Why is Mercedes-Benz Malaysia (MBM) lagging behind on its local electrification strategy? Why are there fewer Mercedes-Benz hybrid models available for sale today? Where does the problem lie?
In June 2019, Mercedes-Benz Malaysia (MBM) launched two electrified models simultaneously (the facelifted C300E and S560e Plug-in Hybrid) and previewed what was at the time a revolutionary model that would define the coming age of the brand, the Mercedes-Benz EQC.
Though the production version of Merc’s first all-electric family SUV was not due until late 2020 (according to reporting at the time). MBM went to great lengths to get the car here and prove to the Malaysian market in bold capitalised letters… they were ready for the electric revolution, and the EQC was just one example of how ready they were.
Fast forward two years and nearly all plug-in hybrid vehicles have disappeared from their model line-up, leaving just two locally-assembled models, the aforementioned S560e (PHEV) and recently introduced GLE 450. The former is at the end of its lifespan while the latter utilises a mild-hybrid powertrain with an integrated Starter/Generator (ISG) sandwiched between engine and transmission. The mild-hybrid system or EQ Boost enhances power by 22 hp over short periods.
Mercedes-Benz's current form may almost seem regressive from the electrified past they touted in the years before. But why? Well, in a recent media roundtable with VP of Marketing, Michael Jopp the answers became more clear, and evident that Mercedes-Benz Malaysia is not the one that needs to play catchup, there are two main reasons for this.
The market conditions
In not so many words, the current state of the National Automotive Policy (NAP 2020) which sang a good song about stimulating the automotive industry to transition into “new energy vehicles” remains inconsistent and vague on the actual legislation that allows carmakers like MBM to plan their product strategy to cohesively cater to the Malaysian market.
In the absence of transparent legislation that allows carmakers to take advantage of incentives and pricing packages that not only allow them to price their cars more effectively and fit competitive products within these regulations, they’re forced to play it safe and introduce cars that are best optimised for the current market conditions.
Our automotive policies heavily revolve around the ‘customised incentive’ program which dictates overall incentives that are granted to a manufacturer and their vehicles or models. The program, though in its simplest form is meant as a flexible system in which carmakers and the Government agencies can have effective dialogue (and this is good), remains vague as to how carmakers attain these incentives.
The incentives also vary between manufacturers as central criteria of the negotiations are the investments companies make towards the local economy and job creation, how this is quantified falls deeper within ambiguity. So how does a manufacturer take advantage of incentives when it requires a large initial investment, but you can’t justify that large investment without knowing you can price a car competitively so that it will sell in good numbers to recoup on that investment? A little chicken and egg conundrum.
To give you an idea of the effects these incentives have on the overall price of the car, if were we to take away all the incentives the previously sold C350e had, it would have cost in the region of 30 percent more, or around RM100k more than the RM 299k customers were paying for it.
The hard truth is that most buyers gravitate to hybrids when they are priced comparatively or better than the equal conventionally powered vehicles. Remove this from the equation and suddenly a car buyer's urge to save the planet and embrace new technology can disappear very quickly. Why would you spend RM100k more on a C350e (that saves fuel) if you could fuel a ‘regular’ C200 for years with that very RM100k?
Hybrids and Plug-In Hybrids are expensive enough before Governments slap import duties and other taxes on them, therefore literally 10 percent more or less tax on a particular model can make or break a car’s pricing, and render the car a market leader or the outsider.
BMW Malaysia is bringing in a range of electric vehicles, why can't Mercedes-Benz do the same?
Well, that’s exactly it, with little or no transparency in how incentives are handed out, there can be big differences in the final pricing of the vehicle. While we applaud BMW Malaysia on their efforts to spearhead EVs in the Malaysian market, the incentive structure they are granted can vastly vary from what its competitors might receive.
Now it may be better, it may be worse, the thing is, we don't know and we'll likely never know!
When the rules of the game are transparent and set in stone, more players can participate, and use the right tools to play the game. Until then, it’s as good as bringing a cricket bat to a tennis match, yes you could theoretically get the ball across the net, but it may never land on the right court.
By comparison, if we look at Thailand's automotive policies, which have largely been transparent, well thought out and effective in luring in investments both financially and technologically, we see a very different Mercedes-Benz, one that will soon start local assembly and sales of the Mercedes-Benz EQS.
Now, ask why is that so...