(Bloomberg) — Mercedes-Benz, which has fixated for years on leading the auto industry in luxury-vehicle sales, will rethink its ambitions and restructure operations to be more profitable in the midst of a costly shift to electric cars.

Daimler AG’s main division will aim for a return on sales in the mid to high single-digit range by 2025, even if market conditions are unfavorable. Its ambition will be to earn a double-digit profit margin if the environment is strong.

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Daimler AG Unveils New Mercedes Benz S-Class Hybrid at Automaker’s Carbon Neutral Factory

Ola Kaellenius

Photographer: Michaela Handrek-Rehle/Bloomberg

“We have not yet lived up to our full potential in terms of turning volume success into profit growth,” Chief Executive Officer Ola Kallenius said in a statement ahead of Daimler’s capital markets day. “We will invest where we can win, grow more intelligently, and reshape our industrial footprint.”

Video: VW could sell Lamborghini, Bugatti – sources (Reuters)

Investor confidence in Daimler gradually improved in recent months after the German manufacturer navigated the unprecedented industry slump triggered by Covid-19 better than feared. But electric-car leader Tesla Inc. zoomed past all traditional manufacturers to become the world’s most valuable automaker while Daimler and others wrestle with revamping their legacy operations.

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Daimler shares are recovering from a steep slump

Daimler has 13 buy ratings among analysts surveyed by Bloomberg, followed by 11 holds and seven recommendations to sell the stock. The stock slipped 3.1% this year through the close of trading Monday, outperforming larger German peer Volkswagen AG and arch rival BMW AG.

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Mercedes has flanked its all-electric EQC SUV with a plug-in minivan dubbed EQV. It plans to start output of the compact EQA hatchback later this year and rolled out a fresh version of its flagship S-Class last month. The sedan will get a fully-electric sibling dubbed EQS next year, which will be based on the company’s first dedicated electric-car platform.

Profits from large luxury cars will be key to financing restructuring costs aimed at making Mercedes more efficient. The brand has outsold luxury-car rivals for years, but returns have slumped below the level of mass-market peers such as PSA Group.

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