When automakers kicked off their electric vehicle arms race a few years ago, their plans ran on a lot of assumptions. One of the biggest was that customers would just show up for EVs like they have for their other cars—loyal Audi owners would buy Audi EVs, Mercedes owners would buy Mercedes EVs, and so on. But many of them neglected to think that their EVs would have to be actually good for customers to make that leap.
Now, they're looking to adjust their plans as the EV takeoff wasn't as direct as they expected, and Mercedes is a perfect example. That kicks off this Monday edition of Critical Materials, our morning roundup of tech and industry news. Also on deck today: Rivian and Lucid prepare to report Q2 earnings and Ford's "dirty" secret when it comes to profits. Let's go.
30%: Mercedes To Offer The 'Little Bit Of Everything' Powertrain Strategy
Like I said, the EV transition was built on assumptions. (The other big one was that the EV charging infrastructure would just kind of "show up" around these cars like the gas station network once did, but that wasn't the case, so now the automakers are doing it themselves in various ways.)
Mercedes made some wrong assumptions about the EQ-branded EVs. They're not all bad, of course—the range on some of them is excellent, the Hyperscreen is rad and I'm weirdly partial to the EQE sedan—but their super-aerodynamic "jellybean" style hasn't delivered the kind of presence and stateliness that Mercedes buyers expect. And cars like the EQS just don't feel as nice or as premium as a proper S-Class, somehow.
So the plan moving forward is to eventually phase out the special, standalone EQ cars and do more vehicles like the new G-Class: same body but in gas or electric form.
As Automotive News points out today, that's basically what BMW is doing too. It offers gas, electric and hybrid versions of many of its most popular cars, along with some standalone versions of each like the iX, XM or M3, to give some examples. Here's more:
Mercedes-Benz is bringing 25 new and updated models to showrooms this year, including entry and midsegment vehicles such as the redesigned E-Class and new plug-in hybrid GLC crossover.
The automaker is backing off its electric vehicle push as U.S. consumers cool to its zero-emission offerings.
At a meeting in April, Mercedes told retailers it would boost combustion engine and hybrid vehicle supply in 2024. The automaker plans to expand its plug-in hybrid offerings in the second half with the GLC.
The automaker is tweaking product development plans and taking a page from rival BMW. Future models will share platforms and support gasoline-only, hybrid and electric powertrains. Mercedes will ditch the jelly bean design and EQ branding on future EVs.
But this doesn't mean Mercedes is abandoning EVs, as some outlets have implied. There's a new electric cargo van coming, a high-performance AMG model, the new "electric first" CLA-Class family and more. Meanwhile, a number of EQ models will be updated and conventional cars like the E-Class and S-Class are getting hybrid and plug-in hybrid powertrains, if they don't have them already.
The plan certainly worked well for BMW, which has a higher EV share of sales than most and gives loyal customers other options too. No reason it can't work for Mercedes either.
60%: Lucid, Rivian To Report Q2 Earnings
Overall, the second quarter wasn't exactly spectacular for most automakers. While several posted more strong EV sales, car sales, in general, are down as interest rates remain high and the companies themselves face steep capital ramp-up costs—or are scrambling to fix various quality issues.
So how will the startups stack up? Lucid's earnings call is this evening and Rivian's is tomorrow and we'll be covering both. Lucid is coming off a record sales quarter, but it's still dogged by enormous costs that will keep profits well on the horizon for now. We may hear more about the Gravity SUV, expected to be a much bigger volume-seller than the Air sedan.
As for Rivian, it has said that it expects to be "gross profit positive" by Q4 of 2024, but we'll learn more about that trajectory soon. Rivian's shares were bolstered by the big investment and tech joint venture with Volkswagen, but that's going to be a long-term play and probably not something that yields immediate, overnight returns.
More on both stories as we learn more.
90%: Ford's Secret 'Ferrari': The Commercial Fleet Division
Ford is fairly unique among automakers because it breaks out financial results for its EV division separately from its gas and commercial divisions. That's made it a bit of a punching bag for investors, who want profits and returns right now, but any EV supply chain and production system is going to take time and money to build out—investors love Tesla and it burned cash there for well over a decade.
But Ford has a secret weapon that's both paying the bills and keeping its EV division afloat: the Ford Pro commercial division, CNBC reports:
But Ford has proven that’s not always the case by breaking out financial results for its “Ford Pro” fleet business. The operations have raked in about $18.7 billion in adjusted earnings and $184.5 billion in revenue since 2021.
Such results have led Wall Street to praise the business, as analysts have called it a “hidden gem” and Ford’s “Ferrari,” referring to the highly profitable Italian sports car manufacturer.
Automakers, including Ford, also see fleet operations as a key driver in other ways, including for electric vehicle sales, as well as reoccurring revenue options such as software and logistical services.
“This revenue has gross margins of 50-plus-percent which drives significant operating leverage and improved capital efficiency,” [CEO Jim] Farley said during the quarterly call. “The major part of this new software business is actually Ford Pro.”
This is interesting for a few reasons. For one, EVs are a big part of these commercial plans, as are traditional gas-powered vans and trucks. And General Motors and Stellantis are jealous, so they're trying to ramp up similar commercial operations as well:
Unlike retail customers, many fleet and commercial customers have predefined routes or schedules that could accommodate EVs well because they drive locally in a region and could charge overnight when electricity costs are lower.
All three of the legacy Detroit automakers are touting such advantages to their fleet customers, while still offering traditional vehicles with internal combustion engines.
Stellantis and Ford also have started highlighting their portfolios of different powertrains such as hybrids and plug-in hybrid electric vehicles as adoption of EVs has not occurred as quickly as many had expected.
Ford last month announced plans valued at about $3 billion to expand Super Duty production, including to “electrify” Super Duty trucks.
“We’ve gone to, on all of our commercial vehicles, a multi-energy platform so we will offer customers the choice that we think no other competitor will have,” Farley said during the earnings call. “We believe we will be a first mover, if not the first mover, in multi-energy Super Duty.”
But all of them know that if they can't get consumer-focused EVs right—and profitable—the commercial truck and van business might be all they do someday.
100%: What Did Mercedes Get 'Wrong' Here?
Was it just the blobby styling, or did Benz drop the ball on EVs some other way? Why didn't people warm up to these like other models? Share your thoughts in the comments.
Contact the author: patrick.george@insideevs.com
