Mercedes is preparing a new model offensive. The company’s wealthy customers are eager to reach for combustion cars

Luc Williams

The product offensive is underway over the next two to three years, the S-Class carmaker will increase its spending on its lucrative range of fuel-burning vehicleswhich are still very popular with customers. CEO Ola Källenius said in an interview that especially the best buyers “still reach for technologically advanced cars with combustion engines.”

“We need flexibility for longer, into the 2030s” – Källenius said, keeping intact the company’s goal of becoming carbon neutral by 2039.

Mercedes scaled back electrification plans

After the slowdown in demand for electric cars, which was particularly noticeable in Europe, the world’s largest The premium carmaker has scaled back its electrification plans.

Sales of Mercedes battery-powered vehicles fell 9 percent in the first quarter to 50,500 units. The reasons for the decline in popularity of electric cars can be traced to high prices and design errors.

Percentage of total car sales that are fully electric / Bloomberg

EQS – the most failed launch in decades

In particular, the EQS model, available from 2021, which was announced as one of the most important launches in decades, fared poorly.

The €109,500 sedan’s sloping roof, intended to maximize aerodynamics, was a real pain for wealthy buyers. Low demand prompted expensive design improvements. The facelifted EQS, due next year, will get more rear-seat comfort.

The sales debacle contributed to Mercedes’ decision to back down from its ambitious goal of selling only electric vehicles where possible. The plan was to eventually electric cars were to account for 50 percent of sales in 2030.

Sales of the electric Mercedes EQS sedan fell 40% last year. / Bloomberg

The new generation of Mercedes cars

Next year, production of a new generation of vehicles will begin built on new foundations, starting from the basic CLA coupeand later GLB SUV. CLA will be available in battery-powered and combustion engine versions. Although combustion engine cars will continue to generate huge profits for a long time, the Stuttgart-based company continues to insist on saving on purchases, optimizing repair costs and non-essential expenses, Källenius said.

Mercedes also plans to release an electric, compact version of the G-Wagon in 2026.

The need for savings

The company is saving expenses for nowsuspending two of three joint investments in European battery factories worth €7 billion. Automotive Cells Company Company SEco-owned by Stellantis and TotalEnergyshas suspended work in Germany and Italy to consider a direction for cheaper cell production in light of slowing demand for electric vehicles.

“We will build battery cell factories at the speed we need them,” Källenius said. “We need to match capital allocation to the pace of adoption.”

Mercedes doesn’t want a trade war

The transition to electric vehicles is also a challenge amid geopolitical tensions. The European Union is set to formalize temporary tariffs on battery-powered cars made in China this week. Care expected to increase to as much as 48 percent. If the levies are introduced, Smart models produced by Mercedes and China’s Zhejiang Geely Holding Group Co. in China would be subject to a tariff of 20 percent on top of the current 10 percent, Källenius said.

“When you benefit from open markets, as Germany has for decades, it makes no sense to provoke a trade conflict,” he said. “We produce Smart in China with our partner Geely, which means we import cars into Europe on a significant scale.”


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