Lack of product mix harms Mercedes BEV volumes

German OEM says entry segment BEVs will drive growth by 2026

Lack of product mix harms Mercedes BEV volumes
Mercedes says hybrids will provide crucial bridge to next-gen BEVs

German automaker Mercedes has blamed a lack of EV product availability for its 8pc year-on-year decline in all-electric deliveries in Q1, as the firm projects flat EV volumes for 2024 during a period of product changeover.

Mercedes' 8pc decline in BEV volumes is the same as the contraction of 8pc seen in its overall car sales in the quarter. This means that despite the drop-off in absolute BEV volumes, Mercedes' share of all-electric sales remains unchanged at 10.3pc compared to Q1 last year.

"We are in the situation where we do not have EV offerings in all the important segments of the market," Harald Wilhelm, member of the Mercedes board of management, told analysts on the firm's Q1 call. Meaningful BEV growth may have to wait until into 2025 and 2026, when the firm's upcoming MMA vehicle platform will see Mercedes have a "much broader offering of EVs in the entry segment".

Wilhelm says the electric C-Class and GLC products are earmarked as volume sellers in this next-generation range.

As with the firm's 30pc decline in overall Ebit in the quarter, Mercedes attributes a drop in BEV deliveries to a period of model changeover.

"The decline was mainly due to the end of the product life cycle of the smart EQ fortwo — previously produced in Europe — in the first quarter of 2024," the automaker says. "BEV sales declined but are expected to rise with the full availability of the newly launched facelifts of the EQV, eVito and the new eSprinter."

Mercedes' lack of entry segment EVs has knock-on consequences for strategy in the Chinese market, a topic of concern for the majority of analysts' questions on the firm's Q1 conference call.

Wilhelm admits that Mercedes "started the year a bit too nervous and on the back foot in terms of EV transition", and that it lacks an electric product mix that is suited to the Chinese market.

"In China there is a very strong supply of products in the EV space, and we positioned ourselves on the EV side but also, as you can see, we are not artificially pressing or trying to buy a share with products in the EV space in China," he says. "We are rather leveraging the product where we feel intrinsic customer demand."

And Mercedes' cautious approach to China appears to be justified, as even Chinese EV leader BYD reported minimal revenue growth as a result of fierce downward pricing pressure in the domestic market.

"We are following customer demand. We are not excessively pushing products into the market. We want to protect the products' substance and also protect margin," Wilhelm says. "That is why I would rather say we see an EV share globally which is rather stable of 19-21pc."
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But this target of 19-21pc is Mercedes' guidance for its electrified sales share, not strictly BEV. The company did not guide to any specific BEV targets, and the automaker's investor deck says that "Mercedes-Benz plug-in hybrids are expected to play an important role" in bridging the gap to the next all-electric platform.

Talk of declining BEV volumes and a lack of BEV product mix also invited analyst questions on if Mercedes had changed its tune about urging a rethink of EU CO2 targets. In response, Wilhelm referenced a review of the 2035 targets that is set to take place next year.

"I think that makes perfect sense to see if customer demand to support the transition as initially envisaged, therefore taking a pragmatic view. I think we support that perspective.

"Let me be very clear. We do not slow down investments on the EV side, despite some doubts about the pace of transitioning," he maintains.

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