Move blamed on heavy cost of investing in electric vehicles just as traditional car sales slow

This article is more than 10 months old

This article is more than 10 months old

Mercedes-Benz plans to save €1.65bn (£1.4bn) by cutting more than 1,000 jobs in the latest sign German carmakers are struggling to make big investments in electric car technology.

Carmakers around the world are spending billions on developing battery-powered electric vehicles but at the same time sales of internal combustion engines are slowing in the face of economic weakness and scandals over emissions.

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Mercedes-Benz’s premium cars division will bear the bulk of the job cuts, its parent company, Daimler, said on Thursday, with cuts of €1bn from its wage bill expected by 2022. Management and contractors will be particularly affected, while the vans and trucks divisions will together cut €650m in staff and other costs.

Daimler said it would cap investment in property, plant and equipment and in research and development at current levels, with plans in place to reduce investment in the medium term.

Carmakers are on the verge of a key period in the transition away from reliance on fossil fuels, with strict rules on carbon dioxide emissions coming into force on 1 January. Manufacturers will face heavy fines if the average emissions of cars sold in the EU are above 95g of CO2 per kilometre.

Ola Källenius, the chair of Daimler’s board, said: “The expenditure needed to achieve the CO2 targets requires comprehensive measures to increase efficiency in all areas of our company. This also includes streamlining our processes and structures.

“This will have a negative impact on our earnings in 2020 and 2021. To remain successful in the future, we must therefore act now and significantly increase our financial strength.”

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Daimler shares fell by 3% in early trading on Wednesday, to €51.97.

It made earnings before tax of €10.6bn in 2018 but has given repeated profit warnings during 2019 and analysts forecast earnings before tax of about €6.3bn for 2019, according to average estimates from S&P Global Market Intelligence.

As well as the global race for electrification, Daimler faces the prospect of further legal costs in relation to alleged breaches of emissions regulations. The scandal over diesel emissions cheating technology has also dented the rival German carmaker Volkswagen.