Mercedes-Benz Adjusts EV Transition Strategy, Continues Combustion Engine Production

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Mercedes-Benz Adjusts EV Transition Strategy, Continues Combustion Engine Production

Mercedes-Benz has announced a shift in its approach to electric vehicles (EVs), signaling a slower transition away from combustion engines than previously planned. This adjustment comes in response to a less rapid uptake of EVs than expected, leading the German carmaker to revise its sales forecast for electric models by 2030, reducing it by 50%, according to a recent investor statement.

Originally committed to becoming fully electric by 2030, Mercedes-Benz had aimed to phase out internal combustion engine (ICE) vehicles entirely by that time. However, the company now intends to continue offering ICE vehicles into the 2030s. Consequently, Mercedes-Benz now projects that electric and hybrid vehicles will make up to half of its total sales by the end of the decade.

The company cited several reasons for this recalibration, including potential unforeseen events stemming from geopolitical tensions and trade policies. Additionally, it highlighted concerns over supply chain disruptions and the availability of critical components as major risk factors influencing this strategic adjustment.

Despite adjusting its electric vehicle (EV) strategy, Mercedes-Benz remains committed to its long-term goals, positioning itself to adapt as market conditions evolve. The company emphasizes its strategic focus while maintaining tactical flexibility, anticipating a future where demand for EVs increases, charging infrastructure improves, and supply chain issues are resolved. This approach led to a positive market response, with the company’s stock price rising by 5.9% following the announcement and the launch of a $3.3 billion share buyback program.

Mercedes-Benz has made significant strides in the EV market, particularly in Europe and the U.S., where it now offers six pure electric models. These include the EQB SUV, the EQE and EQS sedans and SUVs, as well as the luxurious EQS SUV Maybach. The brand achieved a record EV sales in 2023, underscoring its commitment to electrification.

CEO Ola Källenius has reiterated the company’s commitment to transitioning to fully electric vehicles, but not at the expense of forcing the phase-out of internal combustion engine (ICE) vehicles. He believes in allowing the market and consumer preferences to naturally dictate the end of ICE vehicles. This stance suggests that Mercedes-Benz is prepared to support both electric and traditional vehicles as long as there is customer demand for them.

Mercedes-Benz is actively exploring advancements in electrified powertrains, with a keen interest in the development of range-extender technology. In August 2023, news surfaced about Mercedes-Benz enhancing its M252 engine to serve as a range-extender. This innovative setup means the engine operates as a generator to recharge the EV’s battery, while the vehicle’s motion is powered directly by electric motors. This approach mirrors the functionality seen in vehicles like the Ramcharger, certain Geely models in China (including the Galaxy L7 SUV), as well as the BMW i3 and Chevy Volt, known for their range-extending capabilities.

The adoption of range extenders in EVs significantly boosts the vehicle’s total driving range by minimizing sole dependence on the battery. This technology presents a solution to range anxiety among drivers by offering greater flexibility. However, it does introduce a reliance on fossil fuels to generate power, presenting a paradox in the push towards electrification and environmental sustainability.

Looking ahead, Mercedes-Benz plans to utilize the Modular Mercedes Architecture (MMA) for future EVs and ICE vehicles alike. This flexible platform is expected to underpin the production version of the new CLA (to be named later), marking its debut. Subsequent models like the next GLA and GLB will also benefit from this versatile architecture, signaling Mercedes-Benz’s commitment to innovation in both electric and traditional powertrain technologies.

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