“I would sell Mercedes”, “Nothing is happening there”, “Mercedes is the worst positioned for the electric future” – I have seen these statements recently here in the sub and would like to show why I clearly disagree here and will hold my shares.
Mercedes-Benz's Luxury Strategy
Mercedes' strategic decision to focus on the luxury segment has been widely (and critically) reported. In my opinion, it is bold and 100% correct.
- In a battery-electric car market, the expertise needed for combustion engines is no longer worth anything. In the future, anyone can build electric cars.
- There are two options to deal with this change:
- Try to sell a higher number of cars at a lower price.
- Try to sell a lower number of cars at a higher price.
- For a German manufacturer that already produces high-quality cars, only the second option really makes sense, because:
- The value chain for e-cars is mainly located where the lithium mines and battery factories are, e.g. in China. Trading these key building blocks within a country is simple, which is why China is able to produce inexpensive e-cars more easily – not to mention the personnel costs and legal requirements. The strategy of “mass instead of class” would probably not work for a German manufacturer.
- Conversely, Mercedes already has a high level of expertise when it comes to the “hardware” of the car. It would be wasted potential not to use this knowledge to produce high-end vehicles.
- The luxury segment offers significantly higher margins and is almost crisis-proof.
Therefore, I find the move to the luxury segment reflective, honest, and commendable.
Fundamental Development of Mercedes-Benz
I also like the fundamental development of Mercedes. In my view, Mercedes is the best positioned of all German automakers for the electric future.
- I'm not buying the company, I'm buying the CEO. The new CEO of Mercedes comes from Research & Development himself, is very progressive and engineering-driven, and wants to exclusively design vehicle platforms for electric cars as of 2025.
- About 2 weeks ago, a company got clearance for autonomous driving at SAE level 3 in the US for the first time. That company was not Tesla, but Mercedes.
- Mercedes is investing in its own future in a very big way: 60 billion development budget until 2025 (compare Tesla: 2.6 billion per year), construction of a fast charging network with 10,000 charging stations, binding supply agreements with Rock Tech Lithium, etc.
- Mercedes dares to design completely new platforms for e-cars, e.g. with the EQE – while BMW, for example, does not want to scare away customers and builds several e-cars that would work well as a combustion engine car but are actually suboptimal as an e-car.
- VW is also sticking too closely to what they already know and can do. This is what the new ID.4 looks like from the inside, and accordingly, the model flopped in the tech-savvy Chinese market. Mercedes, on the other hand, manages to sell a third of its cars in this market.
Therefore: I currently have 18 shares in MBG. Even though there is sometimes talk of selling them, I'm holding them for now.
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