Mohit Oberoi
German luxury carmaker Mercedes has said that it would invest billions of dollars to modernize its plants in Europe and China and expand its US plant as it pivots to EVs (electric vehicles).
Automobilwoche reported that Mercedes’ production manager Joerg Burzer said that the company would modernize its plants in Rastatt in Germany, Kecskemet in Hungary, and Beijing.
Burzer was quoted as saying that “We are investing a three-digit million amount per plant for the run up.”
Mercedes would also invest “low single digit billion dollars” to modernize the painting systems at Bremen, Sindelfingen, and Rastatt plants in Germany.
Notably, the news comes days after Volkswagen announced a $192.6 billion investment to scale up its EV business. The investment would be over a five-year period and Volkswagen said that two-thirds of the investments would go towards electric vehicles and digitization.
In his prepared remarks, Volkswagen CEO Oliver Blume said, “We have set clear and ambitious targets and took necessary decisions to streamline processes in FY22. FY23 will be a decisive year for executing strategic goals and accelerating progress across the Group.”
Automakers Scale Up EV Investments amid the Pivot to Electric Cars
Volkswagen has also announced a new affordable EV with a starting price of around $26,600. Tesla is also working on a new lower-priced EV model but the company did not divulge much details about the platform at its investor day on March 1.
Other legacy automakers have also announced multi-billion-dollar investments to scale up their EV production capacity.
Ford intends to spend around $50 billion through 2026 which would increase its annual EV production capacity to 2 million by the end of 2026. The company’s EV production run rate was 12,000 monthly in the fourth quarter and it is looking to increase it fivefold by the end of 2023.
General Motors also committed to invest $35 billion on EVs between 2020 and 2025 and forecast an annual EV production capacity of 1 million by 2025. It has announced that it would stop selling ICE (internal combustion engine) cars by 2035-becoming the first Detroit automaker to commit to a hard deadline for ICE cars.
Mercedes to Expand Its US Plant
Mercedes is also considering expanding its Tuscaloosa plant in the US. Notably, in order to qualify for the EV tax credit of $7,500 in the US, the vehicle needs to be assembled in North America.
Days after the Act was passed last year, Toyota announced an additional $2.5 billion investment in Toyota Battery Manufacturing North Carolina (TBMNC) which would help support higher EV production in the country.
The Act also has gradual battery sourcing requirements which have left automakers scrambling to produce batteries domestically.
Automakers are Scrambling to Secure Battery Metals
General Motors signed a long-term nickel supply agreement with Vale to procure battery-grade nickel sulfate from Vale’s upcoming plant in Quebec, Canada. Ford also announced a multi-billion-dollar investment with China’s CATL to produce EV batteries in the US.
Coming back to Mercedes, it sold 12,421 EVs in the US in 2022. While sales rose exponentially from 433 in 2021, they are a fraction of what market leader Tesla sells in the country.
With its EV expansion in the US, Mercedes might want to increase its EV market share in the US. Volkswagen is also targeting a 10% market share in the US-more than double its current share.
Meanwhile, given the flurry of new EV models hitting the roads, there are visible signs of a price war, especially in China which is among the most competitive auto markets globally.
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This article was written for Business 2 Community by Mohit Oberoi.
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