Zetsche says his successor will have tough job

OSLO -- Daimler's next CEO will have a tough job to restore margins at Mercedes-Benz, current boss Dieter Zetsche said, as Mercedes launched a new luxury electric car to rival Tesla.

Zetsche said Mercedes needed to find a way to rebuild margins after research and development costs at Mercedes-Benz ballooned.

Zetsche will be succeeded as Daimler's CEO on May 22 by Ola Kallenius, who is already considering ways to cut billions in costs, according to Germany's Manager Magazin.

Zetsche said: "There are many challenges ahead. We are in a situation of an economic slowdown. It is not going to be easier going forward." He was speaking on the sidelines of the launch event near Oslo.

Pressure to develop electric and autonomous cars has led r&d costs at Mercedes-Benz passenger cars to rise to 14 billion euros ($15.7 billion) from around 8 billion euros four years ago, Zetsche said.

At the same time, China, the world's largest car market, has seen sales momentum slowing for nine months in a row, with a 5.2 percent fall in sales in March.

Mercedes-Benz's EQC electric crossover will hit showrooms this summer, years after Tesla launched its Model S sedan in 2012.  The EQC will go up against Tesla's Model X crossover.

Daimler has been cautious about embracing mass production of electric vehicles at Mercedes-Benz amid concerns about operating range and customer acceptance.

The company took a 9.1 percent stake in Tesla for around $50 million in May 2009 to learn about battery technology, but sold its stake for a $780 million profit in 2014.

Daimler launched an electric car under the Smart brand in 2010, but waited until 2014 to build an electric Mercedes B class.

Daimler, like other automakers, has struggled to make electric cars profitable, although the cost of battery packs is expected to fall as they invest in ramping up battery cell production.

ING analysts say the total cost of ownership, including fuel prices, could reach parity between electric and combustion engined vehicles by 2025.

In an effort to make a profit with electric cars, Daimler has opted to build the Mercedes EQC in a way that enables it to be built on the same production line as a combustion engined car, retooling existing plants. The EQC is being built in Bremen, Germany, on the same line as the C-class sedan and wagon, and GLC and GLC Coupe.

Daimler is investing more than 10 billion euros to expand the electric EQ model range and is building battery cell production facilities.

The EQC will have an operating range of 445 km (277 miles)  to 471 km (293 miles) under Europe's outgoing NEDC test cycle, with a base version costing below 60,000 euros to make it eligible for Germany’s electric car environmental bonus.

Asked whether Daimler was too late to the electric vehicle trend, Zetsche said: "For the past 40 years I have heard that German manufacturers have missed all the important trends. But apparently customers still like cars from manufacturers that have missed the boat."

Zetsche took over as CEO of DaimlerChrysler in 2006 and took the decision to sell Chrysler, returning Mercedes to the top selling luxury brand globally in 2016 and defending the title ever since.

Zetsche said Daimler's future hinged on making electric cars profitably.

"We need to prove that we can earn adequate margins, and the capital market wants to proof points. We are working on making this a reality."