Demand for Electric Vehicles is Low, Mercedes CFO is Not Satisfied!
Mercedes-Benz cannot achieve the success it wants in the electric vehicle market. Harald Wilhelm, the company's CFO, said that demand for electric vehicles is low and profit margins are below expectations. Mercedes relies on the power of its internal combustion engine vehicles.
The Electric Vehicle Market Is a Challenging Area
German luxury automaker Mercedes-Benz is facing lower-than-expected consumer interest in the electric vehicle (EV) market. Harald Wilhelm, the company's CFO, stated that the EV market is "a very difficult area" and stated that if the profit margins on electric vehicles are below the forecast, the company can benefit from its portfolio of internal combustion engine vehicles.
“Some traditional players are selling battery electric vehicles at lower prices than internal combustion engine vehicles… This is a very competitive space,” Wilhelm said.
Wilhelm's comments were made as Mercedes reported its third-quarter earnings. The Stuttgart-based brand announced a sales profitability of 12,4% in its passenger vehicle division. However, they may fall short of the 12% to 14% forecast expected for the year due to factors such as price competition, inflation, high interest rates, geopolitical uncertainty and supply chain issues.
Mercedes' Profit Dropped, Its Commercial Division Shined
Profit at the Mercedes-Benz Group fell 6,8% to 4,8 billion euros ($5,1 billion), while earnings in its commercial division rose 44% and return on sales reached 15%.
Mercedes characterizes the market conditions as “calm” and with intense price competition, especially in the electric vehicle segment.
Automobile manufacturers continue to reduce prices in many markets from the USA to China in order to increase demand. However, Mercedes disagrees with this overall strategy, focusing on increasing profit margins rather than volume sales. High inflation, exchange rate impacts and supply chain costs appear to have negatively impacted the company's third-quarter earnings.
What is Mercedes' Electric Vehicle Strategy?
Mercedes continues to develop new models and technologies to compete in the electric vehicle market. The company plans to offer more than 2023 fully electric models by 10. It is also investing in battery technology to increase the range of electric vehicles and shorten charging time.
Mercedes says it is working to be profitable, not to be a leader in electric vehicles. Ola Källenius, CEO of the company, said: “The important thing for us is not to be a leader in electric vehicles, but to be profitable in electric vehicles. "What is important for us is to offer products that meet our customers' needs and add value to them," he said.
Mercedes hopes demand for electric vehicles will increase and profit margins will improve. However, in this process, it relies on the power of its internal combustion engine vehicles. The company predicts that sales of internal combustion engine vehicles will remain high in 2023 and that the transition to electric vehicles will be gradual.
Mercedes is struggling hard in the electric vehicle market. The company strives to maintain both its profitability and prestige while competing with both traditional and new rivals. Mercedes is not happy with the low demand for electric vehicles, but it is confident in the power of its internal combustion engine vehicles.