German automaker Mercedes-Benz has delayed its electrification goal by five years, flagging a weaker-than-expected demand for battery-powered cars. It has assured investors that it would keep improving its combustion engine models, becoming the latest carmaker to delay its electric ambitions. The company now expects sales of its electrified vehicles, including hybrids, to account for up to 50% of the total by 2030.
Delay of electrification goal
The goal has been shifted five years from the forecast made in 2021, when it aimed to hit the 50% milestone by 2025 with mostly all-electric cars. While automakers and suppliers are betting big on future demand for electric vehicles, investment in capacity and technology development has outrun actual EV demand, prompting carmakers to readjust production plans.
Sprucing up combustion engine lineup
Mercedes CEO Ola Kaellenius cautioned towards the end of last year that even in Europe, sales would likely not be all-electric by 2030. Currently, battery-powered cars making up just 11% of total sales, and 19% including hybrids. The carmaker made it ample to investors and customers that it was well-positioned to carry on producing combustion engine cars and was ready to update the technology well into next decade. “It is almost like we will have a new lineup in 2027 that will take us well into the 2030s,” he said.
The confident message to investors led the luxury carmaker’s shares go up 5.9%, also supported by a 3 billion euro (USD 3.3 billion) share buyback programme unveiled late on Wednesday.
2024 outlook
Mercedes-Benz’s outlook for 2024 was affected by slower economic growth, supply chain bottlenecks, and trade tensions between China and both the US and European Union, forecasting lower returns on sales across its car and van divisions. Due to component shortage, particularly of 48-volt systems supplied by Bosch, production has been held back – which might lead the first-quarter sales to go below the previous year’s level.
For 2024, Maruti also expects a lower adjusted return of 10-12% for cars and 12-14% for vans, down from last year’s 15.1%. The company raised its average price by 2% to 74,200 euros, and increased spending on research and development for future technologies such as its MB.OS platform. Group earnings before interest and taxes fell to 19.7 billion euros from 20.5 billion euros last year despite a 2% rise in revenue.