Mercedes-Benz Adjusts Strategy Amid EV Demand Shift

Mercedes-Benz has signaled a departure from its earlier focus on an exclusively electric future. This strategic shift reflects the luxury carmaker’s acknowledgment of slower-than-expected consumer interest in electric vehicles (EVs).

During a recent announcement, Mercedes-Benz tempered expectations regarding EV demand, indicating its intention to continue updating its lineup of combustion engine vehicles well into the next decade. CEO Ola Kaellenius pointed out that Europe may not be fully prepared for a complete transition to electric vehicles by 2030, citing challenges such as inadequate charging infrastructure and a limited selection of appealing electric models.

Originally aiming for a portfolio entirely composed of electric vehicles by 2030, Mercedes-Benz now anticipates that electrified sales, including hybrids, will constitute up to 50% of total sales by the same year. "It is almost like we will have a new lineup in 2027 that will take us well into the 2030s”, said Kaellenius to stakeholders. 

While Mercedes-Benz's announcement led to a 5.9% increase in shares, the broader automotive industry faces significant uncertainty. Automakers and suppliers, initially expecting strong demand for EVs, are now grappling with investments surpassing actual market demand, which has intensified pressure to reduce costs.

Factors such as slower economic growth, supply chain bottlenecks, and trade tensions between major global economies have contributed to a cautious outlook for Mercedes-Benz in 2024. The company anticipates lower returns on sales across its car and van divisions, with first-quarter sales projected to be below the previous year's level.

Sales of electrified vehicles, including hybrids, are expected to remain at 19-21% of the total. In 2023, Mercedes-Benz reported an adjusted return on sales in its car division of 12.6%, meeting forecasts. However, inflation, supply chain-related costs, and component shortages have impacted profits.

For 2024, Mercedes-Benz expects a lower adjusted return of 10-12% for cars and 12-14% for vans, down from the previous year's 15.1%. To navigate these challenges and invest in future technologies, the company has raised its average price by 2% and increased spending on research and development for its MB.OS platform.