Mercedes-Benz cuts costs and renews focus on combustion engine models

Mercedes-Benz has announced additional measures to cut costs and expand its range of petrol and diesel internal combustion engine (ICE) models. These steps have been taken in an attempt to restore profitability against the backdrop of a projected decline in profits in 2025.

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The company plans to launch 19 new internal combustion engine (ICE) models and 17 electric vehicles (EVs) by the end of 2027, signalling a strategy review and a return to a focus on petrol and diesel cars after electric vehicle sales fell by a quarter last year.

Most of the new models will be in the premium price segment, confirming the carmaker's commitment to its strategy of selling fewer cars at higher margins, despite concerns from investors and union representatives in recent months about the effectiveness of the strategy.

Company officials also announced plans to localise more production in China and the United States as a protective measure against rising trade tensions, including US President Donald Trump's threats to impose 25 per cent duties on car imports from April.

Mercedes-Benz plans to cut production costs by 10 per cent by 2027 and double that by 2030, in addition to its current plan, launched in 2020, to cut costs by 20 per cent between 2019 and 2025.

Harald Wilhelm, Mercedes-Benz's chief financial officer, said Thursday that the company has no plans to close plants in Germany, but will move production of one of its models to Hungary, where costs are 70 per cent lower.

It also plans to outsource a number of functions, from finance and human resources to purchasing, and reduce headcount by not hiring new staff to replace those retiring and negotiating voluntary redundancies, he added.

The carmaker's sales fell significantly last year in its key markets of China and Germany. Mercedes-Benz's performance was better than premium rival Audi, but worse than BMW, which posted an increase in electric vehicle sales.

Mercedes-Benz plans to devote significant resources over the next five years to increasing its market share in China but is determined to avoid what chief technology officer Markus Schaefer called "irrational decisions" by rivals to cut prices.

Source: Reuters