Daimler budgets for supplier support

German vehicle manufacturer Daimler has warned that a fall in demand for diesel cars and a switch to electric vehicles (EVs) could force it to ‘prop up’ its supplier base.

As carmakers face intense scrutiny over their diesel vehicles, following the Dieselgate scandal of 2015 and a number of national governments looking to encourage drivers to switch away from the fuel, many have stepped up their development of EVs and agreed some software recalls to ensure the technology remains relevant.

As well as manufacturers themselves, suppliers are also being forced to invest to help electrify model ranges, with Daimler having a target of every model featuring an EV version by 2022. This need for investment has prompted the carmaker to use unusually frank language to warn about the impact of the shift to electrified cars.

Its annual report said, ‘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. This could result in over- or under-utilisation of production capacities for certain suppliers. If suppliers cannot cover their fixed costs, there is the risk that suppliers could demand compensation payments.

‘Necessary capacity expansion at suppliers’ plants could also require cost-effective participation.’

By 2022, the company plans to electrify its passenger vehicle line-up, offering more than 50 battery-electrics, plug-in hybrids and 48-volt mild hybrids in all sizes and segments.