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8 Mar 18

Mercedes-Benz CEO Dieter Zetsche explains the 'ketchup effect'

Even if the future is electric, and despite its own progress in that direction, it makes sense for Mercedes-Benz to pursue other advances, including better diesel engines. That prudent strategy is based on what company CEO Dieter Zetsche, in a round-table interview at the Geneva Motor Show, called the 'ketchup effect'.

Zetsche – or 'Dr. Z', as he is affectionately known – is not just head of Mercedes-Benz Cars, he is also Chairman of the Board at parent company Daimler. At the recent Geneva Motor Show, he opened up about his group's strategic thinking in a round-table conversation with the press, including Fleet Europe.

WLTP tests
The conversation turned to some of the main topics in the automotive industry today – first among them the gradual replacement, since last September, of the old NEDC lab tests for cars by the new WLTP tests.  

“The execution is quite a challenge. We have to get more vehicles through certification than in the past, as we have to address almost every specific model version with specific options separately But it doesn't make sense to complain. We just have to find solutions”.

Li Shufu
In the past few weeks, the German car industry was dominated by the news that Li Shufu, Chinese billionaire and chairman of Geely – which already owns Volvo Cars – had acquired almost 10% of Daimler for about $9 billion and is now its largest shareholder. Mr Zetsche sought to put the controversial move in context.

“Li Shufu definitely made a good investment”, he laughed. “And we’ve always said that we welcome strategic investors. In that regard, it's certainly a positive move for us. Secondly, Li Shufu has been very successful in all that he has done so far, so he's obviously a good entrepreneur. There's certainly nothing wrong about talking with successful entrepreneurs who have a strong market position in China”.

2.3 million cars
The US and the UK remain important markets for Mercedes-Benz, but there may be trouble on the horizon: in the latter case, there’s Brexit, and in the former, the trade war that president Trump is threatening to unleash.

“Out of an annual total of 2.3 million new cars sold, we're selling about 340,000 units in the U.S., so that's not negligible”, Mr Zetsche said. “The UK market accounts for 180,000 units – in 2017, for the first time ever, we became the #1 brand in the UK premium segment. So that's a very relevant market for us as well”.
“But of course, we're not politicians. We don't set the framework. We can only wait for the facts. Ideally, there will be no changes to the current situation. And if there are, we'll have to make the best of it”.

Mobility and sharing
On the subject of the possible merger of car2go and DriveNow, respectively Daimler's and BMW's carsharing subsidiaries, Mr Zetsche remained diplomatically reticent: “We like to follow the speculations in newspaper articles on developments in this field. Some of the things we read have substance – some don't. We have our own communications strategy: if there's anything of substance to communicate, we will do so, at the right moment”.

“In general, these mobility and sharing activities certainly require scale. Therefore, as a general consideration, it makes sense to improve scale in these fields as soon as possible, because there is a first-mover advantage to this as well. These are general observations; to which specific conclusions they may bring us, remains to be seen. But I might know a little bit more than you do (laughs)”.

Modern diesel
Mr Zetsche was happy to reveal that, while Daimler is investing substantially in electric powertrains, it is not giving up on diesel – despite the current anti-diesel climate: “The latest diesel engines – particularly the ones developed and produced by us – have low emissions also on the road, and they fulfil current requirements. And our current diesel engine generation has the technology to fulfil the future requirements as well”.

“These diesel emissions levels at the same time continue to provide a 10-15% advantage on the CO2 side. Since we're still collectively trying hard to reduce humanity's carbon footprint, I think it would be irresponsible not to use this opportunity to make further progress in reducing CO2 emissions. That is, as long as diesel doesn't come with significant disadvantages. In light of this, we continue to pursue the same (powertrain) strategy as we did in the past”.

Tipping point
As Mr Zetsche confirmed in the round-table conversation, Mercedes-Benz has a very realistic view of when it will sell more EVs than combustion-engine cars: “The timing of that tipping point will be determined by a number of factors. The cost of battery-electric drivelines is one. The driving range, charging time and charging infrastructure are important elements as well. And ultimately, even when all those elements are positive, it will depend on the customer reaction, which is not 100% predictable.

“That's what I sometimes call the 'ketchup effect': you know it's coming, but not when or how much. I think we have to be aware that the world out there is not like the Geneva Motor Show”.

“For example, forecasting when there will be sufficient charging infrastructure in remote places of the world will be difficult. So I think there will be internal-combusting cars for a long time yet, independent of which we are going full throttle with all our capabilities towards a full range of electric and battery-electric vehicles for all segments in our offer”.

Copyright picture: Daimler

Authored by: Steven Schoefs