On the one hand, the company is all in. On the other, there is a recognition that people need to buy the vehicles

By Gary S. Vasilash

The important point about Mercedes-Benz announcement of its transition to “electric-only output” by the end of the decade “where market conditions allow” is that: where market conditions allow.

If people aren’t buying EVs, then there is little point in making EVs—except the whole thing that legislation may make it a requirement to do so.

Which is something that gets lost in most of the discussion of the subject.

But if people are buying a whole lot of a given type of car with a given type of powertrain may be predicated on the fact that the alternatives are rather insufficiently appealing.

The phenomenon that is Tesla proves the point that if there are vehicles that are sufficiently desirable people will buy them.

In is only recently that OEMs have gotten to the point where they aren’t just sticking electric powertrains in vehicles in order to meet the aforementioned legislative demands, that OEMs have twigged to the fact that Tesla is not only annihilating these traditional OEMs when it comes to EVs, but is also crushing it when it comes to sales of premium vehicles.

People want to buy Teslas. Teslas look good. They have class-leading performance. They are supported by an extensive charging infrastructure.

As Ola Källenius, CEO of Daimler AG and Mercedes-Benz AG, acknowledged, “Our main duty in this transformation is to convince customers to make the switch with compelling products.”

Otherwise, the market conditions are not going to be such that people are going to want to buy electric Mercedes in any great numbers. The same goes for any other OEM that is putting out EVs.

Now in the case of Mercedes the company doesn’t need to worry so much about gross volumes as it does gross margins.

It acknowledged, “An important lever is to increase net revenue per unit by raising the proportion of high-end electric vehicles such as Mercedes-Maybach and Mercedes-AMG models, while at the same time taking more direct control over pricing and sales. Rising revenue from digital services will further support results. Mercedes is also working on further reducing variable and fixed costs and cutting the capex share of investments.”

So get the top end revenues while decreasing the amount it takes to build them, and supplement that with digital income.

Källenius: “This step marks a profound reallocation of capital. By managing this faster transformation while safeguarding our profitability targets, we will ensure the enduring success of Mercedes-Benz.”

Clearly, unless it makes a move now, then that success may not be as enduring as the company would like.