Markus Schaefer began his journey at Daimler-Benz as a trainee back in 1990. Progressing through various roles over the years, he has witnessed the evolution of the automotive industry firsthand. Today, as a key figure within Mercedes, he sheds light on the company’s current stance, the technological hurdles it faces, and the strategies it employs to excel in an increasingly cutthroat market.
In a landscape where some automakers have opted for a dual model approach like mb or vw, while others have banked on hybrid frameworks such as BMW, which approach has yielded superior results amid shifting consumer preferences in recent times?
Markus Schäfer: Flexibility has been our primary focus. Predicting the speed of consumer adoption across different powertrains has been a challenge. While we strive to deliver top-notch products with innovative technology and enticing design, external factors beyond our control come into play. Considerations like charging infrastructure, fluctuating incentives, and disruptions in the supply chain. Consequently, we set up a versatile manufacturing system capable of producing both ICE vehicles and BEVs on the same assembly lines. Our initial foray into BEVs with models like the EQE and EQS showcased our commitment to efficiency, range, and rapid charging. However, cost efficiency remains paramount as BEVs currently bear a higher price tag compared to ICE vehicles.
Empirical evidence suggests that premium car brands, though less susceptible to pricing pressures than mainstream brands, are not impervious to them. While MB refrained from engaging in the ongoing EV cost reduction race, enhancing cost efficiency seems to be an alternate avenue to bolster the balance sheet, which is under strain, evident from the rise in your R&D expenditure from 8.5 to 10 billion euros from 2022 to 2023. How do you plan to counter this trend? (trimming model variants on the MMA platform? Scaling back diesel engines? Outsourcing engine development to Geely?)
Markus Schäfer: We are leveraging every available resource. On the product front, we are streamlining operations by reducing complexity, allocating less R&D towards ICE technology (focusing on enhancements rather than full-scale developments), promoting greater component sharing among our diverse lineup, conscientiously optimizing sourcing strategies, and realigning our global procurement processes for optimal outcomes. However, our unwavering commitment to quality, a cornerstone of our brand, remains non-negotiable. The brunt of costs is borne by battery and e-motor technologies, prompting substantial research efforts geared towards developing innovative solutions that enhance cost-effectiveness. A significant portion of our research is dedicated to devising new battery chemistries that promise a more economical future. To this end, we are set to unveil our state-of-the-art battery lab in Stuttgart, reaffirming our commitment to pioneering advancements after substantial investments.
Are diesel PHEVs set to maintain a foothold in your product lineup for the foreseeable future? Will Mercedes-Benz continue to refine ICE technology well into the 2030s, considering the shift in the 50% EV sales target from 2025 to the latter part of the decade?
Markus Schäfer: Our commitment to ICE technology will endure, albeit with a streamlined array of offerings. We have established a central team proficient in developing powertrains spanning diesel to 12 cylinders, including AMG variants. These solutions will persist beyond the advent of regulations like EU7 and forthcoming Chinese and Californian standards. As the regulatory landscape evolves, so will our engine technologies. Electrification will be integral, starting from mild hybrids to PHEVs. Currently, there are no plans to phase out diesel plug-ins.
Chinese automotive brands have pledged to introduce the first EVs equipped with solid-state batteries (SSBs) between 2024 and 2026, significantly ahead of the Western industry’s projected timeline of 2028-2030. Could this development be a game-changer if realized? Are you preemptively developing your SSB solutions as well?
Markus Schäfer: We are deeply engrossed in advancing on two fronts: solid-state battery technologies through collaborations with reputable partners in the USA and Southeast Asia, as well as refining conventional lithium-ion NCM batteries with higher silicon content in the anodes. Both avenues of research are poised to enhance energy density and yield lighter batteries in the long run. While the potential of both developments is promising, it is worth noting that SSBs are in their nascent stages. While laboratory testing has shown positive results, transitioning to real-world scenarios with sustained reliability and rapid, continuous charging cycles poses a different set of challenges. Mercedes-Benz remains confident that we will not lag behind in SSB advancements and are poised to compete on a global scale.
It’s been mentioned that your MMA platform will incorporate 800-volt technology starting next year. However, the absence of a Mercedes-Benz EV equipped with this tech in the market so far is intriguing. Can you shed light on the reasons behind this delay?
Markus Schäfer: While we unveiled the concept showcasing the 800-volt technology in Munich last September and China in April, we exercise prudence in timing its market debut, aligned with the readiness of the charging infrastructure. Engaging with this technology prematurely without a robust infrastructure in place would not serve our customers optimally. It’s essential to focus not just on the technology itself but also on charging power and time. At Mercedes, we are diligently working on comprehensive solutions that cater to the evolution and demands of the automotive landscape.The current 400-volt system in the EQS aims to deliver an exceptional charging experience. Enhancements will be implemented soon, aligning with the global shift towards an 800-volt charging infrastructure. Our dedication to building charging hubs with partners like Ionity and Iona in the USA emphasizes our commitment to timing, not tardiness.
Is Mercedes-Benz leaning towards collaborative ventures like ACC or internal development for battery production?
Markus Schäfer: We are diversifying our investments in research, as seen in our upcoming reveal of the Stuttgart chemistry research institute in July. Collaborations will play a crucial role in our battery cell production strategy to ensure competitiveness and efficiency. Emphasis is also placed on optimizing raw material sourcing for cost-efficiency and quality.
Can traditional auto manufacturers match the accelerated development pace of Chinese brands, possibly shortening new model development cycles to 2.5 years instead of the typical 4 to 5 years in Western industries?
Markus Schäfer: The concept of “China speed” is pivotal in adapting to market demands swiftly. Our increased R&D presence in China, with dedicated offices in Beijing and Shanghai, enables us to leverage tech partnerships effectively. Aligning with the rapid Chinese development model is crucial for expediting our own innovations back in Germany.
Will Mercedes-Benz engage in more internal collaborations similar to the F1 Brixworth team for future projects like the EQXX?
Markus Schäfer: We are restructuring Mercedes-Benz R&D to collaborate more closely with our Chinese counterparts and internal expert teams such as the F1 Brixworth division. Leveraging the expertise from our motorsport achievements, like winning the Formula E championship twice, allows us to optimize powertrains efficiently. This approach, as showcased in the EQXX’s development, will be extended to upcoming MMA platform vehicles beginning with the CLA.
Has Mercedes-Benz’s product and tech planning been impacted by EV sales stagnation and the resurgence of PHEVs, especially in China?
Markus Schäfer: Our long-term platform investment strategies remain unaffected by recent market shifts. Despite regional variations in EV adoption rates, our commitment to electric mobility remains steadfast. Significant investments will continue to flow into electric vehicle development, enhancing product appeal and narrowing price differentials for customers.
Mercedes-Benz’s Drivepilot system surpassed Tesla’s autopilot, becoming the first L3 certified tech in California and Nevada. Are similar achievements expected in other regions and with L4 autonomy in the future?
Markus Schäfer: Applications for L3 tests have been submitted in China, albeit pending final regulations. Progress is being made with partners in major Chinese cities to advance autonomous driving. At the recent Beijing auto show, the introduction of point-to-point navigation on Level 2++ systems was a notable milestone. Future advancements will focus on gauging customer interest in more advanced ADAS systems.
Despite projections of in-car digital services as significant revenue sources in the future, current revenue generation remains below expectations. What factors contribute to this discrepancy?
Markus Schäfer: While in-car digital services hold promise for increased revenue, customer willingness to pay for such services is a limiting factor. Striking a balance between enhancing product features with over-the-air updates and meeting customer expectations for premium hardware and software is crucial. Ensuring continued interest without overwhelming customers with excessive additions is key.
