Mercedes Benz to Strengthen its Partnerships with Chinese Suppliers
German automaker Mercedes Benz is deepening its partnerships with Chinese auto parts suppliers as the automaker adds more electrified powertrains and connected technology to its model lineup, Mercedes-Benz executive Wilko Stark said on Thursday.
Strengthening its supplier network will help Mercedes maintain its new corporate strategy called "CASE", which stands for Connectivity, Autonomous, Shared & Services and Electrification. Future models from Mercedes will include some or all of these technologies.
"Procurement makes a significant contribution to the implementation of the CASE strategy at Mercedes-Benz Cars by working together with suppliers at a very early stage in the development of innovations." Mercedes wrote in a statement.
Stark, the head of Procurement and Supplier Quality at Mercedes-Benz, said the shift toward electric and connected cars has made it more dependent on battery cell chemistry and connected vehicles expertise from outside the company, mainly from China.
"We will think about partnerships in some areas. The role of partnerships as a whole will gain in importance," Stark said during a news conference in Stuttgart to discuss the German carmaker's procurement strategy.
In December, Mercedes announced a $23 billion commitment to purchasing battery cells over the next decade to ensure a reliable supply of EV batteries is available.
"With extensive orders for battery cells until the year 2030, we set another important milestone for the electrification of our future electric vehicles," said Stark last month.
The next goal for the automaker is to ensure that suppliers can meet the demand for high-tech components for its upcoming fully-electric models and the company is betting on Chinese suppliers.
China is emerging as a leader in electrification and connected cars services, giving local suppliers an edge over European and United States competitors, Stark said.
The Mercedes Benz EQ Concept SUV
The suppliers will also support the automaker's development of new models under the EQ brand, which is the new Mercedes divison foucing on "intelligent mobility". The EQ branded electric vehicles are based on an architecture developed specifically for battery-electric models.
The EQ portfolio comprises all future battery-powered vehicles, as well as the associated products and services from Mercedes-Benz
"China will dramatically increase in importance," Stark said referring to the network of suppliers that Mercedes-Benz does business with in China.
Mercedes-Benz will rely more on its suppliers to take a leading role in the area of research and development as well as to identify cost-cutting potential through process optimization, Stark said.
"We will intensify scouting of Chinese suppliers. China is more advanced than the United States in many areas of digital innovation," Stark said on Thursday.
"In the area of connectivity services, the Chinese are ahead of the Americans; we have no choice but to deepen our relationship with these suppliers," he said, naming China's retail giant Alibaba and tech company Tencent as leaders.
Daimler is also thinking about a broader alliance on batteries in view of the challenge of trying to police potential ethical or human rights violations in mining of rare earth minerals - such as cobalt, which is often found in conflict zones, but cobalt is an essential raw material for EV batteries.
"There are no formal decisions in this area," Stark added.
Mercedes is also scouting suppliers for innovations to see whether the German carmaker could make use of a more compact, lighter electric vehicle battery.
Stark noted that percuring less expensive, more energy-dense EV batteries with fast recharging times could also allow Mercedes to bring down the cost of electric cars closer to their equivalent combustion-engined variants.
"Overall volume and weight are as important as energy density," Stark said, referring to battery cells.
Mercedes also wants its maintain its relationships with its existing supplier network, as the automaker shifts towards electrification. By working with suppliers in the early stages of vehicle development, Mercedes-Benz hopes to help its supplier base manage the transition to electric vehicles.
Daimler estimates that EVs will account for 25 percent of its total vehicle sales by 2025.
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