Mercedes is investing more than $1 billion to upgrade a U.S. plant for assembling batteries and electric SUVs -- putting a big bet on the market for larger battery-powered vehicles.
The German automaker, owned by Daimler, made the announcement Thursday at its Tuscaloosa, Alabama plant, which makes its SUV models GLE, GLS and GLE Coupé.
Along with a nearby battery factory, Mercedes will upgrade factory lines to build its EQ brand electric SUV, the EQ C, starting sometime around 2020.
The move comes as Mercedes prepares to launch its broader EQ line of EVs, starting with the EQ A midsize hatchback, and now the EQ C. Daimler CEO Dieter Zetsche said earlier this month that Mercedes will offer electric versions of all of its models by 2022, plus a new series of plug-in hybrids, for about 50 new models in all.
All told, Daimler plans to invest $11 billion in EVs over the next five years.
The company told investors that profit margins may suffer in coming quarters as it ramps up sales of EVs -- which come with roughly half the profit margins of its internal combustion engine vehicles -- in order to prepare for a world market more focused on reducing vehicle emissions.
Daimler’s moves are being matched by automakers around the globe, and not just early EV entrants like Nissan and General Motors.
Volvo announced in July that every new vehicle model released starting in 2019 will be either a hybrid or electric. Audi is scaling up EV production at its Brussels plant. Volkswagen has committed to investing $10 billion over the next five years to bring 25 new EV models to market by 2025. And Ford plans to invest $4.5 billion in electrification by 2020.
Meanwhile, the electric SUV market is mainly defined by Tesla’s Model X -- a gull-winged, poorly reviewed vehicle. CEO Elon Musk described it as the “technology bandwagon of everything cool we could imagine all at once."
The Model X received Consumer Reports’ second-worst ranking in midsize luxury SUVs, and analysts report that vehicle registrations in the U.S. have been slipping over the past few quarters. Tesla recently dropped the price from $82,500 to $79,500.
Musk took a moment during a May earnings call to address the next SUV concept, the more fleshed-out Model Y. That vehicle, supposedly featuring a “genuine step change” in manufacturing, will “aspirationally” be out in 2019, or more likely in 2020, he said.
Battery prices are one of the most critical determinants in EV pricing, which has turned automakers into battery manufacturers.
Tesla’s Gigafactory in Nevada, as well as its foray into behind-the-meter energy storage through its Powerwall and Powerpack systems, has gotten much of the press attention.
But Mercedes has also launched a U.S. energy storage company making use of its automotive manufacturing capacity -- in fact, the battery plant it’s building in Tuscaloosa will be its fifth around the world.