Daimler chief executive Ola Kallenius is predicting that electric vehicle profits at standalone car business Mercedes-Benz will match those from combustion engines by 2030 © Getty Images

Streamlined, valuable and so comfortable you will not want to get out — Ola Kallenius’s vision for Daimler could be modelled on the German automaker’s luxury sedans, definitely not its trucks. The chief executive confirmed last week he would spin off the group’s lorry business. This week he accelerated the strategy by predicting that electric vehicle profits at standalone car business Mercedes-Benz would match those from combustion engines by 2030.

This is not an outlandish claim, even if the new car company is taking the name of its most iconic marque, best known for large, leather-lined, gas-guzzling cars. The group trails rivals that have already thrown their weight behind electric vehicles. Källenius is right to point Mercedes in the same direction.

Daimler shares have risen 12 per cent since the break-up was announced. The move should unlock the conglomerate discount that has contributed to long-term underperformance. Accounting for about a quarter of sales and operating profits, a standalone Daimler Trucks should command a higher multiple than Daimler’s 12 times expected earnings and might be closer to Volvo Trucks and VW’s Traton at 15 times. 

Mercedes-Benz should win its own re-rating if it expands its EV efforts. Källenius has his eye on more than just Tesla’s trading multiple. A dedicated luxury electric vehicle such as Mercedes-Benz’ new EQS will directly compete with the Tesla Model S.

Global EV penetration is expected to be about half of total vehicle sales by 2030. Sales of higher end versions are concentrated in regions where electrification is progressing faster. EV penetration in Europe was already approaching one-fifth by the end of 2020. 

A roughly 15 per cent cost disparity between EV and combustion engine cars should disappear by 2025, thinks UBS. Battery costs are expected to halve over the next five years. Growing costs for emissions reduction for combustion power will help to close the profit gap, too. These long-awaited benefits will boost Mercedes-Benz in its conversion.


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