A year ago, investors practically gave up on the big global automakers to die. The shares of Daimler, General Motors and Ford Motor were at least 10 years old. Electric vehicle starters without any sales were sometimes worth more than traditional automakers with tens of thousands of employees and factories around the world. The pandemic seemed to seal the fate of the dinosaurs.
But it turns out that the old giants may not be doomed yet. The gains reported by Daimler on Thursday underlined a notable return by some traditional automakers. These companies have managed to survive the pandemic, refocus on electric vehicles and convince stock market investors that they will not let Tesla win over its customers without a fight.
Daimler’s stock has tripled since it hit its lowest point in March and rose again on Thursday after the company said net profit for the year increased by almost 50 percent to 4 billion euros, or $ 4.8 billion. billion in 2019.
General Motors’ shares have also almost tripled since March. The company exceeded analysts’ expectations last week when it reported a net profit of $ 2.8 billion in the fourth quarter, compared to a loss a year earlier.
In addition to making more money than investors thought possible in a year of turmoil, the two companies, dating from the early 20th century, have been making decisions that show that they understand the technological changes that are devastating the sector.
GM changed the perception of its commitment to electric vehicles when it said last month that it would eliminate fossil-fuel vehicles by 2035. Daimler’s stock soared after the company said this month that it would split its car and truck divisions into separate companies, each. with its own list of actions. Daimler, based in Stuttgart, Germany, manufactures luxury Mercedes-Benz cars and Freightliner trucks.
Ola Källenius, Daimler’s chief executive, said the decision to break up the company aims to give managers more freedom to react to technological changes.
“As the speed of transformation in the automotive industries is increasing,” said Källenius in an interview, “speed in decision-making is crucial”.
GM’s promise to forgo fossil fuels, although only 14 years from now, has triggered a chain reaction in the industry. Ford said on Wednesday that by 2030, all of its passenger cars sold in Europe will run exclusively on batteries. Jaguar Land Rover said on Monday that all of its Jaguar luxury cars and 60 percent of Land Rover luxury SUVs will run exclusively on batteries by 2030.
Mr Källenius avoided making a similar statement. In many markets where the company operates, there is no infrastructure for electric cars, he said. Therefore, a vote of abstinence from fossil fuels “is not something we should do just to get a headline,” he said.
But all future Mercedes-Benz models will be designed to be electric, said Källenius. “Our technology path is clear,” he said. “We are going to assume a leadership position. It is a little early to choose a date for the world when the last combustion engine will leave the production line. “
Investors appear to be rewarding automakers who show they can build electric cars. Ford’s stock, whose Mustang Mach-E has received good reviews, has doubled since reaching its lowest point in March. French automaker Renault’s shares have more than doubled since then; its affordable Zoe subcompact was the best-selling battery-powered car in Europe last year.
Daimler will begin selling several new electric vehicles this year, including the Mercedes-Benz EQS, a counterpart to the company’s top-of-the-line S-Class car. EQS will go on sale in the summer for a starting price likely to be over $ 100,000.
“Gradually, the financial market is starting to look at our technology portfolio and everything we have in the pipeline,” said Källenius.
So far, electric cars are nowhere near as profitable for Daimler and other traditional automakers as gasoline models. Battery systems are more expensive than conventional engines and transmissions, and automakers are still learning how to make electric cars efficiently. It will take time to reach the profit margins “which we are used to on the internal combustion side,” said Källenius.
Daimler’s unexpectedly healthy profit in 2020 was the result of old-fashioned cost cuts, not any technological advancement. The company reduced its workforce by 7,000 employees, or 4%, and cut its research and development budget, which Källenius said was still large compared to its competitors.
When the pandemic hit, Daimler quickly cut production so it wouldn’t get stuck in unsold vehicles, said Källenius.
Even after the sharp gains in its share prices, Daimler and GM are still worth only about a tenth of what Tesla does in the stock market, which produces only a small fraction of the number of vehicles. Investors are dazzled by Elon Musk, Tesla’s chief executive, and have more faith in a company that only makes electric cars.
As Källenius admitted, dinosaurs still have a lot to convince before investors believe they have so much potential.
“The financial market is going to wait and see a little,” he said. “How is this going to end?”