Mercedes will favor EVs over e-fuel combustion cars, CEO Kallenius says

BERLIN -- Mercedes-Benz will favor "technically superior" electric motors over combustion engines powered by e-fuels, CEO Ola Kallenius told a German newspaper.

Kallenius reaffirmed the company's plans to develop electric-only vehicle architectures.

"We already said four years ago that our new vehicle fleet across the entire value chain should become CO2-neutral in balance sheet terms by 2039," he told the Frankfurter Allgemeine Zeitung. "That is our goal."

Kallenius cited the advantages of EVs in power efficiency, which he called "sensationally good" and drew attention to the zero-emission factor, which said e-fuel vehicles cannot match.

"The electric car is still a young technology compared to the combustion engine," Kallenius added. "We still see great potential for progress: the electric drive will overtake the internal combustion engine in terms of performance before the end of this decade."

Kallenius said the automaker is still working on making ICEs fit for the new Euro 7 emissions standard, but added that by 2026, Mercedes will have reduced investment in ICEs by around 80 percent.

China will be the last market where ICEs are available and only as a plug-in hybrid variant developed in partnership with Geely.

Kallenius also reiterated plans to concentrate the company's growth strategy at the high end of the market while also offering entry-level vehicles and focusing on sustainability.

"The new technology we are developing for our luxury models to ensure ecological sustainability will also be used in other cars at some point in the future," he told the paper. "And do not forget that our cars last longer. That is also a contribution to sustainability."

When asked about the recent price cut Mercedes made to its electric flagship EQS in China, Kallenius noted the price was higher than in other markets to begin with. "We were a bit too optimistic there," he said. "Now we have adjusted the price accordingly."

Charging challenges

Kallenius said the switch to electric cars is coming faster than expected, but added charging infrastructure and sufficient supplies of green electricity were still required.

"The charging infrastructure must be expanded as quickly as possible, and we must do everything we can to promote the generation of green electricity," he said. "We will take care of the product--the electric vehicles."

He pointed to an additional critical element for which a strategy is needed--raw materials in general and lithium in particular, calling it "the new petroleum."

"Building capacity in lithium mining and processing is a gigantic industrial undertaking," he said. "These raw materials will not all be mined in Europe. For that, we need trade agreements with Canada, South America and Australia. That is where government support is needed."

When asked about Mercedes' "modest" stock market value despite record profits, Kallenius defended the company, noting the capital market is watching to see if the automaker will manage the transformation to electric cars while maintaining its profitability and financial strength.

"Mercedes does not get a start-up bonus from the stock market, even though we are actually a start-up, just one that is 137 years old," he said. "We need staying power and have to implement our strategy step by step. We are in the decade of transformation. Mercedes has to prove itself."

When it was pointed out to him that Porsche is also an established automaker and yet a star on the stock market, Kallenius simply offered his congratulations to the company and noted if you can achieve higher profit margins as a luxury manufacturer, then you achieve higher valuations on the stock market.

"Mercedes and Porsche are not directly comparable, of course, because we are bigger," he added. "But we are more likely to go up than down in the market with our products. Mercedes has always done well when we have built good cars. That is what our strategy is based on."