brands

Mercedes-Benz is the most valuable luxury car brand in the world, according to Interbrand. It will remain the guiding star. But Mercedes-Benz also has extraordinary sub-brands: AMG, Maybach, G and EQ. The new strategy will take them to the next level - accelerating their development, with clear and targeted plans to unlock their potential and drive substantial incremental EBIT growth.

AMG is set for the next level with high-performance electrification, starting in 2021. Its links with Formula 1 will also intensify next year, to reflect its identity as Mercedes’ high performance sub-brand. Maybach will pursue global opportunities, doubling in size and going electric. The demand for the legendary G is ahead of current capacity. The legend will grow, and will electrify. With the EQ brand, Mercedes-Benz will address a new audience with progressive high-technology products, built on dedicated electric architectures.

Embrace customers and grow recurrent revenues

Mercedes-Benz is committed to fostering life-long relationships with its customers. The aim is for customers to love owning a Mercedes-Benz and to be so satisfied by the relationship that they stay with the brand for a long-time, ideally forever. Now, Mercedes-Benz will aim for even stronger loyalty, higher repeat purchases and rapid growth in recurrent revenues – from services and parts and also increasingly from Over-the-Air (OTA) updates and subscription services. The growing number of connected cars provides very significant revenue opportunities in the future, as the Mercedes-Benz fleet will reach 20 million fully connected vehicles in total by 2025.

Lead in electric drive and car software

Mercedes-Benz is aiming to take the lead in electric drive and car software with ambitious product development targets and the accelerated introduction of new technology. As part of its »Electric First« strategy, Mercedes-Benz has announced four all-new electric vehicles based on its upcoming large-car Electric Vehicle Architecture (EVA). The EQS luxury sedan is the first representative of this new dedicated architecture and will reach the market in 2021 with an electric range of more than 700 km (WLTP). It will be followed by the EQE, the EQS-SUV and the EQE-SUV. In addition, AMG, Maybach and G will go electric. From 2025, multiple further models will be added to the electric vehicles portfolio on the second all-new dedicated electric platform, the Mercedes-Benz Modular Architecture (MMA) designed for compact and medium-sized cars.

Mercedes-Benz will shift even more of its product development resources and expertise to electric drive, and will invest in new technologies and concepts to accelerate electric range and efficiency. The next generation of eMotors are developed in house and will feature sophisticated inverter and high voltage technology. The company is making huge strides in battery technology - with in-house battery R&D complimented by close partnerships with key strategic partners CATL, Farasis and Sila Nano. New materials and production processes will increase range, reduce charging time and cost.

Mercedes-Benz also announced an exciting next step in electric vehicle development today, with the Vision EQXX technology program. The aim is to build an electric vehicle with spectacular efficiency and range. Mercedes-Benz has tasked its engineering group with pushing the boundaries of electric range and efficiency with a cross-functional, multi-disciplinary team based in Stuttgart, supported by specialists from the Mercedes-Benz F1 HPP group in the UK, who bring expertise in eMotors plus motorsport-inspired development speed. While Vision EQXX is a technology program, it is expected to result in innovations that will quickly make their way into series production cars.

In the area of car software, Mercedes-Benz has announced its own proprietary MB.OS operating system. This will be developed in-house and is scheduled for launch in 2024. It will allow Mercedes-Benz to centralize the control of all the vehicles’ domains and also its consumer interfaces. Proprietary software development will allow greater speed and more frequent updates, and will be designed around scalable architectures that will control future development costs.

“At Mercedes-Benz, we strive for nothing less than taking the lead in electric drive and car software. We will do this with an intelligent electric platform strategy and a proprietary software development approach,” said Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG, responsible for Daimler Group Research and Mercedes-Benz Cars COO. “We are going to do it the Mercedes way, bringing a true luxury experience to the world of electric and connected cars. We will leverage in-house technology development and strategic partnerships to deliver superb products. And from 2025 on, we are targeting strong contribution margins for all new architectures thanks to high commonality and controlled investment, and ongoing falls in the cost of battery systems. While we will expand the electrified portfolio towards a share of more than 50% of global sales by 2030, our investments in combustion engine development will decline quickly and the number of combustion engine variants will fall by 70% by 2030.”