Industry leader or not, Mercedes is playing catch-up today
Mercedes-Benz is quite the historied company. With over 92 years of experience, the German manufacturer has provided the automotive world with some of the best in terms of luxury, quality and performance, becoming a world-class brand in the process.
Today, there is one field in which Mercedes is playing catch-up, however, and that is the electric vehicle (EV) field.
Cost of falling behind? $23bn
Daimler, the German automaker’s parent company, will buy battery cells worth more than $23 billion (20 billion euros) by 2030 as it readies mass production of hybrid and electric vehicles, Reuters reported last week.
Daimler needs battery cells as it builds a global network of battery assembly plants in Kamenz, Untertuerkheim and Sindelfingen in Germany, as well as in Beijing, Bangkok, and Tuscaloosa, United States, Reuters explained. It is investing $1.1 billion into these projects, according to CNN.
“We are systematically pushing forward with the transformation into the electric future of our company,” Daimler CEO Dieter Zetsche said in a statement.
Batteries are at the heart of all current and future EV development, and it makes sense why Mercedes is committing so much towards them. The battery is the gas tank of the future, only one that will infinitely grow in charging capacity as technology improves.
Daimler unveiled its first-ever electric vehicle this year in September, a 402-hp SUV dubbed the Mercedes-Benz EQC, with production slated for next year. The $23 billion battery investment is just in time for mass production of their electric model.
The EQC will go on sale in 2019, while the company plans to offer 130 electric and hybrid models by 2022, in addition to electric vans, buses and trucks, CNN notes.
Who beat Mercedes to the EV race?
Business Insider notes that Mercedes is a bit late to the party, with other automakers having announced similar investments earlier this year.
“The German automaker’s investment is just the latest in a spate of recent EV battery investments by legacy automakers — BMW revealed it had a $1.16 billion EV battery contract with a Chinese supplier in June, and fellow German automaker Volkswagen plans to pour $23 billion into EVs and other new car technologies through 2023,” the US site said.
(Timeline by Business Insider)
First and foremost were the Nissan Leaf electric car, and the Toyota Prius hybrid, which cemented the idea and possibility of electric vehicles in the minds of people around the world.
With strong support from at-the-time CEO Carlos Ghosn, the Nissan Leaf became the world’s most popular EV, Bloomberg explained. With Ghosn’s arrest and mounting legal troubles, the Leaf’s future is uncertain, and they are bound to lose market share during this downtime.
Tesla, the American electric automaker, is another one of the pioneers of this field. Tesla is currently reaping the fruit of its labors on its latest Tesla Model 3, reporting profitability for the first time in 2 years.
The EV market is still very young and ripe for investment
Automakers know the potential that the EV market holds.
According to GlobalData, the global EV market is expected to grow at a substantial CAGR of 15.6% through to 2022, driven by the growing popularity of EVs across countries in Asia-Pacific (APAC) and Europe.
As for the exact figures, Frost & Sullivan’s recently released “Global Electric Vehicle Market Outlook 2018” estimates that global sales are poised to climb from 1.2 million in 2017 to 1.6 million in 2018 and further upwards to an estimated 2 million in 2019. EV sales will overtake combustion engine vehicles sales by 2038, according to Bloomberg.
Aside from Tesla, China has also gotten in on the hype quite early.
“[China] has a larger EV market—primarily BEVs (battery electric vehicles)—than Europe and the United States combined,” research firm McKinsey said. “With a sales share of around 94%, domestic original equipment manufacturer (OEMs) currently dominate the Chinese EV market.”
Figure: McKinsey (Note: EVI evaluates the performance of 15 countries in advancing electric mobility, based on key market and industry indicators.)
China’s positive market performance helped put the country in a strong, well-balanced position in McKinsey’s latest overall EVI rankings (above): it was outperformed only by Norway in the EVI market score and reinforced its leading position—ahead of Japan, Germany, and the United States—in the industry EVI analysis (the “supply” side of the equation).
However, McKinsey cautions that given today’s EV-battery economics, leadership in EVI scores comes at a price: China and Norway have some of the world’s highest levels of spending on consumer and supply-side subsidies, at the taxpayers’ expense.
The MENA market might be behind on the EV trend, but countries like the UAE want to catch up. Dubai, for example, wants to put 42,000 EVs on their roads by 2030.
The road is still long, and the global market has yet to fully embrace EVs. Mercedes’s recent announcement, coupled with those of other automakers, will be noted down in the history books as the start of the EVs’ foretold dominance.