Mercedes-Benz CEO Ola Kaellenius on Thursday toned down expectations amid slowing EV demand and said it will update its combustion engine lineup well into next decade.
Today, the German luxury automaker made headlines with its announcement regarding the slowing demand for electric vehicles (EVs) and its plans to update its combustion car lineup. The company began last year to caution that it would likely not be ready by 2030 for an all-electric lineup and it now expects electrified sales — including hybrids — to account for up to 50% of the total by that date.
“It is almost like we will have a new lineup in 2027 that will take us well into the 2030s,” Kaellenius said.
MERCEDES-BENZ SLOWING EV DEMAND
As recently as as Q2 of last year, Mercedes-Benz was reporting huge increases in EV sales “Mercedes-Benz witnessed a remarkable 123% increase in battery electric vehicle (BEV) sales, totaling 56,300 units in the second quarter of 2023.”
So what happened?
Mercedes-Benz, known for its commitment to innovation and luxury, has been at the forefront of the electric vehicle revolution. However, the company’s recent observations suggest a deceleration in EV demand. While this might seem surprising given the global push towards sustainability, several factors contribute to this trend.
Firstly, concerns about EV infrastructure, particularly charging infrastructure, continue to linger. Despite significant progress, the charging network still faces challenges, including accessibility, convenience, and speed. Range anxiety remains a prevalent deterrent for potential EV buyers, especially in regions with underdeveloped charging infrastructure.
Secondly, the current geopolitical landscape and supply chain disruptions have impacted the availability and affordability of key components essential for EV manufacturing. The semiconductor shortage, in particular, has forced automotive manufacturers to scale back production, affecting the availability of EVs and increasing their prices.
Additionally, consumer preferences and behaviors vary across different markets. While some regions demonstrate a robust appetite for EVs, others still show a preference for internal combustion engine (ICE) vehicles due to factors such as driving habits, infrastructure, and economic considerations.
DEMAND VS. PRICE CUTS
Ok, but is this a demand issue or are the Tesla price cuts adversely effecting the EV industry?
As recently as April 2023, this was being reported….
“That’s because the big winner in this EV price war could be the luxury automakers.
“[Mercedes and BMW are] still holding onto their brands,” London-based Bernstein Research analyst Daniel Roeska wrote in a note to clients on Thursday. “In the long-run, this may actually be good for the premium OEMs.”
Roeska added Tesla’s price cuts mean “Mercedes and BMW’s offerings have now moved clear out of Tesla’s price range.””
Mercedes in 2023 announced plans to establish its own charging network, intensify its electrified fleet, and integrate Level 3 autonomous driving technology into its vehicles in an effort to take on Tesla and reverse market share in the luxury model segment.
While Tesla’s EV market share dropped from about 65% to 55% year over year, the overall EV market growth in the United States was so high that Tesla now has a higher market share than Mercedes-Benz (2.3%).
MERCEDES-BENZ’S STRATEGIC PIVOT
In response to the evolving market dynamics, Mercedes-Benz has outlined its plans to refresh its lineup of combustion engine vehicles. This strategic pivot underscores the company’s commitment to meeting consumer demands while simultaneously navigating the transition towards electrification.
By updating its ICE lineup, Mercedes-Benz aims to leverage its existing infrastructure and expertise in combustion engine technology while continuing to invest in and advance its electric vehicle capabilities. This dual approach allows the company to cater to a diverse range of consumer preferences and market conditions.
Moreover, Mercedes-Benz remains firmly committed to its electrification roadmap, with continued investment in research, development, and production of electric vehicles. The company’s EQ lineup, which includes models like the EQC and upcoming EQS, embodies its vision for emission-free mobility and sustainable luxury.
EMBRACING A MULTI-FACETED FUTURE
As Mercedes-Benz recalibrates its strategy in response to shifting market dynamics, it underscores the multi-faceted nature of the automotive industry’s future. The road ahead is not singularly defined by electric or combustion engines but rather by a blend of technologies, innovations, and consumer preferences.
In this landscape of change, agility and adaptability emerge as indispensable traits for automotive manufacturers. The ability to navigate uncertainties, embrace innovation, and respond swiftly to evolving consumer needs will determine the success and sustainability of industry players.
Mercedes-Benz’s decision to update its combustion car lineup amidst slowing EV demand reflects the intricate balance between tradition and transformation in the automotive industry. As the world marches towards a greener, more sustainable future, the journey entails embracing a spectrum of technologies and strategies.
As Tesla continues to slash prices, the reverberations are felt far and wide, with traditional automakers like Mercedes-Benz scrambling to adapt to the shifting landscape. Mercedes-Benz, known for its luxury and performance vehicles, has been making strides in the electric vehicle market with models like the EQC and the upcoming EQS.
However, the aggressive pricing strategies employed by Tesla have put pressure on Mercedes-Benz to reconsider its approach. With Tesla offering compelling electric vehicles at lower price points, Mercedes-Benz finds itself facing a dilemma: how to maintain its brand image of luxury and exclusivity while also competing in a market increasingly driven by affordability and accessibility.
