Daimler’s road to electrification
Almost 2 years ago in 2019, Daimler, often referred to as Mercedes-Benz, presented to the world “Ambition 2039” and aimed to make the fleet of new cars carbon neutral by 2039. The German carmaker said it will invest about EUR 10 billion in the expansion of its electric fleet and more than EUR 1 billion in the development of battery production.
Daimler had set a few milestones to meet. By 2022, battery production will be carbon neutral worldwide and more than 30 car and van plants worldwide will be producing carbon-neutral vehicles. By 2025 up to 25% of total car sales will be contributed by all-electric vehicles, and more than 50% of sales is expected to come from plug-in hybrids and all-electric models by 2030.
So far, so good. Last year, the share of electric vehicles (EV) in Daimler’s total sales, which includes plug-in hybrids (PHEV) and battery electric vehicles (BEV), jumped to 7.4% from 2% a year earlier. Worldwide it had sold more than 160,000 EVs despite the turbulence caused by the pandemic. At home in Germany it accounted for 15% of EV sales, trailing only behind Volkswagen. Unlike the world’s second largest car manufacturer, Mercedes managed to meet the 2020 EU target for carbon emission and aims to double the EV sales in 2021 that would increase the EV share of total sales to 13%.
Ola Källenius, the head of Mercedes-Benz, told Financial Times in February that the company will make as much profits from electric models as internal combustion engine (ICE) models by end of decade, making it the first premium German automaker with a precise target for the turning point in profits, echoed by Audi who forecasted later in March that profits from latest electric models could match those from ICE models as early as by 2023. In contrast, Porsche and BMW have yet provided any precise timetable.
Mercedes may also say goodbye to ICE models sooner rather than later. While Källenius had said that the it does not make sense for the automaker to prematurely phase out sales of cash-generating ICE models running on diesel and petrol that could help fund the development of future electric models, it was reported in February that the idea of putting an early end to ICE model was mooted within the broad of management, in which directors are accessing scenarios, according to which new vehicle sales could be limited to electric models as early as 2031. Although this was not confirmed by Källenius, he did not rule out the possibility of any revision to intermediate targets for 2025 and 2030.
Investments are being made. Back in 2018, Daimler, who does not make its own batteries, had said that it would purchase battery cells worth more than EUR 20 billion for the coming decade in line with expansion of its electric fleet. Currently the automaker has supply deals with leading auto battery makers including Korea’s SK Innovation and LG Energy Solutions. The EUR 1 billion mentioned in Ambition 2039 will be pumped into expansion of its global battery production network, with new plants in Germany, Poland, Thailand and the U.S. being planned or under development.
The company has been on the lookout for future battery technology to meet market demand for faster charging and higher energy density. In 2017, Daimler led a $60 million funding round for a startup from Israel named StoreDot, who replaces graphite with proprietary organic compounds and nano-materials in anode and claims that its EV batteries can be fully charged in 5 minutes. In 2019, Daimler had also acquired minority stake in Sila Technologies, a developer of new battery materials from the U.S., who sells a silicon-based powder that goes into the battery anode to increase energy density by more than 20%. The company has raised an investment of $590 million to fund the construction of a new 100 gigawatt-hour (GWh) plant with operation expected to begin in 2024.
China’s influence to Daimler’s electrification plan cannot be overstated. The world’s second largest economy was Mercedes-Benz’s largest single market in 2018. Last year the sales in China increased by 11.7% and set a new record with 774,382 units sold, accounting for over 30% of total sales worldwide.
As part of the electric initiative, Daimler and its joint-venture partner Beijing Automotive Industry Holding Co. (BAIC) announced in 2017 a joint investment of about EUR 655 million in the production of BEVs and battery localization in Beijing. The plan to further expand local production was later revealed in 2018 to meet growing demands for premium models including EV, through an investment of about EUR 1.5 billion.
In China Mercedes-Benz partnered with CATL, the largest producer of EV battery packs in the country who is one of the suppliers of the Stuttgart-based automaker, to jointly develop next-generation lithium-ion batteries, aiming to extend the range to more than 700 km and double the charging speed. The future battery technologies are expected to be introduced in a number of vehicles in the next few years, including the EQS Luxury sedan that will be delivered to customers next year. Daimler also invested multi-million euros as IPO of Farasis Energy, a Chinese battery cell manufacturer, who is building a plant in Germany where construction is reported to be significantly delayed.
Daimler is also one of the shareholders of Ionity, an ultra-high speed charging station network in Europe, along with other automakers including Volkswagen, BMW, Ford, Hyundai, Porsche and Audi. Currently 336 charging stations are in operation, with another 39 under construction.
