It's an "anything Tesla can do, we can do better" strategy, Sanford Bernstein analyst Max Warburton said in a note to investors. "Mercedes is convinced it can match Tesla battery costs, beat its manufacturing and procurement costs, ramp up production faster and have better quality. It is also confident its cars will drive better."
Those product plans follow several recently introduced, long-range mass-market electric cars, including GM's Chevrolet Bolt, Tesla's Model 3 and the forthcoming redesigned version of the Nissan Leaf.
The base models of those vehicles have travel ranges of 238, 220 and 150 miles, respectively, and starting prices of $37,500, $35,000 and $30,000 before tax incentives.
Despite low gasoline prices and U.S. market share of only 0.5% so far this year for electric cars, investments in the segment are accelerating for regulatory and technological reasons. Sanford Bernstein analyst Mark Newman projected that falling battery costs would make electric cars the same price as gas vehicles by 2021, which is "far earlier than most expect."
And although the Trump administration is considering lowering fuel economy standards, automakers are pressing ahead with electric car plans because regulators in other markets are pushing to reduce emissions.
Chief among them is China, the world's largest car market. Xin Guobin, China's vice minister of industry and information technology, announced the ban on manufacturing and sale of gas vehicles but provided no details on timing, according to state news source Xinhua. It follows similar moves by the Britain and France, which are aiming for 2040.
"The measures would surely bring profound changes to the sector's development," Xin said.
With China stepping on the accelerator, global automakers have no choice but to invest in electric cars, despite the corresponding drag on profits.
"If there's any country in the world that could pull off a switch, it would be China, only because of the government control that they have," AutoPacific analyst Dave Sullivan said. "There's less free market forces in play."
For Volkswagen, China's move is ideal timing. The automaker is planning 80 electric vehicles by 2025 as it continues its campaign to shed the negative image associated with its diesel emissions scandal.
The I.D. Crozz SUV will be one of the first models, boasting range of up to 310 miles, while the I.D. would have range of up to 370 miles.
"The electric car will quickly gain extreme momentum at the start of the new decade," VW brand CEO Herbert Diess said in a statement.
Diess said sales of VW-brand electric vehicles could total 1 million by 2025, up from a negligible amount today and a projected 100,000 in 2020. VW's other brands include Audi and Porsche.
Mercedes' ambitions are slightly less aggressive. The Daimler brand hopes to sell 500,000 electric vehicles by 2025, Warburton said.
Although the regulatory reasons for investments in electric cars are self-evident, the moves will still compromise profits in the short-term. Daimler warned that its margins could fall from 10% to 8%.
"And that sounds like a best-case scenario," Warburton said.
article by Nathan Bomey, USA Today
