Economy & Politics

In the crisis, Mercedes relies on tradition

Daimler boss Ola Källenius relies on luxury, tradition and e-cars. Photo: dpa / Sebastian Gollnow

The income breaks down, the industry is changing. In this situation, Daimler has now set up a car strategy that provides for many electric cars – and a return to the traditional brands. This is what CEO Källenius considers to be a treasure.

Stuttgart – The situation at Mercedes has not only deteriorated due to the corona crisis, but also the trade hurdles, the previously weak global economy and the costs of new technologies have depressed results. Daimler boss Ola Källenius now wants to sustainably improve the earnings position of the Group’s passenger car division and has strategically realigned the division.

Turning away from Zetsche’s path

The strategy is a clear departure from the path that the former Daimler boss Dieter Zetsche once took. Zetsche had placed great emphasis on expanding the product variants in the compact segment, i.e. with models such as the A-Class, in order to transfer development costs to as many vehicles as possible through high unit numbers and also to attract younger customers with initially smaller budgets for the brand. Källenius now wants to position Mercedes higher and have a stronger presence in the luxury segment. “We don’t want to achieve volume at any price,” said CFO Harald Wilhelm at a virtual analyst and investor conference.

In order to achieve this goal, the individual models are to compete more internally than before for the allocation of capital. The models that promise the best returns should have the best chances – that is, the models in the upper and luxury segment. At the same time, they want to raise the bar that investments have to take. However, it is less about the existing models and more about the future product range. This change requires a cultural change that begins now, said Wilhelm.

Maybach brand is undervalued

While some of the series promoted under Zetsche are pushed to the edge, other brands are activated more strongly than was the case under Zetsche. Källenius has so far considered the Maybach brand to be completely undervalued in the group. It has huge potential, not just in China, where it already has a strong position. Maybach will in future stand for “sophisticated luxury” and play a more important role. The “G” off-road vehicle brand is also set to gain in importance – as a brand for “adventure, including adventure in the city”. The AMG brand will stand for “performance-oriented luxury” and, like the other sub-brands, will be electrified. The brands in focus also include the EQ brand, under which Daimler sells all-electric vehicles.

The group intends to strongly promote electromobility. According to production manager Markus Schäfer, they are ready to increase the proportion of electric vehicles to up to one hundred percent – if necessary.

Profit comes before quantity

The new strategy is intended to put Daimler in a better position to enforce its prices and to help improve earnings. There is always a trade-off between the quantity, the prices asked and the profits. “We decided to put profit first,” said CFO Wilhelm.

An important part of the strategy is also to increase current sales through better customer loyalty. It is not enough just to sell a car to the customer, said Britta Seeger, Head of Sales. In order to strengthen the customer relationship and make it more profitable, one relies on the use and analysis of data that enable a personalized approach. In addition, online sales are to be expanded. The goals for digital services, with which the group intends to generate an additional billion in profit by 2025, are particularly ambitious.

Positive news on sales

Daimler did not announce any news about the planned job cuts. The group wants to cut a five-digit number of jobs in order to prepare for falling income. In any case, the cost targets are ambitious: by 2025, the fixed costs are to decrease by more than 20 percent compared to 2019.

However, there is also positive news about the analyst conference: Thanks to a strong recovery in China, the group sold four percent more cars in the third quarter than in the same quarter of the previous year – i.e. before Corona.

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