Daimler CEO puts struggling Chinese EV brand Denza on notice

Daimler AG Chief Executive Officer Ola Kallenius said the success of the latest Denza crossover will determine the future prospects of the Chinese electric-car brand with partner BYD Co. Ltd., following years of lackluster sales.

“The cash investment is behind us" for the model, Kallenius told reporters Thursday. “Now we look how Denza develops and then we’ll make decisions."

Tepid demand for Denza’s EVs has raised concerns as the maker of Mercedes-Benz cars works to lift returns. BYD declined to comment.

Daimler and BYD established the brand a decade ago to tap growth in the Chinese new-energy vehicle market. While sales have taken off, fierce competition in price-sensitive volume segments is posing a challenge with regard to profitability.

“We hold the view that only EVs geared toward the higher end of the market makes economic sense," Sanford C. Bernstein analyst Arndt Ellinghorst said in a note.

Kallenius has taken a number of steps to overhaul the world’s largest maker of luxury cars and commercial vehicles since becoming CEO in 2019. Daimler this month said it’ll spin off its sprawling trucks division to make both companies more nimble.

Earlier, the company folded the Smart minicar brand into a joint venture in China and sold the unit’s French factory to Ineos Group. The moves are part of a plan to focus on luxurious cars packed with sophisticated electronic gadgetry.