Mercedes: a long way from home

Let us now look at another example, the Mercedes Group. Unlike BMW, Mercedes did not hit its 2018 target, closing the year at 151 g/km or 7.3 g/km above its quota. The group’s 2020 target it 103.6 g/km. By substituting 600 EQC to GLCs and achieving 10% of A, B, C, E and GLE classes in with plug-in hybrid models, Mercedes runs out of supercredits at 125.2 g/km, or 2358 CHF in average per car sold in Switzerland.

If EQC is a hit with 1’000 units in 2020 and consumers flock to A250e, B250e and the plug-in hybrid diesel versions of  C, E and GLE product lines, the average drops to 116.8 g/km, or 1435 CHF of penalty per car.

Above the target

Commercial strategies will determine the impact on price lists. The least likely hypothesis is that manufacturers absorb these penalties by trimming their margins while they have to invest heavily in electrification, and the profitability of electrified cars is lower.

It is more plausible that the 109 CHF/g CO2 penalty will be reflected in the pricing of high emission cars. This will put large groups at a significant disadvantage in comparison with a few niche players.

Actual demand from consumers for battery electric and plug-in hybrid cars remains unknown. Switzerland is an affluent market, but there are no federal incentives on the purchase of low emission cars. In the last 12 months rolling, the share of electric cars on the swiss market was only 3.6%. This could turn into a heavily promotional environment in the second half of 2020 depending on how the actual mix of different importers evolves.

One thing remains certain: if CO2 targets have been relatively easy to meet up to now, things are going to change drastically as we enter into a new decade, ripe for profound changes in the choices made by consumers for their personal mobility.

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