Mercedes Vows to Keep Making Gas-Powered Engines as EV Transition Slows
Mercedes Vows to Keep Making Gas-Powered Engines as EV Transition Slows

By Jana J. Pruet

Mercedes-Benz Group AG is easing off its aggressive electric vehicle goals as sales lag, pushing the luxury automaker to keep producing its trusted combustion engines.

“The transformation might take longer than expected,” CEO Ola Källenius told shareholders during the company’s annual meeting on May 9.

The German automaker previously aimed to produce a fully electric new car fleet by 2030, but Mr. Källenius said the company now has no plans in the near future to stop building its combustion engine.

“There will be both in the years: electric cars and cars with ultra-modern electrified combustion engines,“ he said. “If the demand is there, well into the 2030s.”

The move comes after orders for Mercedes-Benz’s pricey electric vehicles, including the EQE and EQS sedans, failed to meet the German car maker’s expectations, which was a key part of Mr. Källenius’s strategy to boost profits.

He told shareholders that Mercedes-Benz has set its “plants up for flexibility.”

“That way, we can produce combustion engine models alongside the electric cars and react quickly to the market,” Mr. Källenius said.

The company is prepared for whatever the market demands, he said, adding that “many factors influence the pace of transformation,” such as the “expansion of the charging infrastructure.”

Mr. Källenius said the company will keep all its drive systems up to date and “then the customer decides.”

“We will build perfect Mercedes for every wish,” he said.

The company will remain focused on increasing sales of its highest-end vehicles, including AMG performance models, the EQS, the G-Wagon SUV, and the Maybach line, by up to 60 percent by 2026 and increase the operating margin to about 14 percent.

Other Companies Report Slowing EV Sales

Mercedes is not the only automaker having to rethink its electric vehicle (EV) strategy.

Ford’s EV sales have continued to slide this year. In late April, the automaker reported a net loss of $1.32 billion in its EV segment in the first quarter of 2024 while also reporting a profit among its gas-operated vehicles.

The company reports earnings from three segments: Ford Model e, which covers its electric vehicles; Ford Blue, which includes the automaker’s gas and hybrid vehicles; and Ford Pro, which represents its commercial market.

During the first quarter, Ford’s Blue segment reported $905 million in profits, and Ford Pro recorded a profit of $3 billion.

Ford sold 20,223 electric vehicles during the first three months of the year at a loss of more than $65,000 per vehicle, according to company data. It lost $4.7 billion over the same period in 2023.

Meanwhile, Elon Musk’s Tesla announced last month that it was cutting 3,300 workers in California and more than 2,600 in Texas after the automaker reported a 9 percent drop in revenue year over year.

The company reported revenue of $21.3 billion in the first quarter, down from $23.3 billion a year ago. Profits dropped from $2.51 billion to $1.13 billion over the same period.

In a memo, Mr. Musk told employees that his company’s rapid growth created “duplication of roles and job functions in certain areas.”

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” he said in the memo, adding that the organization would reduce its global headcount by more than 10 percent.

Mr. Musk’s announcement came after Tesla reported delivery of 386,810 vehicles in the first quarter of 2024, down by about 100,000 deliveries from the last quarter of 2023. The reduction was the automaker’s first drop in deliveries since 2020, when the COVID-19 pandemic severely hindered production.

A recent Gallup poll showed that fewer Americans were interested in purchasing electric vehicles. The percentage of Americans “seriously considering” buying an electric vehicle fell to 9 percent, down from 12 percent in 2023.

Naveen Athrappully and Katabella Roberts contributed to this report.

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