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Mercedes to fortify supply chain amid growing concerns of gas crisis

Mercedes to fortify supply chain amid growing concerns of gas crisis

Mercedes-Benz is reportedly planning to strengthen its supply chain by dealing with chipmakers directly and creating contingency plans. This comes amidst growing concerns of a gas shortage crisis in Europe, with the automaker looking to reduce gas usage by around 50% in Germany.

The development comes after Mercedes-Benz reported an increase in its annual financial outlook, predicting an additional growth in revenues as compared to last year. The automotive behemoth managed to increase its revenues and profits this quarter despite a decline in unit sales.

As for natural gas, the CEO of Mercedes-Benz Ola Kaellenius reported that, if necessary, a combination of efficiency improvements, increasing power use, adjusting temperatures in manufacturing facilities, and switching from gas to oil may reduce gas use by up to 50% within a year.

Kaellenius cited that the luxury automaker is also collaborating with Asian battery suppliers to expand cell production to Europe. He further added that partners will soon reveal where they had increased production capacity to fulfill the ongoing demand.

The German automaker's Asian battery suppliers include China's Contemporary Amperex Technology Co. Limited, as well as South Korea's SK Innovation Co. Ltd., LG Chem Ltd., and Farasis Energy Inc. Moreover, Kaellenius stated that although the conversation with electrical companies has not yet transpired, a 10% reduction in consumption has already been attained.

Notably, modified earnings before interest and tax (EBIT) in the second quarter was USD 5 billion, 7.4% above consensus, and group revenue rose by 7% to USD 37 billion. Shares of Mercedes-Benz were trading at 2.5% higher following the announcement.

Kaellenius assured that the automaker would continue to adhere to its approach of placing value over volume even if the supply chain problems that are presently limiting output are resolved.

If market speculations are right, the top-end luxury market is predicted to expand by more than 10% this year, with the Mercedes-Benz Cars division expected to witness a slight increase in sales.

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Omkar Patwardhan

Omkar Patwardhan started his professional career in the hospitality industry. Having nurtured a deep-sated passion for words however, he found his way into content writing and now pens down articles for numerous websites, including News Origins, spanning the sectors of business, finance, and technology.