Mercedes-Benz says plug-in hybrids to 'stay relevant' amid EV demand slowdown

STUTTGART – Mercedes-Benz expects lower returns on sales across its cars and vans division this year, it said on Thursday, flagging “exceptional” uncertainty caused by conflict in the Middle East and Ukraine and tensions between China and the U.S.

Supply chain bottlenecks for critical components remained “a significant risk factor”, while the potential for an “even more pronounced” slowdown in economic growth could also have an impact on automotive markets, the group said in a statement.

First-quarter sales are likely to be below the previous year’s level, it said.

Electrified vehicle sales, including hybrids, were expected to remain at approximately 19-21% of sales, Mercedes-Benz said, in line with reports across the industry of slower growth in EV demand.

Mercedes-Benz said it now expects up to 50% of sales by the end of the decade to come from electrified cars.

The carmaker has long said it was preparing for all-electric sales by 2030, but Chief Executive Ola Kaellenius cautioned towards the end of last year that even Europe would likely not be ready by then.

“We think plug-in hybrids will stay relevant for many years,” Kaellenius said on Thursday.

While automakers and suppliers are betting big on future demand for electric vehicles, investment in capacity and technology development has outrun actual EV demand, boosting pressure on companies to cut costs.

The luxury car maker reported an adjusted return on sales in its car division of 12.6% for 2023, in line with its forecast, as inflation and supply chain-related costs as well as component shortages ate into its profits.

For 2024, it said it expected a lower adjusted return of 10-12% for cars and 12-14% for vans, down from last year’s 15.1%.

Over the course of 2023, the carmaker warned of supply snags and inflation weighing on sales, with price wars particularly in the electric vehicle segment placing pressure on margins.

Still, Mercedes-Benz, the first of Germany’s three top car makers to report 2023 results, was expected to have the highest returns margin among the three, in part due to its strategy of passing higher costs to customers.

The luxury car maker raised its average price by 2% to 74,200 euros ($80,396), and increased spending on research and development for future technologies such as its MB.OS platform.

Group earnings before interest and taxes fell to 19.7 billion euros from 20.5 billion euros last year despite a 2% rise in revenue.

($1 = 0.9229 euros)

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