Daimler : Mercedes-Benz Strategy Update 2020 Presentation

The following presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. For further details, please refer to the disclaimer at the end of the presentation.

Our statement of intent:

We will build most

desirable cars.

We will deliver on this intent with our refocused strategy

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
industrial
brand	growth	sub-brands	revenues	car software
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

Let us begin with our brand promise

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
industrial
brand	growth	sub-brands	revenues	car software
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

Luxury has always been part of our soul

It ties together our values and virtues.

Luxury is our home field advantage and our leading edge.

Luxury has always been part of our soul

at each moment in time.

Luxury has always been part of our soul

And luxury of the future will be sustainable.

Ambition 2039

Luxury is where we belong, and luxury is where the growth is

Global # of wealthy individuals	Per region
(private investable wealth > $250k, individuals in million)	(private investable wealth >$250k, individuals in million)

95

U.S.

26

52	Western Europe	7

Greater China

7

2019 2030

45

12

20

Source: BCG Analysis September 2020; based on a COVID-19 quick rebound scenario

We will provide the luxury experience across all touchpoints

Brand touchpoints

Product substance

Digital experience

Setting new standards with the S-Class

Summing up pillar 1

Luxury is who we are

and we will use it to grow

economic value.

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
industrial
brand	growth	sub-brands	revenues	car software
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

We will focus on profitable growth

Profit	Price	Portfolio
Rethink volume ambitions	Reorientate pricing	Reshape future product
profitability first	and channel mix	portfolio to optimize returns

#1

Profit

Price

Volume

Rethink volume ambitions: Profitability first

Reinforce our contribution margins with current portfolio shifting upwards over time

Ensure volume targets focus on the most profitable models and regions

Reorientate pricing and channel mix

Markets primarily measured on sales contribution growth

Enhance positioning with optimized product substance

Manage residual values to determine new car supply

Get stricter about channel mix

Improve lifecycle pricing

Reshape product portfolio: We will refocus product development resources to grow in the most profitable parts of our relevant segments

Overall global car market 1	Premium segment 2	Luxury segment 3
will grow	will grow faster	will grow fastest

		4.2
1.2	1.7
CAGR sales 2019-2030	CAGR sales 2019-2030	CAGR sales 2019-2030

1 Total global LV market; 2 Top 20 premium definition; 3 Large luxury vehicles over approx. US$ 70k (w/o tax); Source: IHS 08/2020

Summing up pillar 2

We will pursue higher portfolio profitability.

Let us explain how we will further target profitable customer segments

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
brand	growth	sub-brands	revenues	car software	industrial
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

Mercedes-Benz is our master brand and will always be our guiding star

luxury car brand1

1 Interbrand

Rapid and highly profitable growth

Sales volume in k units		CAGR 2011-2019
12		7% 3
32	1	23% 4

9

15

113	2	27% 4

62

6

17

2011

2015

2019

1 G-Class without model 461; 2 AMG without G63; 3 Maybach CAGR (2015-2019) ; 4 CAGR of AMG and G-Class with G63 (double counting)

N

Sales actuals 2019

Demand ahead of capacity

Sales vs. key competitor 2019

Capacity constrained

AMG

Gr. China Overseas Europe

N.A.

2013

2019

U.S.

Gr. China

GB

Global opportunity

Increasing demand

Conquest potential

Our sub-

JP Kuehlwein

We will unlock the potential of our sub-brands

Mercedes-Benz

Modern

Luxury

Performance	Sophisticated	Adventurous	Progressive
Luxury	Luxury	Luxury	Luxury

Clear growth plan for every sub-brand

Brand Maturity

Taking it to the next level

Growing the legend

Unlocking the potential

Addressing a new audience

Time

AMG: Significant growth and high-performance electrification

In 2021, the links between AMG and Formula 1 will intensify

Maybach: Global opportunity, double in size, go electric

G: Grow the legend, go electric

EQ: Addressing a new audience

Summing up pillar 3

We will seek

substantial EBIT growth

via our sub-brands.

Pillar number four our lifetime approach to customers

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
brand	growth	sub-brands	revenues	car software	industrial
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

The value of monogamy: Life-long relationships with our customers

It's about owning the customer relationship and leveraging our car parc and customer base

Embrace customers

Grow recurrent revenues

Physical		Direct		Data-driven		Service & parts		Digital services
retail		sales		connection		business		business

Luxury experience,	Significant	Personalized	Still significant profit	OTA
greater concentration	acceleration	relationships	growth ahead	upgrades

It's about owning the customer relationship and leveraging our car parc and customer base

Embrace customers

Grow recurrent revenues

Physical		Direct		Data-driven		Service & parts		Digital services
retail		sales		connection		business		business

67%	25% +20%	80% 1 bn.
would pay more for a	online sales	customer	data driven workshop	EBIT target
great experience	target in 2025	leads 1	business target in 2025	by 2025

1 UK trial

Summing up pillar 4

valuable customer bases we intend to make the most of it.

Now talk about our technology strategy

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
brand	growth	sub-brands	revenues	car software	industrial
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

Ambition 2039: Our societal responsibility

2022	2030	2039
Carbon-neutral	>50% xEV share	Carbon-neutral
production globally

will follow our ambition

Our economic responsibility

Our challenge

Our answer

Contribution margins on EVs

Driving down powertrain costs

Technology and eDrive investments

Intelligent platform strategy

Legacy activities

Clear plan for the transition

Our path to higher EV profitability

Costs of batteries coming down faster than originally expected	Other measures
(	Significantly below €100/kWh system level
	by mid-decade (cell/module/system)
	Simplified Modular Strategy will drive
	economies of scale

Partnerships and supply secured beyond 2025

Targeting strong contribution margins for all new architectures from 2025 1

New high-end EQ products target solid profitability from the start

2014	2017	2020	2024	2030

1 Without governmental incentives

Our aim is to lead in electric drive

We will rapidly	We will accelerate	We will offer a
expand our portfolio of	range and efficiency	state of the art
luxury xEVs		charging experience

We will build the world's most desirable electric cars

Aiming to take the lead in EV with a true Mercedes-Benz luxury experience - the combination of aesthetics and technology

Quality &	Luxury	Sublime	World class	Exceptional digital
craftsmanship	refinement	ride & drive	safety	experience

An electric future: We will rapidly expand our electric portfolio

> 20 BEV

< 25 PHEV

> 10 BEV

> 25 PHEV

• • 5 BEV
• 20 PHEV

Increase of xEV models1

2021

2025

2030

xEV share >50% with very high flexibility

1 MB xEV models, incl. EQV and T-Class, w/o smart

An electric future: We will significantly reduce our combustion engine variants

Reduced by

-40%

Reduced by

-70%

Reduction in variants of combustion engines

2020

2025

2030

Attractive PHEV products will support reaching CO2 targets

Range

in km1

100

Compact

Class

74km

50

Best

competitor

Charging

Alternating current (AC)

High Speed Charging (DC)

Compact

GLE-Class

98km

Best

competitor

Full Size SUV

E-Class (China)

100km

Best

competitor

Full Size

S-Class

Best

competitor

Large

1 Worldwide harmonized light vehicles test procedure - low, equivalent all electric range - combined

We are fully committed to dedicated electric architectures

Today

Powertrain flexible architecture

EQC

EQA

EQB

Dedicated large electric platform (EVA)

EQS

EQE

EQS SUV

EQE SUV

Dedicated compact and mid-size

electric platform (MMA)1

Stay tuned!

1 Electric

skateboard, intelligent modular strategy with body variants for electrified ICE

Launching in 2021: Our dedicated EVA platform for large cars will deliver high-tech performance and luxury

Dedicated electric skateboard architecture

Proprietary Mercedes e-drive technology

Production in Germany, China and U.S.

True luxury experience; exceptionally quiet ride

>700 km WLTP range

Up to 500kw

The next step: MMA compact and mid-size car electric platform

uncompromising

-architecture and modules

Exceptional range	Very competitive
	e-drivetrain costs
Benchmark high	Luxury: aiming to offer
power charging	best noise and comfort
	in the industry
Highly energy efficient	State-of-the-art digital
drivetrain & vehicle	experience

Optimized investment & cost structure

Range through efficiency: Focus on all relevant levers and total vehicle optimization

Cd & front surface

Drivetrain

efficiency

Auxiliaries

mass	Rolling
resistance

Next generation of our e-drive unit developed in-house

Electric-motor

PMSM-technology1

Increase active diameter

Optimized oil cooling concept

Scalable e-motor length

SiC-Inverter

Reduction of switching loss (specific transistor)

Combined control unit - saves costs & weight

Variable switching frequency

2 speed gearbox

Best cost-efficiency-ratio on system level In 2nd gear one planetary gear active Dog clutch to reduce drag loss

800V

Reduction of current & energy losses with same power output

for cost & weight savings

1 PMSM = Permanent-magnet synchronous motor

Mercedes-Benz has extensive in-house battery R&D, and also works closely with key strategic development partners

Cell format and production

• Continuous assessment of different cell architectures
• Internal design of new manufacturing techniques and joint development of processes with strategic partners

Anode - increase energy density

• Silicon based anodes: strategic partnership with (specific anode material, capacity, and energy density)
• Lithium metal anodes (specific energy density on cell level)

Next-gen battery development

Electrolyte - increase safety

Optimized electrolytes to significantly improve overall cell performance (lifetime, power)

and solid-state electrolyte for high energy density chemistries and intrinsic stability

Simulation - speed up battery development

Improvement of simulation methods by digital twin simulation (physic based models, matching model vs. reality, multilevel simulations)

Cathode - sustainability and cost reduction

• Reduction of cobalt as our contribution to sustainability by increase of nickel-rich cathodes
• LFP cathodes as cost optimized entry type option

Careful capital allocation: We drive innovation via in-house R&D and partnerships but leverage strategic suppliers for cell production

Cell	Module	Battery Pack

In-house R&D	In-house Production	In-house Production
AND
Partnerships	Supplier	Supplier

Our software delivers a seamless and easy EV-charging experience

80% of public infrastructure is accessible via Mercedes me in almost all markets

Over 350,000 charging stations worldwide

one contract, one invoice

The new EQS will offer high speed charging, enabling long distance capability

>250 km

in 15 min1

1 Preliminary forecast based on WLTP indicated range

Range: Towards the next frontier

VISION EQXX

Now let us explain our software strategy

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
brand	growth	sub-brands	revenues	car software	industrial
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

We have already made huge strides in our software competence and technology offer

MBUX Software

ADAS Software

Battery Management Software

The digital user experience in the S-Class sets new standards

Crystal clear	Biometric
OLED display and	authentification
3D instrument cluster	for personalized settings

Over	Augmented	Intuitive
the Air	Reality	gesture
updates	head-up display	control

Natural voice

interaction in

27 languages

Personalized infotainment

on each seat

In 2021, we aim to take automated driving to the next level

L3 Drive Pilot 1	L4-ready Parking System: 2
	Intelligent Park Pilot incl. 3D view

OTA-based learning	Augmented Reality
Automated Driving functions	Automated Driving experience

1 L3 System according to ALKS, planned for Germany first; 2 This parking function will be available for use on public roads as soon as regulations and infrastructure allow.

L3 S-Class: Technology suite including LIDAR and high definition maps

Precise HD maps	Benchmark
and positioning	cameras

Microphone

LiDAR sensors

Long range /	Redundant actuation
short range radars
Road condition
	sensor and service

Decision time for the industry: Which software path to choose?

Proprietary OS

Outsourced OS

Our own proprietary operating system will deliver an extraordinary customer experience

Compelling luxury experience	Scalable, lower variable costs
Speed of execution	Lower complexity
Higher customer loyalty	Recurrent revenues

What exactly is MB.OS? And what will Mercedes-Benz develop?

Vehicle software

Vehicle hardware

Frontend Layer 100% in-house

Applications Layer

Mainly in-house1

Middleware Layer

Partially in-house

Infrastructure Layer

Partially in-house

Cloud/ IoT

5 domains: Drive train

Autonomous Drive

Infotainment

Body control

Communications

Sourced from suppliers but chipset specifications defined by Mercedes-Benz

(key strategic partners)

Consolidated hardware strategy away from many ECUs

Full integration by Mercedes-Benz

1 Automated Driving co-developed with Nvidia

We will deliver MB.OS by 2024 by further expanding our international software development network

24

3

hours from idea to new function as prototype

months to series release

	Berlin
Seattle	Beijing	Seoul	Tokyo
Stuttgart

Sunnyvale	Tel Aviv
Bangalore

Co-inventing: Teaming up with the best

Summing up pillar 5

Leadership in electric drive

and proprietary car software will be essential for our future success.

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
industrial
brand	growth	sub-brands	revenues	car software
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

The challenges are clear

Our initial challenge

got reinforced

and amplified.

Revenue	Revenue	Revenue	COVID-19

Electrification & CO2 measures

Cost & Capacity Growth

Cost & Capacity Growth

Cost & Capacity Growth

Our break-even point is too high

Sales MB cars

in units

Pre-/post-COVID-19 measures

2019

2011

2011

2020

EBIT MB cars

adjusted in bn.

In response we have stepped up our cost reduction and capacity adjustment measures

Significant short-term cost reduction and cash preservation measures implemented and being continued

Substantial cost reduction and capacity adjustment measures to lower break-evenpoint initiated:

• CAPEX and R&D
• Fixed costs
• Variable costs (internal & external)
• Capacity adjustment and powertrain transformation

Driving continuous performance improvement culture

Indicators of change

Q2 Sales

MB cars	409,000
(-29% vs. py)
in units

Q2 EBIT

MB AG

in mn. , adjusted

Accelerating headcount reduction

Headcount (rounded)

173,400

173,400

-3,800169,60070

12/201908/2020

Increase in exit packages signed

Contracts signed, cumulated

1,100

530

100

03/20 06/20 08/20

Q2 CFBIT

-284

522

522

Fixed costs coming down

YtD Jan-Aug 2019 vs. 2020

-12.3%

Reducing external spend (purchase requisition)

Indirect spend, Jan-Aug 2019 vs. 2020

2019 2020

MB AG

in mn. adjusted

08/201908/2020

Q1

Q2

Jul/Aug

We will lower CAPEX and R&D

Key levers

Reduction of platforms/portfolio, and vehicle complexity

Reduced spending on conventional powertrain and highly standardized EV architectures

Streamlined industrial footprint

Absolute year by year

for CAPEX and R&D (not % of sales targets)

> -20%

2019	2020	2021	2022	2023	2024	2025
Actuals

Note: refers to Capex, R&D and non-recurring expenses - cash flow view

We will significantly reduce our fixed costs

Comprehensive fixed cost optimization scope, including

Absolute fixed cost reduction

Personnel cost reduction targets continued	> -20%
through to 2025

Adjustment of production capacity

Structural change in marketing & sales

Sustainable implementation of COVID-19	2019	2020	2021	2022	2023	2024	2025
learnings, e.g. travel, consulting, facility
Actuals

management, etc.

We will reduce variable costs to mitigate CO2 burden

Comprehensive optimization of all external and internal variable cost levers, including

Increased saving targets for material costs

Ambitious targets for variable manufacturing costs

Reduction of variable sales costs

2019	2020	2021	2022	2023	2024	2025
Actuals

1 Before mix change from xEV

We have initiated a series of transformational actions to drive down costs

Lower cost base and improve industrial footprint

Operational		Supply		Portfolio and complexity		Performance		Future
footprint		strategy		reduction		culture		sales setup

Powertrain		Global engineering		E2E processes and		IT and		Governance
transformation		footprint		organizational complexity		full digital value		and admin

Our financial ambitions for MB AG 2025

Market environment/revenues

Contribution margin

Profitable growth

Fixed costs

> -20% vs. 2019

> -20% vs. 2019

> -20% vs. 2019

CAPEX and R&D (CF impact)

> -20% vs. 2019

> -20% vs. 2019

> -20% vs. 2019

RoS MB AG

Mid to high single digit

High single digit

Double digit

Cash conversion

0.7 - 0.9x

In summary: Our refocused strategy

Think	Focus	Expand	Embrace	Lead
and act	on	customer base	customers and	in electric
like a luxury	profitable	by growing	grow recurrent	drive and
brand	growth	sub-brands	revenues	car software

Grow economic	Higher portfolio	Substantial	Significant profit	Leverage
value	profitability	EBIT growth	streams	technology

Lower

cost base and improve industrial footprint

Absolute cost reduction

In summary: Our refocused strategy

Think	Focus	Expand	Embrace	Lead	Lower
and act	on	customer base	customers and	in electric	cost base
like a luxury	profitable	by growing	grow recurrent	drive and	and improve
industrial
brand	growth	sub-brands	revenues	car software
footprint

Sustainability as a guiding principle

Driven by a highly qualified and motivated team

Disclaimer

This document contains forward-looking statements that reflect our current views about future events. The words and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an adverse development of global

economic conditions, in particular a decline of demand in our most important markets; a deterioration of our refinancing possibilities on

the credit and financial markets; events of force majeure including natural disasters, pandemics, acts of terrorism, political unrest, armed conflicts, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates and tariff regulations; a shift in consumer preferences towards smaller, lower-margin vehicles; a possible lack of acceptance of our products or services which limits our ability to achieve prices and adequately utilize our production capacities; price increases for fuel or raw materials; disruption of production due to shortages of materials, labor strikes or supplier insolvencies; a decline in resale prices of used vehicles; the effective implementation of cost-reduction and efficiency-optimization measures; the business outlook for companies in which we hold a significant equity interest; the successful implementation of strategic cooperations and joint ventures; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety;

the resolution of pending government investigations or of investigations requested by governments and the conclusion of pending or

threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading and

Opportunity in the current Annual Report or latest Interim Report. If any of these risks and uncertainties materializes or if the assumptions underlying any of our forward-looking statements prove to be incorrect, the actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements since they are based solely on the circumstances at the date of publication.