Vienna Manage less and produce faster: With this mixture, Mercedes-Benz Vans saves against high additional expenses for electric vehicles. Specifically, the van unit of the Stuttgart car manufacturer is planning to reduce fixed costs by a good fifth by 2025 compared to 2019, as announced on Tuesday as part of a “Strategy Update”.
“We are questioning all costs in order to align ourselves with the semi-electric world,” explained Mario Pucher, Chief Financial Officer of Mercedes-Vans. For example, production is to be reorganized across all plants in order to reduce the so-called production hours per vehicle by a quarter. This increases output: more vans are produced in the same amount of time.
In addition, the number of currently more than a hundred portfolio positions for some vehicles is to be reduced by almost a third in the medium term. This would primarily affect equipment variants, not the models themselves. In addition, functions in administration will be combined, with no layoffs: “There is no staff reduction program, but where we bundle and digitize functions, we do not make any follow-up appointments,” emphasized Van- Boss Mathias Geisen.
16.5 percent return on sales
The manager did not name a specific amount of savings, but in the previous year the fixed costs were already around seven percent lower than in 2019. This year, another significant leap in efficiency is to be achieved.
The savings plans seem surprising at first glance. In the first quarter, Mercedes-Vans more than doubled its operating profit to 762 million euros and achieved a record return on sales of 16.5 percent. At second glance, however, the division is under a lot of pressure.
Geisen wants to increase the share of light commercial vehicles with electric drives in total sales from just four percent today to 20 percent by 2026. By the end of the decade it should be more than 50 percent. The problem: The production of fully electric vans is many times more expensive than that of passenger cars. Internally, there is talk of “immense additional expenditure”.
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The batteries used in vehicles such as the E-Sprinter, which is more than six meters long and 2.7 meters high, are significantly larger and heavier than those used in conventional cars. The safety requirements for commercial vehicles are also higher, as are the loads being transported.
“We do not see cost parity between combustion engines and fully electric vehicles in this decade,” states Geisen. Consequently, “no stop with combustion engines” is also planned. Both the business with battery electric vehicles and that with diesel engines will continue.
50 percent identical parts
However, the manager promises to keep the operating margin of Mercedes vans in the double-digit percentage range in the coming years, despite increasing electric sales. Last but not least, this should be made possible by synergy effects in purchasing, development and production with the car division, which is about seven times as large.
Up to 50 percent of the parts used between the divisions are already identical. With the electric platform VAN.EA, Geisen is aiming for further savings. The architecture on which all new large and medium-sized vans with electric drives will be produced from 2026 provides for uniform front axles and battery housings as well as electric motors in different versions in the segments. This applies to the Sprinter and Vito models, for example.
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In general, Geisen wants to focus more on the large models and the lucrative private customer business. His unit currently sells eight out of ten vehicles to commercial customers, such as parcel services and craftsmen. They order the Sprinter particularly often. The panel van accounts for more than half of annual sales of more than 415,000 vehicles.
In the private customer business, meanwhile, the buses of the V class are seen as a margin guarantee. In China in particular, there is still great potential for luxury vans. Division head Geisen is even considering setting up on-site production based on the VAN.EA platform from 2025.
Unlike the Mercedes passenger car unit, the van division has so far had little presence in the Far East. Almost two-thirds of star-logo vans are sold in Europe. Geisen wants to reduce this dependency on the EU and, in addition to China, is pushing sales in the USA. Geisen announces that sales there are to be increased “significantly” and “profitably” in the coming years.
Small vans on siding
All in all, the former head of strategy at Mercedes and still a close confidant of CEO Ola Källenius swears by the “top-end segment” and particularly lucrative applications. What is striking in this context is which segment Geisen does not explicitly address – the small vans.
With the Citan for commercial customers and the T-Class for private users, Mercedes is still represented in the segment. But many top managers at Mercedes have always struggled with this business, as the small vans are based on a cooperation with Renault.
The French were once a welcome partner, and the small car Smart was also assembled. But those times are long gone. The mass manufacturer Renault is hardly compatible with the luxury strategy of Mercedes CEO Ola Källenius. It is therefore questionable whether a new generation of the Citan and T-Class will be launched in a few years’ time.
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