Mercedes-Benz, the latest automaker to acknowledge a lower-than-expected demand for battery-powered vehicles, announced on Thursday that it would be delaying its electrification objective by five years and giving investors confidence that it would continue to improve its combustion engine models.
The company’s new projection indicates that sales of electrified vehicles, including hybrids, may make up as much as 50% of the total by 2030. This is five years later than its 2021 forecast, which targeted the 50% milestone with largely all-electric cars by 2025.
Even though suppliers and automakers are placing large bets on the potential demand for electric vehicles in the future, capacity and technology development investments have outpaced real EV demand, forcing automakers to recalculate their production schedules.
CEO Ola Kaellenius issued a warning at the end of the previous year, pointing out that even in Europe, sales by 2030 were probably not going to be all electric. At the moment, battery-powered cars account for just 11% of total sales, with hybrids making up 19%.
According to Kaellenius, Mercedes-Benz (MBGn.DE) opened a new tab to let investors and customers know that the company was prepared to upgrade technology well into the upcoming decade and was in a strong position to continue producing combustion engine cars.
“It is almost like we will have a new lineup in 2027 that will take us well into the 2030s,” according to Kaellenius’s upgrade plans.
Following the announcement, the premium automaker’s shares increased 5.9%. This increase was bolstered by a share buyback scheme worth 3 billion euros ($3.3 billion), which was revealed late on Wednesday.
Mercedes-Benz said that its outlook for 2024 was clouded by slower economic growth, supply chain bottlenecks, and trade concerns between China and the United States and the European Union. The automaker projected lower returns on sales across its car and van division.
According to the statement, first-quarter sales are probably going to be lower than they were the previous year because of ongoing production delays caused by shortages of parts, especially those of Bosch’s 48-volt systems.
Mercedes-Benz stated that sales of electrified vehicles, including hybrids, were anticipated to stay between 19 and 21% of the total.
In keeping with its prediction, the luxury car manufacturer revealed an adjusted return on sales of 12.6% for its automobile business in 2023. However, its profits were negatively impacted by shortages of some components, supply chain-related costs, and inflation.
It stated that, compared to last year’s 15.1%, it anticipated a lower adjusted return for 2024—10–12% for automobiles and 12–14% for vans.
The company increased spending on R&D for upcoming technologies like its MB.OS platform and hiked its average pricing by 2% to 74,200 euros.
Despite a 2% increase in revenue, group earnings before interest and taxes decreased to 19.7 billion euros from 20.5 billion euros in the previous year.
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