The head of German carmaker Mercedes-Benz has highlighted the challenges facing the company in an interview with the German business newspaper Handelsblatt. CEO Ola Källenius, also the current President of ACEA, warns of a European car market collapse if the ban on ICE vehicles in 2035 is implemented.
Källenius proposes to drop an actual date for the ban and to stimulate the sales of EVs through low electricity prices, also on public charging points, and tax incentives. “If we don’t do this, Europe will fall behind in the automotive industry, and many consumers will hastily buy an ICE car just before the deadline,” says Källenius. “That’s surely of no use for our climate.”
German automakers have recently seen significant profit declines, with Mercedes-Benz reporting a consolidated net profit of around €2.7 billion for the first half of the year, marking a drop of 55.8% compared to the same period last year.
“The environment in which we operate is extremely complex at the moment,” CEO Ola Källenius told the newspaper in the interview published on Monday. “Car manufacturing is a tough business, now more than ever.”
Three main reasons
Källenius sees three main reasons for this, with US tariffs top of the list. He said that if the US decides to redefine a global trade order that has been in place for decades, this will inevitably have an impact on business. Under President Donald Trump, the US has raised tariffs on imports from the EU, including cars.
Second, Källenius described the intense “Darwinian” competition in China, where over 100 car manufacturers vie for market share. “Consumer sentiment in the high-end segments important to us has been very subdued for several years, to put it mildly,” he noted.
Third, the shift to electric mobility is taking longer than anticipated. “That is why we are investing in multiple drive technologies in parallel for an extended period,” Källenius explained.
“It would be easier to stop investing and see our profit soar again, but we’re not going to do that. We’re aiming at the long term and are rolling out the biggest product offensive in our history: between 2025 and 2028, we will bring dozens of new and very attractive vehicles to the market. The effects of this offensive on our financial results will be seen at the latest in 2027.
Luxury focused?
Not so long ago, Mercedes-Benz wanted to concentrate on luxury cars and vehicles with high profit margins, but the course has been adapted since then. “Our goal is to offer the best and most wanted cars in all segments. I admit that there are flaws in our offering, especially in the good EVs in the middle segments of our portfolio. We are going to close this as soon as possible with the venue of the new GLC and, somewhat later, the new electric C-Class. Meanwhile, we will certainly not neglect the lower segments, and in the top-end segment, we managed to grow from 11% to 14% of our total sales volume.”
China
In China, Mercedes-Benz is continuously losing market share. Is something wrong? “The Chinese market sees more than 100 manufacturers fiercely competing with each other. This gives enormous pressure on the market, often described as ‘Involution’. Many manufacturers have high debts and severe overcapacity. I don’t know how long this will last.”
“I’d rather think it will be eight years before the market has completely cooled down again. Meanwhile, we try to defend market share where it is meaningful and aim at a good balance between market share and cash flow. We don’t want to gain market share by lowering our prices.
EVs
Mercedes was the only serious manufacturer in Germany that sold fewer electric cars this year than during the same period last year. Is there a problem? “We want to do it differently from some of our competitors. We don’t want to sell our EVs too cheaply because that will hurt the residual value. We’d rather go for an extension of our EV portfolio.”
The margins on electric cars are still smaller than those on ICE cars. “Nobody has invested more in electrification than the European car industry, more than €250 billion. Now is the time for our politicians to improve the circumstances for electromobility.”
“The rollout of a comprehensive charging infrastructure hasn’t occurred yet. On the other hand, it is nonsensical to ban other technical solutions if they still make sense.”
Trump’s tariffs
“We hope that the current agreement between the EU and the US will stand for a long time. We are flexible, but decisions in production must be made years in advance. This year, we will invest €14 billion, with the majority of it allocated to Germany. However, as the US remains the world’s most significant economic market, we will also invest there. The car industry is exceptionally networked. Investing in the US also secures jobs in Europe and Germany.”
