Mercedes-Benz Vans: Mathias Geisen's new strategy

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High-ranking visitor: German Chancellor Olaf Scholz (left) paid a visit to Mercedes-Benz Vans and Mathias Geisen in Ludwigsfelde at the end of April. The plant is located in Scholz's constituency.

Photo: CHRISTIAN MANG / REUTERS

In the passenger car business, Mercedes boss Ola Källenius (53) is fully committed to luxury. In the future, the van division will also exude more glamour. However, Vans boss Mathias Geisen (44) does not have to switch to "luxury only". Geisen presented the future strategy of his division on Tuesday. This also provides luxury models for private buyers in the van business, but Mercedes is content with premium for commercial customers. The latter account for around 80 percent of the business, with an annual turnover of just over 17.2 billion euros.

Above all, however, Geisen must electrify. "We want to be the pacesetter for the electrification of the industry," said the manager. To date, Mercedes is far from that. The Sprinter, the Vito and the V-Class are now also available as electric variants. Of the approximately 415,000 units sold by Mercedes-Benz Vans last year, only 3.6 percent were electric models.

Geisen wants to pick up speed with the new e-architecture called "Van.EA". With slight delays: Instead of starting in 2025 as planned, all new models of the brand are to be based on it from 2026. This means that Mercedes-Benz Vans will soon no longer be developing new combustion engine models. "We are fully committed to the topic of electrics," says Geisen, but also adds: "We have not planned to stop combustion engines." Some customer groups and also some sales markets are still hesitant about electromobility.

Nevertheless, Geisen wants to gradually increase the proportion of electric vehicles in sales. He has set himself the target of 2026 percent for 20, and by 2030 more than half of all Mercedes vans delivered will be BEVs. Too unambitious? "The way we are positioned, we could also deliver 2030 percent electric vehicles in 100," Geisen counters. But he doesn't believe that the market will develop accordingly.

With the new e-architecture, Mercedes-Benz Vans also wants to reduce the complexity and complexity of its own production network. Compared to the current combustion engine portfolio, the number of variants offered will be reduced "by more than 50 percent". This should also help to "significantly improve our cost structure," says Greisen. "We have to get a grip on that."

At the same time, the future platform should help to offer vans "with a completely new luxury positioning". This is particularly important for private customers in China. To date, Mercedes-Benz Vans sells only 8 percent of its vehicles in the world's largest single market. Similar to the USA (16%), the manufacturer wants to grow there in order to become less dependent on business in Europe. Mercedes-Benz Vans currently sells around 60 percent of its vehicles in its home country.

Despite the costs of ramping up electromobility, Geisen and Co. continue to aim for stable returns. 16.5 percent, as last time in the first quarter, will not be able to be maintained, said CFO Mario Pucher. However, the company wants to remain in double digits until 2030 in any case. Lower margins would be incompatible with CEO Källenius' targets.

Cost pressure is increasing

In order to be able to maintain the current yield level halfway, the van division wants to reduce fixed costs by more than 2025 percent by 2019 compared to 20. To date, the company has made little progress in this regard: in 2022, Mercedes had only achieved 7 percent, according to Pucher. "We had set ourselves the goal of over 10 percent." But inflation and problems in the supply chain have recently slowed things down. "This year, however, we will take a significant step towards 20 percent," promises Pucher.

Mercedes-Benz Vans does not intend to reduce staff as part of the cost programme. After bitter years in the recent past, the brand has already undergone a drastic austerity course. Where competencies can be bundled, vacancies are not filled, said Geisen. "But we don't have any dismantling plans." The van unit is already "an extremely lean team". Instead, Greisen and Pucher hope for an "increase in performance" in production through the leaner portfolio and digital processes. Production hours per vehicle are to be reduced by a quarter by 2025.

Mercedes-Benz has planned the new plant in Jawor, Poland, as a pioneer for this. The company would have liked to share the costs for the site through a cooperation with Rivian. But the U.S. manufacturer surprisingly jumped off. Rivian is concentrating on the U.S. market for the time being, Geisen said, but left a back door open for the future: "We have always parted ways in talks and not in discord."