Daimler Warns that Diesel, EV Shifts Will Disrupt Its Supply Chain

February 14, 2018 at 12:20 AM

Daimler AG warns that its aggressive plans to shift from diesels to electrified powertrains could destabilize its supply base, Reuters reports.

Daimler aims to electrify its entire Mercedes-Benz passenger vehicle lineup of more than 50 models by 2022. But its annual report cautions that doing so will squeeze profits over the next several years.

Daimler warns that its move away from diesels will result in significant cuts in capacity utilization for some suppliers. The carmaker notes that it could be forced to pay compensation to help affected vendors cover their fixed costs.

At the same time, electrification will create an abrupt upswing in demand for batteries, motors and other EV components. Daimler cautions that it might be pushed to provide financial aid or invest in key suppliers to help them acquire the new technology and production capacity they need.

A third source of financial pressure on the carmaker is uncertainty about access to sufficient raw materials related to EVs. Daimler says political factors and supply bottlenecks could hike vehicle costs that would be difficult to recapture through vehicle price increases.