New technologies require major decisions.
Mercedes-Benz's parent company, Daimler, aims to become a smaller automaker in the next five years, in contrast to the typical industry goal of expansion. The main reason is very simple, according to CEO Ola Kaellenius who spoke with Reuters. "We will have a fundamental change in the industrial footprint on the powertrain side," he said. "The next five years we will become a smaller company."
As the 134-year-old automaker moves away from combustion engines and embraces electrified vehicles, including the Mercedes EQC SUV and upcoming EQS Sedan and other EQ-branded models, numerous internal changes will also take place. There will be job losses because it takes fewer people to build electric cars. An EV's battery has just 200 or so components while there are at least 1,400 parts in a combustion engine.
Instead of assembly line workers, Kaellenius wants to hire "a lot of new software engineers, experts in battery chemistry, electrification." Another vital goal is that Mercedes wants to make money in different ways. Instead of focusing on luxury physical features, it wants to tap into recurring revenues that come with software-based services. In other words, Mercedes wants to redefine the luxury experience where some types of hardware become less important. Digital services are key, such as over-the-air updates.
Sustainability and efficiency are increasingly being desired by customers over luxury. "There is no doubt in our minds that the footprint that this product leaves on this Earth needs to be smaller. That is part of the modern luxury promise," Kaellenius added.
Self-driving technology development is also critical. In many ways, Daimler is taking a page directly out of Tesla's playbook. Tesla is considered a premium luxury automaker and yet its biggest appeal, aside from the all-electric powertrains and advanced batteries, is the way it connects to customers with unique digital services and tech advancements. There's not a single physical luxury feature that makes it stand out.
Tesla also happens to have a market value above $400 billion while Daimler is currently worth about $63 billion. Daimler may have its work cut out to achieve a Tesla-like valuation, but it can adopt aspects of its rival's business model in its own unique ways.