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Mercedes Plans “Brutal” Cuts in Powertrains

Mercedes to slash piston engine usage 70% by 2030
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Daimler’s Mercedes-Benz unit is getting mighty serious about cutting powertrain costs.

Mercedes intends to phase out manual transmissions, reduce the number of platforms it makes and slash the use of piston engines in the models that remain 70% by 2030.

Sign of the future: Mercedes EQ electrics (Image: Mercedes)

Deep Reductions

The cuts in combustion engine investments will be “brutal” as Mercedes rushes to electrify future vehicles, says Chief Financial Officer Harald Wilhelm.

The radical surgery is part of a broader push by Mercedes to lower its fixed costs—including reductions in production capacity and personnel—more than 20% by 2025.

Daimler/Mercedes Chairman Ola Kallenius told analysts last week that Daimler aims to achieve a return on sales ratio (operating profit divided by net sales) in the mid- to high single-digit range, regardless of market conditions. In 2019, Daimler swung to a €1.7 billion ($2 billion) net loss.

Impact of Electrification

While it’s busy economizing, Mercedes also must ramp up is spending on electrification. By 2030, Mercedes expects to be selling more than 20 all-electric models and 25 plug-in hybrids.

The company will need both types of vehicles to meet European Union carbon dioxide emission limits. A report released earlier this week by environmental research group Transport & Environment described Mercedes as currently lagging in its effort to meet the EU’s 95 g/km CO2 target by the end of 2021.

The report caution that hybrids are a stopgap on the way to meeting the EU’s overall carbon emission goals. That means that the future of piston power even when paired with electric drive is likely to fade eventually.

With electrification comes the demise of manual gearboxes, which are largely irrelevant in electric drivetrains. Manuals account for only about 6% of Daimler’s entire transmission output today, with applications largely relegated to the company’s smallest models.

Outlook

Underpinning Mercedes’ strategy is a deliberate move further up the luxury ladder. “Luxury is who we are,” Kallenius declares. “We will build the world’s most desirable cars.”

It’s an admirable goal. Kallenius has given himself five years to deliver.

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