Mercedes-Benz has announced plans to invest US$1.18 billion into electric vehicle production at its Alabama facility.
Capital will also go towards a dedicated battery and advanced technology plant, alongside a logistics centre, that will be built next to the existing factory.
The automaker plans to use the MBUSI (Mercedes-Benz US International) facility to produce SUV models under its EQ brand. The plant expansion will comprise of a new body shop and enhancements to the SUV production process, as well as upgraded logistics and IT systems. However, the integration of these models on to the line will not start until late 2020, despite Mercedes scheduling full portfolio electrification by 2022.
We do learn that the automaker intends to add 50 electric variants to its portfolio and to continue to develop plug-in hybrids and 48V systems. It makes sense, therefore, that the plant will also be working on these projects while the factory in Bremen, Germany, will be responsible for the production of EQ.
MBUSI promises to deliver “a clean ‘sheet of paper’ in vehicle concept” for the “young corporate culture.” With the the repositioning of the plant towards EVs, it is evident that Mercedes intends combine the needs of its target audience with a social responsibility strategy. According to data from Nielsen, millennials and future generations regard company sustainability as a major priority when making purchases.
Presumably, it also wants to put the recent huge diesel car recall issues behind it, and to build trust within its customers, adding: “We are…sending a clear message to our customers across the US and around the world: Mercedes-Benz will continue to be on the cutting-edge of electric vehicle development and production.”
Construction of an additional battery plant will begin early next year. The facility is designed to ensure the “availability of advanced technology for future generations of Mercedes-Benz vehicles built in the US.” The majority of the investment will be allotted to the company’s electric initiative through technology development. However, the money will be shared across Mercedes’ European and Chinese production network rather than just the US location.
Tuscaloosa, Alabama, has become an industrial hub, thanks to the MBUSI, and Mercedes hopes to build on the ‘Made in Tuscaloosa’ reputation. It is, therefore, keeping logistics and after-sales within the same location as well as consolidating its warehouses so parts can be shipped out quickly and easily.
Mercedes has definitely put its money where its mouth is considering that this latest investment adds to the US$1.3 billion spent in 2015. Similarly, the company’s SUV branding is known globally and exports account for 70% of the model’s sales.
However, there may be concerns over the Mercedes brand and the actual desire for SUVs from young customers. The vehicles are typically expensive, on top the the automaker’s luxury status, and may be out of price range for many people. Such an audience may not want or need a larger car and could prefer a smaller model that suits city living.
Senior VP for Nielsen Innovation Practice, Liana Lubel, elaborates; “Connection to a brand’s values remain particularly important in emerging markets, for both practical and emotional reasons… Nonetheless, for many, disposable incomes remain limited, and for these consumers, trusted brands provide an assurance of quality”. Indeed, Mercedes may yet have work to do in convincing millennials and Gen Z to trust the company again after its emissions faux pas. So will a social responsibility strategy justify the extra expense? Only time will tell.