Commentary

Mercedes Amps Up $1 Billion For Electric SUV Production In Alabama

Mercedes-Benz will invest $1 billion in its SUV manufacturing facility in Tuscaloosa County, Ala., to turn out EQ-branded electric vehicles by the beginning of the next decade, parent company Daimler announced yesterday, creating 600 jobs and yet more competition for Elon Musk’s Tesla. It will build a battery plant nearby as part of the initiative.

“While the investment could ease tensions over President Donald Trump’s claims that too many German cars were being sold to Americans, the real target is certainly the intensifying rivalry with Tesla,” writeBloomberg’s Christoph Rauwald and Elisabeth Behrmann. “The Palo Alto, California-based carmaker’s flagship Model S sedan outsold the Mercedes S-Class and BMW 7-Series last year in the U.S., putting pressure on the brands to defend their image as automotive innovators.” 

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The new EQ brand will cover electric products from vehicles and charging services to home energy storage units, reports Kirsten Korosec for Fortune

“Mercedes gave the world a first look at what EQ vehicles might look like at the Paris Motor Show in 2016 when it unveiled an electric crossover concept vehicle. Mercedes also has a performance brand called Mercedes-AMG and super-luxe brand called Mercedes-Maybach,” Korosec writes.

“While electric vehicle sales have been tepid overall, Mercedes has watched as Tesla jumped out and has become a formidable player in the super-premium segment with its electric Model S sedan and Model X crossover. Now Tesla is threatening the lower, entry-level part of the luxury market with its lower-priced Model 3 sedan,” points out Nathan Bomey for USA Today

Mercedes “is pursuing an ‘anything Tesla can do, we can do better’ strategy, Sanford Bernstein analyst Max Warburton said in a recent note to investors,” Bomey reports. “‘Mercedes is convinced it can match Tesla battery costs, beat its manufacturing and procurement costs, ramp up production faster and have better quality. It is also confident its cars will drive better.’” 

The investment announcement was made during a 20-year celebration of Mercedes-Benz U.S. International’s plant in Vance, Ala., which drew officials including Gov. Kay Ellen Ivey, who said the facility had reinvigorated the state’s manufacturing sector. 

“Standing in front of Job 1, the first M-Class SUV produced in February 1997 at the plant in Vance,” Markus Schäfer, member of the divisional board of Mercedes-Benz Cars, Production and Supply Chain, announced the expansion to employees, writes Ed Enoch for TuscaloosaNews.com. “The celebration took place in the new body shop for the plant, which features more than 900 robots and is currently still ramping up for production.”

The number of robots to be added to the workforce was apparently not disclosed.

“Schäfer and Mercedes-Benz U.S. International President Jason Hoff recalled how the plant grew from a 1.2 million-square-foot facility with about 1,100 employees in 1997 to its current size of 6 million square feet with more than 3,700 employees. The plant produced more than 310,000 vehicles last year,” Enoch continues.

“Transitioning to electric vehicle manufacturing will be a big change for the plant,” write Bloomberg’s Rauwald and Behrmann. “Currently, it produces the GLE, GLE Coupe and GLS SUVs for Mercedes. Crossovers have been one of the few consistent profit-makers for the auto industry over the last five years, so the transition to all-electric is a big vote of faith in the technology.”

As well as in the continued popularity of larger vehicles.

“We see a global trend toward SUVs” and away from sedans, Schäfer said.

“Daimler said some of the new EQ SUV production will also be exported but wouldn’t specify how many of these vehicles it expects to sell in the U.S. These fully electric vehicles will be integrated into the gasoline engine and hybrid gas-electric assembly lines in Tuscaloosa,” writes Chester Dawson for the Wall Street Journal.

“In 2014, SUVs and compact, crossover SUVs, such as Mercedes’ GLE Coupé, became more popular than saloons [sedans] for the first time, according to IHS Global Insight,” reports Patrick McGee for Financial Times

“The trend has since been turning global. Seventy percent of the SUVs Mercedes builds in the U.S. are exported. The same holds for rival BMW, which builds SUVs in Spartanburg, S.C. In 2016 BMW built 411,000 SUVs in the U.S., and exported 270,000 of them, according to Evercore ISI,” McGee continues. 

But the Europeans would be hard put to trump us when it comes to rhetorical backlash.

“The Germans are bad, very bad,” Trump said during a European Commission meeting in Brussels in May, Der Speigel’s Peter Müller reported. “See the millions of cars they are selling to the U.S.? Terrible. We will stop this.”

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