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Speaker 1: We welcome out our Bloomberg radio and television audiences to

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Speaker 1: a fantastic conversation with Ala Hallinis. He is the Mercedes

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Speaker 1: Benz CEO. He joins us in New York, as does,

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Speaker 1: of course, Bloomberg's Matt Miller.

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Speaker 2: Ah, I great to see you.

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Speaker 1: Thank you very much, indeed for taking some time to

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Speaker 1: drop by and see us here at Bloomberg. All of

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Speaker 1: the story we've been talking about over the last few

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Speaker 1: days has been all about China. We're trying to work

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Speaker 1: out whether Europe is going to start a fire with

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Speaker 1: China that is going to impact Mercedes Benz. This talk

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Speaker 1: of tariffs, this talk of trade wars around auto's and evs.

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Speaker 2: Are you worried?

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Speaker 3: It's great to be with you this morning, guy. No,

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Speaker 3: we're not fundamentally worried. We have a very strong business

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Speaker 3: in China that has grown significantly over the last ten years,

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Speaker 3: and we'll continue to invest in China to make sure

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Speaker 3: that we bring the product that the Chinese customers are

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Speaker 3: expecting for us from us.

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Speaker 2: I think it's important.

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Speaker 3: In these types of discussions to not forget what has

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Speaker 3: made are so successful over the last decades. It's been

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Speaker 3: opening up markets, free trade, free competition, but also.

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Speaker 2: A level playing field.

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Speaker 3: So as long as all of those frameworks are in

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Speaker 3: place to make sure that we can do business in

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Speaker 3: a sensible way, we're not worried.

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Speaker 4: Well, we have though all an EU inquiry and the

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Speaker 4: Chinese car imports. Don't you expect Beijing to react with countermeasures.

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Speaker 3: We will see how this plays out and what comes

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Speaker 3: out to that. And we like to remind people that

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Speaker 3: open markets is what drives growth and also drives wealth creation.

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Speaker 2: In fact, if you look at the history of our.

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Speaker 3: Company, it didn't take Gottlieb Diamer more than fifteen years

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Speaker 3: to figure out that Germany is not the only attractive

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Speaker 3: marketing in the world. And we've been here in the

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Speaker 3: United States for more than one hundred and twenty years now.

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Speaker 3: So that companies go global and that competition goes global,

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Speaker 3: I think that's natural. We had the Japanese come to

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Speaker 3: the United States in the eighties and the nineties, then

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Speaker 3: the Koreans, then Tesla came. Now when we're going into electrification,

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Speaker 3: so let's keep markets open, let the market participant to

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Speaker 3: divide it out.

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Speaker 1: And Alina Beerbach, the German Foreign Minister, was speaking to

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Speaker 1: our good friend and colleague Amrie Harding a little bit

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Speaker 1: earlier on, she was saying that there's a risk that

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Speaker 1: Europe is too exposed to China, that we need to

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Speaker 1: be cautious in our approach to China. Do you think

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Speaker 1: that European German luxury carmakers are though at risk of

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Speaker 1: being overexposed to China, that that market has become too

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Speaker 1: big for you and the politics could get.

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Speaker 2: In the way.

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Speaker 1: How do you think about it when you get warnings

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Speaker 1: like that from German ministers.

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Speaker 3: On the one hand, I think we learned a thing

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Speaker 3: in the pandemic that supply chain can be fragile, and

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Speaker 3: to create some optionality and more resilience into your supply

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Speaker 3: chains is generally.

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Speaker 2: A good thing for businesses. This is something that.

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Speaker 3: We have already started, especially on battery materials, where we

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Speaker 3: have devised a strategy where we're going to try to

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Speaker 3: as best as we can over the next years, go

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Speaker 3: into a kind of region for region sourcing. So yes,

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Speaker 3: we do look at different commodities to make sure that

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Speaker 3: their supply chain is resilient. But it would be a

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Speaker 3: complete illusion to think that we can divide the world,

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Speaker 3: the automotive world, into individual regions that have nothing to

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Speaker 3: do with each other. These supply chains are supplied networks

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Speaker 3: rather are much too sophisticated. There are five continents in

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Speaker 3: every Mercedes that is being sold, and that is the

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Speaker 3: strength and market economy that the invisible hand of the

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Speaker 3: market figures out what the economic optimum is. So supply

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Speaker 3: chain resilience yes, but keeping the markets open and the

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Speaker 3: market working, I think is even more important.

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Speaker 4: You have a strike going on here in the US, well,

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Speaker 4: not you, the UAW striking on for GM and Stilantis.

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Speaker 4: You have production here in the US doesn't have UAW workers,

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Speaker 4: but you still got to be prepared for supply chain

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Speaker 4: issues due to the strike.

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Speaker 2: What are you.

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Speaker 4: Expecting now and how do you expect it to affect

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Speaker 4: your business?

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Speaker 3: We don't expect any major impact or on our business,

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Speaker 3: and of course, Mercedes Benz doing businesses more than one

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Speaker 3: hundred and fifty countries and have operations in all major

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Speaker 3: economic regions. We try to make sure that we're competitive,

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Speaker 3: that we're an attractive employer, but at the same time

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Speaker 3: we're in transformation. The audio industry is getting more competitive,

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Speaker 3: not less competitive. So whatever pressures we have on cost

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Speaker 3: is going to have to be made up in productivity.

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Speaker 3: So I think we have to be very mindful to

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Speaker 3: keep the gain on productivity up and make sure that

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Speaker 3: we don't have cost run out of control.

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Speaker 4: But don't you expect all, well, if they get a

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Speaker 4: twenty twenty five percent increase at UAW plants, you're going

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Speaker 4: to have to raise your price, your pay at some

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Speaker 4: point in Tuscaloosa as well, otherwise you're going to lose

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Speaker 4: workers to plants up north.

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Speaker 3: We have been in the United States, in the southeast

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Speaker 3: of the United States with our plant in Alabama and

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Speaker 3: also our commercial van operation in South Carolina now for

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Speaker 3: in Alabama more than twenty five years, almost thirty years,

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Speaker 3: and we have always kept lockstep with what's going on

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Speaker 3: in the economy to make sure that we have attractive jobs.

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Speaker 3: So we watch that and we make adjustments as we

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Speaker 3: go along.

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Speaker 2: But at the same time we look at.

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Speaker 3: You know, how can we do things better, how can

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Speaker 3: we do work in a smarter way, get leaner because

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Speaker 3: the cost competition is not going to go anywhere.

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Speaker 1: Alo Do you think that companies such as yourself's companies

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Speaker 1: like Stalantis and food should be guaranteeing the workers that

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Speaker 1: are working on combustion engines will have a place in

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Speaker 1: the new EV world, should they be guaranteed jobs, should

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Speaker 1: they be carried through this transition process.

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Speaker 3: I cannot speak for other watermakers, but if I look

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Speaker 3: at what's happening at Mercedes Benz around the world and

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Speaker 3: primarily in Germany where we have most of our operations, Yes,

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Speaker 3: we're investing heavily into the new technologies. The lie and

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Speaker 3: share of our capital allocation goes into electrication and digitalization, and.

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Speaker 2: We're creating new jobs there.

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Speaker 3: But the fact of the matter, on the powertrain side

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Speaker 3: of things, the net at the end of this transition,

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Speaker 3: which is a ten year plus affair, is going to

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Speaker 3: be less jobs on powertrain. On vehicle assembly, it's about

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Speaker 3: the same. But we will use demography over this ten

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Speaker 3: year plus period, our demographics to make sure that we

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Speaker 3: can get into a position where we do this in

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Speaker 3: a sensible way.

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Speaker 4: Although I drove recently the EQS, it's an electric euroelect suv,

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Speaker 4: obviously a very luxurious product as you move even more upscale.

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Speaker 4: At the same time, the Tesla Model X and Model

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Speaker 4: S are getting kind of long in the tooth. If

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Speaker 4: you have lost customers to Elon Musk are you gaining

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Speaker 4: them back with this new push into you know, luxury electrics.

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Speaker 3: What we have seen with the EQS and the EQUE

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Speaker 3: both on the Sedans and the SUVs, and here you

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Speaker 3: have some extremely high tech, luxurious products. We didn't make

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Speaker 3: carbon copies of our combustion equivalents, but really tried to

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Speaker 3: create a complementary offering. And yes, we have a lot

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Speaker 3: of conquest customers coming into those vehicles. People that maybe

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Speaker 3: didn't look at Mercedes before that goes like, wow, Mercedes

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Speaker 3: is going electric. This is interesting for me. So so

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Speaker 3: far that plan is working out quite well.

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Speaker 1: Matt, I have to say, you've got a big smile

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Speaker 1: on your face. You look like you're enjoying driving that car.

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Speaker 1: Is it as good as a nice engine?

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Speaker 4: Are you?

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Speaker 2: Are you a convert?

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Speaker 1: Yeah? I've been tracking Matt's history as he's worked his

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Speaker 1: way through this process.

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Speaker 2: You know what I want to do with that?

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Speaker 4: Yet, this is the one electric vehicle that may be

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Speaker 4: able to win me over because of the pedal feel,

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Speaker 4: because of I hate to say it, I don't want

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Speaker 4: to get flame, but the fake sound, which I absolutely loved.

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Speaker 4: It really felt like a big block more than an

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Speaker 4: EV And oh, are you going for that? I mean,

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Speaker 4: are you trying to make these electric vehicles feel like

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Speaker 4: you know, the luxury V eights that were so that

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Speaker 4: we long for.

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Speaker 3: Of course there's a different sound profile, but the way

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Speaker 3: a car drives and rides, you know what you expect

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Speaker 3: from a Mercedes, to safety, the quality, how everything just

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Speaker 3: feels right. That is true for an electric vehicle as

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Speaker 3: it is for a combustion vehicle. But for you, Matt,

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Speaker 3: I got a special coming up next year. I know

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Speaker 3: you're a big fan of the G Wagon, the G class,

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Speaker 3: and next year we're going to have an electric g

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Speaker 3: It's going to blow you away.

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Speaker 2: Promise.

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Speaker 4: I am absolutely looking forward to that. As you know,

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Speaker 4: I have had the V eight version, so I'll see

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Speaker 4: what the version.

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Speaker 1: That's that's This is a high bar we're talking about

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Speaker 1: here on so I hope you know what you're doing here.

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Speaker 1: That's a big promise for Mats. Final quick question, Champagne

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Speaker 1: sales are beginning to folter. Luxury goods companies like Richmar

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Speaker 1: talking about the idea that even upper end consumers begin

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Speaker 1: beginning to feel the inflation re effects. Is that going

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Speaker 1: to be a challenge for you as well? Are you

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Speaker 1: in that kind of bracket, are you going to be

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Speaker 1: affected by those same forces.

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Speaker 3: Our top end vehicle sales for the first six months

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Speaker 3: of this year were very strong, but at the same time,

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Speaker 3: you have to watch the macro picture. In North America

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Speaker 3: and in Europe we have higher interest rates. Those higher

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Speaker 3: interest rates are probably going to stick around for a while.

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Speaker 3: That affects the pricing of capital goods in terms of

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Speaker 3: financing and leasing, and that's about fifty percent of our transactions.

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Speaker 3: So we have taken a cautious view on the macroeconomic side.

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Speaker 3: That is why we have guided for our vehicle says

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Speaker 3: at around the same level this year as last year.

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Speaker 1: Allah, great to see you. Thanks for stoping by to

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Speaker 1: see us. We really appreciate it. I know Matt's looking

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Speaker 1: forward to that is it GA wagon next year, very excited.

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Speaker 1: I've heard him talking about it. So this is this

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Speaker 1: is a big moment. A halloos the Mercedes Benz CEO

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Speaker 1: and of course Bloomberg's Matt Miller