FRANKFURT (Reuters) – European car bosses are beginning to address the realities of mass vehicle electrification, and its consequences for jobs and profit, their minds focused by government pledges to outlaw the combustion engine.
As the latest such announcement on Monday by China added momentum to a push for zero-emissions motoring, Daimler (DAIGn.DE), Volkswagen (VOWG_p.DE) and PSA Group (PEUP.PA) gave details about their electric programs that could give policymakers some pause.
Planned electric Mercedes models will initially be just half as profitable as conventional alternatives, Daimler warned – forcing the group to find savings by outsourcing more component manufacturing, which may in turn threaten German jobs.
“In-house production is almost irrelevant to the consumer,” Daimler boss Dieter Zetsche told reporters on the eve of the Frankfurt auto show, in the midst of a German election campaign in which automotive jobs have loomed large. The company set a target of saving 4 billion euros ($4.8 billion) by 2025 to help fund the cost of its electric cars.
“Daimler is the first company to state explicitly how much electric vehicles are going to hurt margins,” said Bernstein analyst Max Warburton. “It was brave to go first – but of course it won’t be the last.” Volkswagen (VW), for its part, said it was seeking new global supplier contracts to source 50 billion euros ($60 billion) of electric car content including batteries, which are not yet manufactured competitively in Europe.