Good morning, ladies and gentlemen. This is Stefan Hoffman speaking. On behalf of Daimler and Mercedes Benz, I'd like to welcome you on both the telephone and the Internet to our update where we want to inform you about Mercedes Benz move to join ACC. Thanks that you could make it to join us in this call even as we invited somehow on short notice. We will now have roughly 30 minutes for this session on our ACC engagement, and we are very happy to have with us Ola Kiellenius, Markus Schafer and Harald Wilhelm.
In order to give you maximum time for your questions, Ola will begin with an introduction directly followed by a Q and A session. Now I'd like to hand over to Olga.
Yes. Thank you, Stefan, and good morning, everybody. At the end of July, we presented our comprehensive plan to transform Mercedes Benz into ultimately an electric vehicle company. And today, We announced the next milestone in this endeavor. We're taking equity stake of 33% in battery cell manufacturer ACC, Stellantis and Total Energies and us, we will become equal shareholders.
Together with ACC, We're going to develop and build next generation battery cells and modules tailor made to the specific requirements of Mercedes Benz. This partnership allows us to secure supply, take advantage of economies of scale and also, of course, provide our customers with superior battery Technology. Moreover, we will help to ensure Europe remains at the heart of the auto industry, even in an electric era. With us as a shareholder. ACC aims to more than double capacity at its European sites, and our objective is at least 120 gigawatt hour of cell capacity by the end of this decade.
And we will step in and engage at around the mid of this decade with regard to our vehicles. The entire project will require an investment of more than €7,000,000,000 which is a combination of equity, debt and subsidies. We will invest a mid-three digit €1,000,000 amount next year. In total, our investments are expected to remain below €1,000,000,000 And these are also included in the financial framework that we presented on July 22. This new partnership gives us access to top notch battery cells at highly competitive costs and at the same time, it will support our ambitious EV ramp up plans.
By the end of the decade, as we have said, Mercedes Benz will be ready to go fully electric where market conditions allow. And I think creating this new battery champion is further proof. We're not going to wait for a transformation to happen. We will help Make it happen. Looking forward to your questions.
Thank you very much, Ola. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioner by name, but please also introduce yourself with name and the name of the organization that you are representing before asking your question. As always, please ask your question in English and please limit the amount of question to a maximum of 2. Before we start, the operator will again explain the procedure.
Before making your selection.
The first question goes to Tim Rodcrosa.
Good morning, gentlemen. It's Tim from Deutsche Bank. I have a couple of questions just to really understand the context of this investment itself. You say that the project will require about €7,000,000,000 of investment, but your injection is only €1,000,000,000 Can you put a little bit more flesh to those numbers? The rest of your partners, to the rest of subsidies.
And also considering you probably need more cells in Europe, will this remain your only investment over here and the rest is covered through regular purchasing or is there more to come? And then secondly, if we move outside of Europe and China, you obviously have CITL at Parazys. Should we plan anything for the U. S. And when?
Thank you.
Maybe I'll get started with the
first question. Tim, hello, good morning. Well, so that investment of about EUR 7,000,000,000 I mean over time refers to the ACC scope. That's the entire investment as we see it with our new partners. In terms of the funding of that EUR 7,000,000,000 Olap Minh alluded to it, It will be a mix of share of debt, equity and European Union support, call it subsidies.
The detailed share of that, I think, I mean, will be hammered out, I mean, over time and will obviously develop. With regard to our own engagement. Ole mentioned it will be below €1,000,000,000 over time. There will be more a bullet payment pretty shortly after closing, which we expect to be rather in the early days of 2022, And that should be in the order of magnitude of 3 digit €1,000,000 And then Over time, I mean, incremental equity might be injected in the proportion of debt, equity and subsidies, as I alluded to before. But please note, I mean, that investment of Below €1,000,000,000 refers to the ACG scope.
Any other, I mean, investment It's part of contractual arrangements as we have it with our current main partners and as we might do it in the context of the ramp up plan with arrangements yet to come. That is separate.
And Tim, as you mentioned, We already have strong partnerships. You mentioned too. Those aren't the only 2 that we have. So it's not like we're starting from scratch now. Some of that capacity has already been installed and pretty much the path towards 2025 has been secured.
For the U. S, we are in discussions with different partners of what the localization option will be, but that's not yet been decided.
Thank you. Good to see you're making progress and good you're keeping us local.
Thank you.
Thank you. And we continue with Patrick Hummel from UBS.
Yes, thanks. It's Patrick from UBS. Good morning, all. Also two questions from my side, please. First one, You've decided to go for a solution that does not include an established cell maker as a joint venture partner.
I'm sure you've weighted the pros and cons of that decision. Can you just give us a short summary why you think this to structure or this form of entity, a purely European solution is a better one as opposed to just entering to a joint venture on European grounds with an established Asian cell player. And my second question, Where does ACC stand in terms of securing the raw materials? We're seeing a pretty volatile price environment or in fact, prices For some raw mats have been up a lot. These are difficult supply chains from an ESG perspective.
And I guess Mercedes has the highest standards here. So I'm just wondering, where is ACC in terms of securing the raw mats required for what will probably be a very to the Brabant for a couple of years out. Thank you.
Yes. Thank you, Patrick. Of course, we have looked at the different initiatives that are going on. And I have Say, it's really positive to see how much dynamism is developing in Europe on the sales front from my Swedish friends to other initiatives that are going on as well in Europe. We looked carefully at these.
And in the discussions that we had with Stellantis and with TotalEnergies and also the ACC management, We felt that this offered the best option for us. Let's not forget that Saft has been in battery technologies, I think, for 100 years. And in fact, it was Mercedes and Saft that launched the 1st lithium ion production battery ever. I don't know, is it 15 years ago? Yes, 2009, so 12, 13 years ago.
So we know this company. We have ourselves amassed to an enormous amount of know how over the years in our R and D as have they over the last years and Stellantis, especially with their operational skills and excellence. I think it's such a it was such a good mix. And this also allows us here to step in deeper. Of course, we work in R and D with our current Asian suppliers.
So we work hand in hand with them and have deep insight to what we need for Mercedes. But here we go one step further. Here we can take all those activities That we're ourselves pouring into our new e campus in Stuttgart and really leverage them in a bigger partnership. So with a range of attractive options, this looked for us like the most attractive option. And that's why we're going to bet on ACC to become a European champion in the sales space.
With regard to sourcing of raw materials and so on, of course, ACC He is working on this. But I don't think we as a shareholder should speak on behalf of them. So they should then present their plans and I will revert them to their management team.
So Ole, if I can just follow-up here. Does that mean that you're not taking care of this as Mercedes Benz, this is going to be ACC's job. No,
that would be wrong. If you're a 3rd shareholder, Of course, you will take care of that your shareholding and the company that you're engaged in will do this in the right way. And as you saw already in the presentation end of July. We ourselves are now looking into the sourcing change of raw materials. We have made one major deal already with Albermarly on the lithium side and are looking at others as well.
So The knowledge that we have gained throughout this process, of course, we will share that with ACC, but it's not like they're not thinking about this. They are very aware and they're working on it as well.
Got it. Thank you.
Okay. And the next in
the line is Jose Asumendi from JPMorgan.
Good morning. Thanks very much. Jose, JPMorgan. Just a couple of questions, please. Can you talk a little bit about battery recycling?
As you ramp up battery capacity in the coming years, how is ACC going to take care of this? And would you create a different entity outside of the ACC collaboration or good to see within ACC? And second, Ola, can you talk a little bit about battery chemistry? How do you think about you. The right composition, the right technology, the right chemistry behind the battery.
And also you have a stake in a solid state supplier. Could you bring this the stake you have in this company into ACC or any collaboration or any outcome of this solid state investment into ACC as well? Thank you.
Yes, Jose, hi. All things that you are mentioning are the things that you need to address as a cell maker and all of those things are on the cards. With regard to recycling for us as Mercedes, but clearly for ACC, to make this ultimately a circular value chain is definitely a target. And the latest recycling methods that are being developed. They look promising that we should be able to and I'm talking globally here now to have recycling quotas of those precious materials higher than 90% once we get to that stage.
I'm going to pass the chemistry question to Michael Schafer that is here. And with regard to solid state, ACC has also stated that they are pursuing to technology paths in this space as well. This is too early to be specific, but so are we, and I'm sure that we will intelligently put our heads together around this thing, maybe Marcus on chemistry.
Yes. On the chemistry side, we're moving to our next generation of battery chemistry. So we're going to the next level. I think we are able to provide highly competitive batteries today in the EQS, for So we're using our development centers here in Germany and the new e campus in Stuttgart and combining our technologies, joining Technologies with the R and D centers of ACC. So best of 2 worlds, We'll end up in our next generation of batteries with high energy density, of course.
So in watt hours per liter and per kilogram, we are improving significantly here. To hear. We are moving more to high silicon and to new recipes and new materials. So we're expecting the next level with this next generation to the batteries we're doing with ACC together.
Very good. Thank you very much.
And the next colleague in
the line is Horst Schneider from Bank of America.
Yes, good morning. Thanks for taking my questions. I have got a couple. I mean you made some comments on ACC and Technology now already, but I still want better to understand why you have finally taken ACC. So Was it just a lack of partner or ACC was really the best partner and you figured out that they have got a technology advantage and then you can source That was here cheaper than as compared to other players or you just wanted to reduce, for example, the dependency on the Asian players.
Just want to understand why ACC. Then the other question that I have relates to the Paragas deal because it's Still in the room that you aim to build up the statutory plant in Bitterfeld. So is that still on the agenda? Or does this deal basically then replaces in a way to the start of the stage. I'll just amend it.
Yes, these are my two main questions. Thank you.
So I'll start kind of from the top. We have very, very strong relationship with suppliers in Asia. 2 of those partnerships are CATL and Pharosys, and they are yielding very good results. You can see the performance of the vehicles that we're putting into the market today. Those are based upon the work that we have done with CITL and with Ferrisys.
And it goes without saying that these strategic partnerships will continue and we will build upon them, no doubt whatsoever. However, as we mentioned in the presentation in July, we said that in a world that in our view is going to go all electric, Rick. We think it's wise to spread the sourcing or put another leg on the stool of that sourcing. And we think that Europe should be a player in this field. So to complement the relationships that we have in Asia, to build up a European champion.
We think it's the right move for us and we think it's the right move for the European Automotive Industry. Why did we pick ACC? Let me start by saying this, every single serious Venture in the sales space in Europe has approached us and wants to work with us. So without any exception, we could pick anybody we would like in Europe to work with us because we're an attractive brand and we have a very progressive strategy. So we have gone through a thorough evaluation of all the options, which are several and looked at from a technological point of view, complementing skills point of view, industrialization, cost structures, financing model, I mean, a 360 degree review, what do we think is the best for us?
And in my conversations with Carlos Travalos and Patrick Poirierne from the other two players and my team's conversations with the ACC management team. We are convinced that this at this juncture for us is the best option. And that's what we're going in and doing this. But we will, of course, on the way to 2,030 and beyond remained open for sourcing, but this is a serious and big initiative for us in Europe and will cover a significant amount of the gigawatt needs that we will need here. With regard to Ferris' to plans.
Markus is on the Board of Ferris' and speak to them all the time. Why don't you say a few words about that?
Well, As we are reading, sometimes some updates on Ferris' the facts are that the Performance of Ferrous in our vehicles is really outstanding and continues to be outstanding when it comes to range, cost and charging time, so a very, very important partner. So we are expanding capacities right now in the existing plant rapidly. But it's up to Ferris' finally just to focus their resources. They need to focus their resources. They're a young company.
They are growing rapidly at the moment, and they have to make their decisions about their next steps in Europe, and they will in the future. So we have to leave it up to them and their growth path and their capabilities to take the timing the right timing to announce the next steps. But most important is the supply is secured for us here and the right technology is available to us.
All right. Excellent. Thank you.
And we continue with Stephen Reitman from Societe Generale.
Yes. Good morning. Thank you for doing this call. My question is about the costing on the project. More than €7,000,000,000 by 2,030 to establish capacity of 120 gigawatt hours.
It seems relatively good value when I consider that looking at past press releases from ACC, I'm looking at one from September last year, In which they were talking about at the time building up to 48 gigawatts of capacity at a cost of about €5,000,000,000 or more than €5,000,000,000 So can you explain the confidence about the figures getting up to a more than doubling of that 48 gigawatt capacity at a relatively low price. Thank you very much.
Stephen, you will see a significant scale effect where you make initial investments into R and D and all sorts of things that you need to get going. Once you then duplicate and replicate that and ramp up to more gigawatt hours. They feel that There's going to be a significant scale advantage, and we're looking at the numbers as well. I mean, it's not like we don't have any experience. We've been doing this with several other higher so we know roughly what the numbers should be.
And even some years ago, we had built our own plant, so what the equipment cost so on and so forth. So the plan with the €7,000,000,000 from today's point of view to get up to 120 gigawatt hours looks robust.
Thank you.
And we continue with Harald Hendriksen from Morgan Stanley.
Yes. Good morning, guys. It's Harold. Thank you so much for doing this call. Great deal, very practical decision, it seems, as I think we're starting to get used to.
My question a little bit is, you're kind of interesting. Mercedes cars are very different from Stellantis cars, especially in Europe. So now we're in the same joint venture. I'm assuming we're going to have the same cells and the same chemistry. So firstly, to what degree would you have a choice To change the chemistry for Mercedes, for example, versus a Peugeot.
Secondly,
if we're going
to share it sells, which is incredibly sensible, But
does it also then start
to make sense to start thinking about sharing modules and how should we think about that? You. I think all the OEMs globally are sort of investing in the same things at the moment. And I suspect there might be others in Europe or elsewhere who might want to join Join the venture as well. So on top of that, would you think about sharing margins at some stage?
And lastly, Would you take new partners into the venture? I'd say the 120 gigawatts is a pretty ambitious target, But obviously, Europe needs probably 1,000 gigawatts by that time. So it seems that this venture could even get bigger. Would you take new partners into the venture to maybe pay for further expansion?
Let's start with the first And this is kind of a truth for any sales supplier, including ACC. And also, if you take a CATL that more or less delivers to to every OEM in the meantime. Each OEM has to decide what they need and what their technical requirements are in terms of performance, range, charging time, etcetera, etcetera. So we very specifically with our sales suppliers today go in and bring our recipe to the table in a way. Even though the cooking method is a common denominator in the NMC world.
So We will do the same thing with ACC that we're doing with the others that we're working with that we will specifically look at what we need and make sure that we get that. If another manufacturer decides to buy equal or same performance per liter, then of course, you have also economies of scale there. But that goes for sales supply today and sales supply tomorrow. So for competitive reasons, we don't share our plans with Stellantis nor do they share with us. There we are 2 customers And the technical teams will work with ACC in a normal supply partner fashion.
With regard to where you take Yes. Where you with regard to where you take a 3rd party business and how you go further. Now we have put together this plan. We have put in our demands. Stellantis, obviously, have put in theirs.
And where it goes from there, I think it's too early to say now. But just with the engagement that the 2 of us are bringing to the table, it's quite sizable and then time will tell how far this can go.
Okay. And sorry, on the modules, would does it make sense? Or am I taking it too far right now?
Yes. I would say It depends. We have a modular strategy for our vehicles that fits into the several different models on one architecture. So I honestly don't know what others do, but we will make sure that we have a very intelligent scaling and module strategy for Mercedes.
Thank you.
And we continue with Henning Cosman from HSBC.
Yes. Hi, good morning. Thank you for taking the question. I just had one more. Thank you for giving all these numbers in the press release.
I'm just trying to Make a little bit more sense of them when you talk about the 8 factories that you're going to be needing, 200 gigawatt hours. I imagine that means 4 factories for yourself and or you said 4 factories in Europe, so supposedly half of that. If you get half of the 120 gigawatts of ACC, there's still a balance of 40. Can you just Sort of talk about the balance a little bit. Is the remainder just to come from sourcing?
Or do you literally mean you want to build 8 Gigafactories, meaning over time, you're going to be replacing the existing supply arrangements? Or are you thinking about doing that with your existing partners, but 1 larger equity stake, similar joint venture structures, to get a better handle and supply security globally as well. Can you just
In our presentation in July, I don't know if you had the opportunity to see it. We have already established supply relationships. Obviously, you're not going to throw away the factories that we have built. There will be technological evolution, but if we want to go all in on electric, we need something like 200 gigawatt hours, which is way beyond what we have already set up for the path to 2025. So we're going to need more.
So it's not about replacing one that was just built. This is one piece of the puzzle with ACC on the path to those 200 gigawatt hours.
Okay. Thank you.
And the next one in the line is Kai Muller from Barclays.
Hi, thank you very much for taking my question. Maybe just to add what Henning was just asking. If you think about these relationships going forward and this 120 gigawatts capacity that you have in this JV. Is it fair to assume that it's fifty-fifty split between the 2 OEMs taking part in that, Stellantis and you. And then the second question is we talked a little bit about the chemistry, and we all know that Stellantis is focusing very much on MMC.
You are doing MMC as well, but you've mentioned in July the potential to do LFP 2.0. Would that JV also focused on that or are you looking at other providers for this? And then as a last question, just when you think about to how vertically integrated this JV is. Are you really focusing solely on the cell production? And are you doing the packaging yourself or what is actually the output of this JV all the way to your production line?
So individual
production volumes are not being disclosed and AEC will not do that, of course. If you have if you start with 2 customers, then you can speculate about shares, obviously, but that's not being individually disclosed. And in terms of what level of vertical integration, you can do cells, you can do modules. So Both of those things are on the table. And with regard to technologies, our initial protocol with ACC He will be focusing on the NMC technology.
Thank you. Thank you very much.
Ladies and gentlemen, thank you for your questions and for being with us today. Thank you very much to Ola, Markus and Harald. Now IR remains at your disposal to answer any further questions. To all of you, Have a great morning, great afternoon or great evening, and we look forward to talking to you soon. Thanks, and goodbye.