In addition to reducing spending
Mercedes announced cuts to restore profits by cutting electric vehicle production costs. The German automaker plans to launch 19 cars powered by internal combustion engines and 17 battery electric vehicles by the end of 2027. Let us understand what this process is designed to achieve.
Experience decline in financial markets and sales
Mercedes’ electricity sales collapsed 25% late last year, which requires important steps to be taken accordingly. Mercedes is still committed to selling higher-priced and lower-capacity vehicles, although some workers and investors suggest that the strategy doesn’t work.
It is important to note that Mercedes’ combustion engine cars are outperforming electric cars.
Mercedes also will be producing in the United States and China to protect itself from 25% tariffs on all vehicle imports recommended by the Trump administration. The company’s stock fell 1.05% in 1100 GMT, the biggest drop in the blue-chip Euro Stoxx 50e index.
Mercedes’ revenue fell 40% in 2024. Falls were also observed in 30% of the automotive sector, and the decline is also expected to fall by 6-8% this year. The brand also recommends that it expects a return on sales of 14% on good days and 8% on difficult days on capital markets day in 2022. The rising labor costs in Europe have also caused a down-level recession, which has recently led to factory closures and massive layoffs.
Increased competition in China
The automaker also outlines the challenges it faces in the competitive Chinese luxury car market. Competitors like Byd can easily get similar levels of luxury goods at affordable prices. Mercedes-Benz plans to reduce costs by 10% in 2027 and 20% by 2030. Not to mention, this reduction in spending is a mid-20% decline between 2019 and 2025.
Effective steps
The brand assured us that it does not intend to close its factories in Germany. However, to save nearly 70% of the cost, it will transfer the output of one of its models to Hungary. Mercedes also intends to resort to the finance and human resources sectors. In addition, automakers plan to reduce their labor by not replacing retired and negotiating voluntary layoffs.
prospect
In terms of performance in major markets, Mercedes performs worse than BMW electric vehicle products, but better than Audi. Mercedes Benz will also try to expand its market share in China and avoid making unreasonable decisions. Overall, these measures suggest that automakers need to think carefully about their automakers, whether they invest in electric vehicles or not.
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Mercedes Post lowered spending on electric vehicles, focusing on burning engines to increase profitability, which is first and foremost motorcycles.
