Electric cars will be profitable far sooner than many anticipated.
The world is turning to EVs to stem the tide of climate change, but EV manufacturers face one big problem - adopting early means costs are high, and EVs are not really profitable. Just ask the late Sergio Marchionne.
But according to a report by the UK's Financial Times (FT), Mercedes-Benz is claiming it will earn as much from electric cars as its piston-powered models by the end of this decade. It's not just a bold claim as, in Germany's ultra-competitive electric car space, Mercedes is now the first company to declare a hard target for electrical vehicle profits. Ola Källenius, head of Daimler AG told the FT that the automaker's "task is to take the healthy business model of today and to prove to ourselves and to the financial markets that we can have healthy returns when we become a dominant electric company."
He backed up his claim by explaining that batteries and electric car specific components are declining in cost quickly.
The target for electric vehicle profitability comes as Daimler AG announced it's breaking off its truck-building division and putting it on the stock exchange as a separate entity. It will create the biggest independent truck-making company globally, and the passenger car business will get the same name as its brand: Mercedes-Benz. The theory is that the move will allow Mercedes to focus on its electric vehicles and "unlock the potential" of its stock. That potential is the benchmark set by Tesla, which has eclipsed Daimler's stock market valuation while selling just a quarter of the German automaker's vehicles over last year.
Mercedes is planning to introduce at least six new electric models in its EQ range by 2022 including the recently launched Mercedes-Benz EQA SUV. We also know there will be AMG versions of some models and an all-electric version of its flagship S-Class luxury sedan. With a dose of arrogance, Swiss-born Källenius took a dig at Tesla, telling FT that "even if you don't know technology, subliminally you understand you're sitting in something that is superior." More importantly, he makes no secret that separating the passenger car business is a valuation play, adding, "Why shouldn't we be able to tap into that fantasy in the capital markets?"