Mercedes Despite Record Year in Panic Mode

First came the celebration, because Mercedes sold in 2016 more cars than BMW and reached new sales records. But then, within a week, three announcements showed the panic mode that Mercedes is in.

2016 was the best year in the Mercedes history. Not only did they sell more cars than BMW, Mercedes also delivered over 2 million cars with a record growth of 11.4%.

Three seemingly unrelated news items from the past week show that Mercedes is trying to extinguish some firs. Record sales could not hide the fact that the car maker from Stuttgart is failing with the coming disruptions in the automotive industry.

First (3/27/2017) Mercedes announced that it is scaling back development of the fuel cell. And that only a few weeks after the company confirmed their commitment to this technology. The change comes due to a simple calculation: batteries for electric vehicles are now cheaper than fuel cells, as well as in some cases for internal combustion engines.

Then (3/29/2017) came the news that Mercedes is accelerating the availability of their planned series of electric vehicles by three years. Instead of 2025 the ten models shall be available in 2022. Yes, 2022! Nine years after Tesla introduced the Model S. Six years after Tesla introduced the Model X. Five years after Tesla introduced the Model 3. The reasons are clear: Mercedes is more and more under pressure with their internal combustion engine cars and potential cheat software. Also several cities are following through with banning Diesel cars from entering their borders. And Mercedes has 90,000 employees that work around the engine. You won’t need them anymore with electric vehicles, and you can’t retrain them to let’s say ‘battery chemistry’. They have to be let go.

And then came the most recent announcement (4/3/2017) on a partnership between Bosch and Mercedes for developing autonomous cars. While Mercedes has been doing research on self-driving cars since the mid-Eighties with some success, the company has fallen far behind new competitors.  Google-Waymo, Tesla, Uber, GM Cruise or Volvoare way ahead of Mercedes (and Bosch). Somehow this partnership looks like the ‘walking dead’. Two guys with foot injuries try to go walk faster by teaming up.

Tesla on the other hand is set up to give German car makers a two-fold ‘kiss of death.’ First with the start of the Model 3 deliver in July 2017. Then with the software-activation of the Autopilot Hardware Kit 2, which is equipped for autonomous drive. So far, Tesla has built and shipped 50,000 cars equipped with the Hardware Kit 2. With one switch in the second half 2017 or beginning of 2018 more than 100,000 Teslas will have self-driving capabilities and generate tons of data that will be used to quickly improve the technology. While German car companies like Mercedes will still be discussing whether customers want to hand over control to the car, Tesla has those cars on the roads.

Mercedes find itself in the ‘peak horse’-moment. The highest number of horses in the US was in 1915 with over 21 million horses. One horse for three Americans. And that at a time when the streets were already dominated by cars, as can be seen on those two pictures below from 1900 and 1913. Mercedes is in the ‘peak car’-Moment, and the three recent announcements show that they understood their situation and are now reacting in a panic mode. Late but they react. The future will show, if they will survive.

This article was also published in German.

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