Electric vehicle development is expensive business and even juggernaut Daimler AG is being forced to rein in costs as it grapples with developing a fleet of EVs and meeting emissions regulations.
The Financial Times reports Mercedes-Benz’s corporate parent is seeking to save more than €1 billion (A$1.6 billion) by 2022. The first place in which it’s cutting costs is in its managerial ranks, the company planning to shed 10 per cent of all management jobs. That amounts to around 1100 employees worldwide.
“The industry is in transformation,” CEO Ola Källenius told investors, “We have to do this.”
Daimler’s statement also mentions a cut to jobs in “indirect areas”, though it’s believed this won’t affect any assembly line roles. Staff representatives from Daimler have told employees the company is committed to job guarantees made in 2017 prohibiting operational redundancies until 2030, except in the ranks of senior management.
Daimler called out the costs of expanding its range of plug-in hybrids and electric vehicles as having a negative impact on profits. In this year alone, Daimler has spent €502 million (A$815 million) on electric vehicle development.
What Daimler’s statement didn’t mention was the impact of the €870 million (A$1.4 billion) fine Daimler had to pay following allegations 684,000 Mercedes-Benz vehicles didn’t comply with nitrous oxide (NOx) emission regulations.
In addition to thinning its management ranks, Daimler is capping its investment in property, plant, equipment and research and development at 2019 levels. It’s also cutting material costs at Mercedes-Benz Vans, where €100 million (A$162 million) in savings will be found in cutting personnel. Daimler will also make cuts across its truck divisions, which include Freightliner, Western Star and Fuso.
Mercedes-Benz’s car and van divisions are targeting a return on sales of 4.0 per cent next year and 6.0 per cent in 2022, though it cautions these figures could be affected by potential tariffs in China, the US and the UK.
While emissions regulations are driving Mercedes-Benz to develop a new generation of electric vehicles, they also have the potential to directly impact the company.
The European Union has introduced new regulations that require automakers to cut emissions by 37.5 per cent between 2021 and 2030. It’s already struggling to reach the 95g/km emission target it’s supposed to reach by next year as part of a 40 per cent cut from 2007’s figures. The company is currently sitting at roughly 138g/km.
If an automaker exceeds its CO2 emissions target, it must pay a penalty of €95 (A$154) for each g/km over its target. It can mitigate this impact somewhat, however, through the use super-credits received from the sale of EVs like the Mercedes-Benz EQC. Källenius has said the company plans to do just that next year.
Mercedes-Benz is continuing its roll-out of electric vehicles which will help it meet the more stringent EU regulations. The EQC and EQV are already available in Europe and they’ll be joined over the next two years by the EQA, EQB and EQE.
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