VW buyers want petrol and diesel engines

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Written By Maya Cantina

After the lean Corona years of 2020/21, things quickly improved for Mercedes-Benz: global car sales increased from 2.32 to 2.45 million in 2022, turnover from 133.9 to 150 billion euros and profit before interest and taxes (EBIT) rose from 16 to 20.5 billion euros – and not only because of inflation and despite supply bottlenecks and Russian sanctions.

Last year came the disillusionment: Sales (2.49 million cars) and sales (153.2 billion euros) increased only marginally. Lucrative sales in the US stagnated at 342,240 vehicles in 2023 – and group profit fell to 19.7 billion euros. Things seem to be getting even worse at the moment: from January to April 2024, only 85,656 Mercedes cars were newly registered in Germany – that was 7.1 percent less than in the same period last year.

The focus on electric cars is the cause of Mercedes’ woes

This is reminiscent of Ford’s restructuring case: the American car manufacturer sold only 33,959 cars (-7.6 percent). This is not due to the car economy: Mercedes’ main competitor BMW increased domestic sales by 16.5 percent to 75,175 vehicles, Škoda by 15.9 percent to 64,343. World market leader Toyota (worldwide car sales 2023: 10.3 million), which only operates in the midfield in Germany due to its limited model range, increased its sales (including Lexus) by 23.2 percent to 30,871 copies.

The main cause of the Mercedes misery is the artificial focus on electromobility (JF 24/09). CEO Ola Källenius complained that this developed more slowly than expected. That is why the new MB.EA platform planned for 2028 for the electric Mercedes top models (S and E-Class) will now be cancelled. “The assumption that electric cars would quickly become the dominant form of propulsion has – so far – proven to be too optimistic,” according to the engineering magazine VDI-Nachrichten.

Combustion engines will continue to play a role for longer than planned

Nine out of ten new Mercedes cars are still petrol or diesel engines – albeit increasingly supplemented with a hybrid drive. To minimize costs, Mercedes now wants to adopt expensive elements such as production systems in the bodywork of the existing EVA2 platform for its future e-luxury models, instead of developing all parts and machines from scratch. Toyota, whose management never shared the European electric euphoria, has been working in a similar way for years. The German-Swede Källenius is now under pressure. In 2021, in the spirit of Greta and in view of the CO₂ panic in the EU (“Green Deal”; fleet consumption) and among major shareholders (keyword: green ESG), he pushed his “Electric only” strategy the Mercedes Group. But in February, Källenius admitted for the first time that his green goal of switching completely to electric cars by 2030 was unrealistic. Demand for electric cars is lagging behind expectations.

In other words: combustion engines will continue to be built. It is now estimated that only half of cars sold will be electrified by the end of this decade, Källenius explained at Mercedes’ general meeting. In response to the disappointing sales figures and because of the ‘wishes of our customers’, he announced a revision of the EQS and EQE models. Nevertheless, the Stuttgart-based car company will be “climate neutral” from 2039 in terms of the total balance of new cars: “That is certain,” Källenius promised, but the desired “transformation could take longer than expected.”

BMW sees itself confirmed

The planned switch to MB.EA-Large should make it possible to switch from large and tall batteries to flatter energy storage devices. As with Tesla, the Mercedes battery must be integrated directly into the underbody and chassis. This was intended to create space for additional energy capacity in order to increase the range, which is modest compared to combustion engines. At the same time, Mercedes is faced with the expensive and extremely complex task of keeping both combustion engines and electric cars up to date. Business insiders report to the Handelsblatt about ‘maximum nervousness’, high workload and short deadlines – while profits and sales will drop if the A and B classes are actually abolished.

Not only the e-skeptics Toyota and Mazda, but also BMW have chosen a multifaceted approach. Munich residents have been quite cautious when it comes to the switch to e-mobility. BMW boss Oliver Zipse has done that the EU ban on combustion engines from 2035 even described as naive. There was “a lot of headwind” for this, “but now many people’s eyes are opening,” Zipse explained in the FAZ. “Every international competitor and every supplier knows that they are dependent on one technology. This undermines the market mechanisms and, for example, makes the raw materials required for this significantly more expensive.”

China leads the world market

VW is in a similar situation to Mercedes. CEO Herbert Diess, who was dismissed in the summer of 2022, already prescribed the politically desired ‘Electric only’ strategy in 2018 – with devastating consequences for the premium brand Audi. Cuts were made to the proven petrol engines, diesel engines and hybrids – which account for 85 percent of sales – which put off customers. At the same time, the ID series all-electric vehicles cannot keep up with BMW and Mercedes for various reasons. And VW’s production quality was initially as poor as Tesla’s, but the American company has a better image and devoted fans like the iPhone. The VW plant in Zwickau, which was converted into a factory for pure electric cars at a cost of 1.2 billion euros and once employed 9,000 employees, is not at full capacity. The petrol/diesel SUV Tiguan, the Golf Variant and the VW Multivan, on the other hand, have waiting times for new cars of more than six months.

In the global electric car market, which is growing due to subsidies and bans, Chinese competition is establishing itself faster than Western manufacturers. BYD is now the largest electric car manufacturer in the world, ahead of Tesla and VW. “German car manufacturers in particular must be at least as much more innovative and better if they are more expensive,” warns the Center of Automotive Management in Bergisch Gladbach. However, this does not yet apply to the German market: BYD was only able to sell 576 electric cars from January to April; MG Roewe, the brand of SAIC Motor from Shanghai, at least 4,001 – almost as many as the former American cult brand Jeep (4,144).

JF22/24

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