German automaker Mercedes-Benz, owned by Daimler AG, is set to cut costs by more than 20% over the next five years and move to the upper market segment in an effort to boost profits amid weak demand and rising investment in electric vehicles.
“We will take action on structural costs, we will focus on high and sustainable profitability,” said CEO Ola Kallenius, presenting a new business development strategy to investors.
In addition to reducing Capex and R&D costs, Mercedes intends to focus more on exclusive premium products, abandoning the strategy of the last decade for wider market coverage.
The company also plans to accelerate the development of electric motors and software for cars by investing in new technologies that will increase electric mileage and improve efficiency.
The phasing out of internal combustion engines and the move to electric vehicles is expected to result in job losses, which will contribute in part to lower fixed costs.
“There is no doubt that there will be fewer jobs when we switch to electric vehicles,” Kallenius said, adding that he is currently in talks with union representatives to cut staff.
Daimler rose 0.6% on Tuesday. Since the beginning of the year, the market value of the company has decreased by 2.5% and now stands at about 51.2 billion euros.