Daimler is planning to make new savings in order to offset the higher costs and lower margins associated with planned boosts to electrification of its model ranges.

Reuters reported that it has set a new target of saving EUR4bn by 2025 as it also warns that electric cars come with half the margin achieved by equivalent conventional engined cars.

“In the beginning of the cycle we believe that we will have to face a significantly lower margin. For some vehicles half of the margin of the vehicles they replace,” Frank Lindenberg, Vice President of Finance and Controlling at Mercedes-Benz Cars, told an Investor Day, according to Reuters.

Lindenberg also warned that a rapid switch to electric cars may prevent it from meeting its return on sales target.

The report added that as part of the cost savings plan, Daimler wants to save EUR1bn from fixed costs and EUR1bn from R&D and capital costs. The other EUR2bn would come from product costs, Reuters reported.

Daimler also said that by 2025 electric vehicle purchase costs should be in parity with combustion engine cars – something that would boost their penetration in sales.

The report also cited remarks by Dieter Zetsche suggesting that Daimler’s high level of vertical integration could be reduced to help bring about cost savings on components, especially those for the new wave of electric vehicles being planned.