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Daimler Maps New Strategy: Trim Costs & Shift Focus on EVs
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Daimler AG recently outlined a new plan of action for the company’s flagship Mercedes-Benz brand at an investor event. The new strategy is for Mercedes Benz to restructure operations and slash costs by more than 20% over the next five years to boost profits amid rising investment in electric vehicles.
The coronavirus pandemic has rattled the auto industry amid factory closures, low footfall at dealerships and supply-chain distortions. Thanks to the coronavirus-induced woes, Daimler experienced depressed demand resulting in sales slump and lackluster growth for several months.
Over the last few years, Mercedes-Benz and other big premium-car makers such as BMW AG (BAMXF - Free Report) and Volkswagen AG's (VWAGY - Free Report) Audi have expanded their lineup of electric vehicles and plug-in hybrids to reduce carbon emissions and provide clean transportation.The shift toward electric vehicles and self-driving car requiredhuge investments in technology, further denting the automakers’ margins.
To counter these headwinds, the luxury automaker is trimming costs and restructuring its model offerings. To strengthen this effort, the company ceased retailing sedans in the United States to focus more on sport-utility vehicles, which are more profitable and make up a larger share of car sales across the globe.
Despite these measures, Daimler posted a loss of 2.06 per share in the quarter ended Jun 30, 2020.
Moreover, Mercedes-Benz recently reported third-quarter sales of 85,122 vehicles including sales of 69,631 Mercedes-Benz units and 15,491 Mercedes-Benz Vans, down 5% year over year.
Such dismal figures have compelled the company to undertake tougher steps and implement a turnaround strategy to recoup sales as well as profit levels.
Along with cutting fixed costs, capital-expenditure and research-and-development expenditure, Mercedes-Benz will rekindle its focus on high-end and luxury products rather than concentrate on higher-volume markets that generate lower profit per vehicle. The strategy of moving its vehicles upmarket is intended to bring back the company’s profits to previous high levels on a sustainable basis.
The fixed cost reductions will be achieved from terminating jobs at Daimler, while much of the development-cost reductions will be achieved by phasing out combustion engines.
The new game plan aims to leverage Mercedes-Benz’s strength by revamping its product portfolio and repositioning it as a luxury brand, like Bentley or Rolls-Royce, instead of its conventional superior standing alongside Audi, BMW, Jaguar and Lexus. The strategy is to avoid non-core activities and focus on winning in areas where it matters the most. Hence, the company is dedicated to the development of electric vehicles and proprietary vehicle software.
By 2025, Mercedes-Benz is targeting for a return on sales within a mid to high single-digit range, even under unfavorable market conditions. It also expects to achieve a double-digit bottom-line growth in a robust market.
The Future is Green
Amid heightening climate concerns, electric vehicles (EV) with zero emissions are the hottest trend in the auto industry. Renowned automakers like Tesla (TSLA - Free Report) and General Motors are taking aggressive efforts toward an electrified future.
To keep up in the race to EV supremacy, Mercedes-Benz also decided to cull its model lineup, inclining the fleet toward electric vehicles.
The German automaker unveiled plans of producing bigger all-electric models first, eventually moving into its special divisions — AMG brand, its ultra-luxury Mercedes-Maybach brand and the G models. By 2025, the company will start adding smaller EVs to the lineup.
The company also revealed the four all-new EVs that will be developed on its upcoming platform —Electric Vehicle Architecture (EVA).
The first vehicle will be its fully-electric sedan called the EQS, set to debut next year that will be built on the company’s new modular electric vehicle platform. The EQS will be an all-electric, S-Class-like luxury sedan. Following that will be the EQE, EQS-SUV and EQE-SUV.
The company desires its electrified portfolio’s share to be 50% of its global sales by 2030, with declining investments in combustion engines.
Notably, shares of the company have moved up 2.6% year to date against the industry’s fall of 7.8%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Daimler Maps New Strategy: Trim Costs & Shift Focus on EVs
Daimler AG recently outlined a new plan of action for the company’s flagship Mercedes-Benz brand at an investor event. The new strategy is for Mercedes Benz to restructure operations and slash costs by more than 20% over the next five years to boost profits amid rising investment in electric vehicles.
The coronavirus pandemic has rattled the auto industry amid factory closures, low footfall at dealerships and supply-chain distortions. Thanks to the coronavirus-induced woes, Daimler experienced depressed demand resulting in sales slump and lackluster growth for several months.
Over the last few years, Mercedes-Benz and other big premium-car makers such as BMW AG (BAMXF - Free Report) and Volkswagen AG's (VWAGY - Free Report) Audi have expanded their lineup of electric vehicles and plug-in hybrids to reduce carbon emissions and provide clean transportation.The shift toward electric vehicles and self-driving car requiredhuge investments in technology, further denting the automakers’ margins.
To counter these headwinds, the luxury automaker is trimming costs and restructuring its model offerings. To strengthen this effort, the company ceased retailing sedans in the United States to focus more on sport-utility vehicles, which are more profitable and make up a larger share of car sales across the globe.
Despite these measures, Daimler posted a loss of 2.06 per share in the quarter ended Jun 30, 2020.
Moreover, Mercedes-Benz recently reported third-quarter sales of 85,122 vehicles including sales of 69,631 Mercedes-Benz units and 15,491 Mercedes-Benz Vans, down 5% year over year.
Such dismal figures have compelled the company to undertake tougher steps and implement a turnaround strategy to recoup sales as well as profit levels.
Along with cutting fixed costs, capital-expenditure and research-and-development expenditure, Mercedes-Benz will rekindle its focus on high-end and luxury products rather than concentrate on higher-volume markets that generate lower profit per vehicle. The strategy of moving its vehicles upmarket is intended to bring back the company’s profits to previous high levels on a sustainable basis.
The fixed cost reductions will be achieved from terminating jobs at Daimler, while much of the development-cost reductions will be achieved by phasing out combustion engines.
The new game plan aims to leverage Mercedes-Benz’s strength by revamping its product portfolio and repositioning it as a luxury brand, like Bentley or Rolls-Royce, instead of its conventional superior standing alongside Audi, BMW, Jaguar and Lexus. The strategy is to avoid non-core activities and focus on winning in areas where it matters the most. Hence, the company is dedicated to the development of electric vehicles and proprietary vehicle software.
By 2025, Mercedes-Benz is targeting for a return on sales within a mid to high single-digit range, even under unfavorable market conditions. It also expects to achieve a double-digit bottom-line growth in a robust market.
The Future is Green
Amid heightening climate concerns, electric vehicles (EV) with zero emissions are the hottest trend in the auto industry. Renowned automakers like Tesla (TSLA - Free Report) and General Motors are taking aggressive efforts toward an electrified future.
To keep up in the race to EV supremacy, Mercedes-Benz also decided to cull its model lineup, inclining the fleet toward electric vehicles.
The German automaker unveiled plans of producing bigger all-electric models first, eventually moving into its special divisions — AMG brand, its ultra-luxury Mercedes-Maybach brand and the G models. By 2025, the company will start adding smaller EVs to the lineup.
The company also revealed the four all-new EVs that will be developed on its upcoming platform —Electric Vehicle Architecture (EVA).
The first vehicle will be its fully-electric sedan called the EQS, set to debut next year that will be built on the company’s new modular electric vehicle platform. The EQS will be an all-electric, S-Class-like luxury sedan. Following that will be the EQE, EQS-SUV and EQE-SUV.
The company desires its electrified portfolio’s share to be 50% of its global sales by 2030, with declining investments in combustion engines.
Daimler currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, shares of the company have moved up 2.6% year to date against the industry’s fall of 7.8%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>