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Amid Shift To Electric Cars, Mercedes Plans To Lift Profit Margins

Amid Shift To Electric Cars, Mercedes Plans To Lift Profit Margins
With the process of shifting to electric cars, which is costly, looming large, the luxury car maker Mercedes-Benz is conducting a rethink of restructuring of its operations to become more profitable after spending years in its efforts to remain the global leader in the sale of luxury cars, an ambition that it is now rethinking too.  
The company wants to return to a path of growth of sale in the mid to high single-digit range by 2025, said Daimler AG’s main division, even in the face of unfavorable market conditions. The company has set a target of clocking a double digit profit margin if the business environment is favorable.
“We have not yet lived up to our full potential in terms of turning volume success into profit growth," Chief Executive Officer Ola Kallenius said in a statement ahead of Daimler’s capital markets day. “We will invest where we can win, grow more intelligently, and reshape our industrial footprint."
After the German car maker managed to successfully negotiate the unprecedented slump in the global auto industry because of the economic impact of Covid-19 pandemic in a manner that was better than what the market was expecting, which has gradually improved investor confidence in Daimler in recent months.
But the crown for the most valuable car company of the world was surprisingly snatched by United States based electric-car maker Tesla Inc. as it surpassed all of the traditional auto manufacturers. At the same time, Daimler and other traditional auto companies struggled to revamp their legacy operations.
Daimler has 13 buy ratings among analysts surveyed by Bloomberg, followed by 11 holds and seven recommendations to sell the stock. The stock slipped 3.1% this year through the close of trading Monday, outperforming larger German peer Volkswagen AG and arch rival BMW AG.
The all-electric EQC SUV has been flanked with a plug-in minivan dubbed EQV by Mercedes.  The company has set a target of rolling out the vehicle – the compact EQA hatchback, sometime later this year. Last month the company rolled out a fresh version of its flagship S-Class. Next year, the company plans to roll out of its manufacturing facilities a fully-electric sibling of the sedan, dubbed EQS, which will be based on the first dedicated electric-car platform of the company.
A crucial element of financing restructuring costs is the profits that the company manages to generate from large luxury cars which the company hopes will make Mercedes more efficient. For years, the company has outsold luxury-car rivals but it has also experienced a slump in returns which have come below the level of mass-market peers such as PSA Group

Christopher J. Mitchell

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