Mercedes-Benz is retooling its production setup for electric drive systems from 2024, including batteries, electric drive units and axles, as the luxury car brand prepares to go fully electric by 2030.

Mercedes-Benz is investing mid-single-digit billion euros in its European powertrain production. The new setup within the company’s powertrain production network has been achieved following consultations with German employee representatives and agreements to further increase flexibility and efficiency, which has paved the way for securing the future of existing plants.

German battery plants in Kamenz and Brühl and China’s Beijing plant will start producing batteries for new EQ models from 2024. Powertrain production will ramp up in German, Romanian and China locations from 2024, along with the production and assembly of electric axles at German plants in Hamburg and Mettingen.

With EVs expected to account for around half of all Mercedes-Benz sales by 2025, the timely transformation of the powertrain production network presents a significant challenge. Building out and converting capacity to service EV production, while needing to protect legacy conventional drive unit production, requires significant investment and planning, particularly to imbed new technologies and processes. Last year, for example, the company acquired the British electric motor company YASA and its unique technology in the filed of axial-flow electric motors.

Established auto-manufacturers, such as Mercedes-Benz, face significant challenges in balancing their transformation from conventional to electric vehicle production. Project Blue believes much of the pace of short-to-medium-term EV adoption and conversion, particularly in Europe and North America, will ultimately be driven by the speed of transformation within the car industry. The large, established car brands will determine the availability of EVs, through their build out of new production capacity, but are still awaiting an inflection point in EV profit margins to fully commit to a more rapid transformation in their production networks.

While Mercedes-Benz have set-out bold plans for change, they appear to have prioritised transforming the existing production network over the speed of investing in new, purpose-built facilities. This is one of the disadvantages for established players over pure-play EV manufacturers and will likely continue to slow the pace of EV transformation and adoption.