Daimler Claims Move From Diesel to EVs Could Affect Supply Chain

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【Summary】Daimler, the owner of Mercedes-Benz, warned that a switch to electric vehicles would cause automotive suppliers to invest a lot of money in helping brands make the switch, which could lead to an undesired outcome.

Original Vineeth Joel Patel    Apr 04, 2018 12:50 PM PT
Daimler Claims Move From Diesel to EVs Could Affect Supply Chain

In recent years, diesels have earned a bad reputation. Volkswagen's emissions-cheating vehicles helped seal the deal for the death of diesels in the United States. But it's not the only automaker to have cheated to allow its diesel-powered vehicles to pass emissions. More reports are coming out ousting other automakers.

The U.S. isn't the only country, though, that has recently come out against diesels. More countries are heading towards hybrids and electric vehicles as a way of helping pollution and reducing the amount of harmful contaminants in the air. This is causing automakers to move away from diesels and towards EVs. Unfortunately, that isn't going to be an easy transition for automakers or automotive suppliers. 

Daimler Issues Stark Warning

According to a report by Reuters, Daimler, who owns Mercedes-Benz, warned about the transition towards EVs. According to the German brand, its automotive suppliers are being forced to invest to help Mercedes-Benz electrify its entire lineup by 2022. The shift to electrified vehicles, as the outlet states, will have a massive impact on automakers and their suppliers. 

"Due to the planned electrification of new model series and a shift in customer demand from diesel to gasoline engines, the Mercedes-Benz Cars segment in particular is faced with the risk that Daimler will require changed volumes of components from suppliers," the carmaker stated in its annual report.

"This could result in over- or under-utilization of product capacities for certain suppliers. If suppliers cannot cover their fixed costs, there is the risk that suppliers could demand compensation payments," said the automaker. 

More Issues Could Affect Switch To EVs 

These aren't the only problems, as the brand also warned about expansions that would have to take place at suppliers' plants. If that didn't sound bad enough, the automaker also warned the outlet about other uncertainties that could lead to supply woes – mainly a political crisis. 

"Generally, the ability to pass on the higher costs of commodities and other materials in the form of higher prices for the manufactured vehicles is limited because of strong competitive pressure in the international automotive markets," claimed the annual report. 

Reuters reports that Daimler's provisions stood at approximately $17.3 billion at the end of 2017, which was roughly $2.59 billion more than the in 2016. Daimler stated that the rise in provisions was due to "increased obligations from sales transactions, provisions for warranty obligations, and provisions relating to legal proceedings." 

It's important to note that diesel owners are suing Mercedes-Benz for their diesel-powered machines. According to the lawsuit, the automaker fitted its vehicles with software that helped the cars produce fewer emissions.  

via: Reuters

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