Mercedes-Benz to continue combustion car sales “well into 2030s”

Mercedes-Benz will continue to sell combustion-engined cars “well into the 2030s” as it adjusts to changing demand for its electric vehicles, the company’s CEO has said.

Mercedes announced in 2021 that it planned to become all-electric “wherever market conditions allow” by 2030. 

“Artificially trying to hit the number by pushing product into the market doesn't make sense,” Mercedes CEO Ola Källenius told investors on the company’s earnings call on Thursday.

Mercedes has also dialled back plans for 50% of sales to be either electric or plug-in hybrid by 2025, now stating that it plans for “up to 50%” of its sales to comprise those electrified drivetrains “in the second half of the decade”.

The decision “looks pragmatic given a bumpier road to adoption, notably in North America,” wrote Jefferies bank analyst Philippe Houchois in a note to investors.

Mercedes has been hit by a weakening in demand for electric vehicles and forecast that the share of its plug-in cars would remain flat at between 19-21% of overall sales in 2024. Last year, those drivetrains accounted for 20% of sales, up from 16% the year before.

“Changing the whole energy infrastructure behind mobility is a very, very big task,” said Källenius. “We have to realise that there can be peaks and troughs in this transition.”

Källenius said the company’s MRA2 (modular rear-drive architecture) platform underpinning the new Mercedes-Benz E-Class can be updated into the 2030s.

Mercedes is also developing a new hybrid-focused four-cylinder engine with engine partner Geely that will launch in 2026 to meet new Euro 7 emissions standards. “We’ve got the powertrain line-up and we have the infrastructure to continue to produce [combustion-engined vehicles],” Kallenius said. “It's almost like we will have a whole new fresh line-up in 2027 that can carry us well into the 2030s.”

However, extending the life of combustion vehicles “adds some execution complexity”, Houchois warned. Mercedes would need to manage building ICE and BEV platforms in parallel for longer as it stretched the life of its EQ electric brand, which will ultimately be retired as all models shifted to electric.

Mercedes is continuing to launch new electric vehicles, with the key model being the CLA saloon in 2025 on the new electric MMA (Mercedes Modular Architecture) platform. 

This platform will underpin four models that will replace the current compact range. In that line-up, the A-Class and B-Class won’t be replaced, with Mercedes focusing instead on SUVs, the CLA Saloon and Shooting Brake. Mercedes has promised models will travel up to 750km (466 miles) and recharge fast enough to give almost 250 miles after 15 minutes of being plugged into a suitable charger.

Källenius confirmed that some future electric Mercedes models would use cheaper lithium-iron-phosphate batteries as the company battles to reduce the cost of EVs. Chinese reports have said Mercedes will source LFP batteries from BYD.

“It's no secret that the variable cost of the battery-electric vehicle sits significantly above what we were used to on the combustion side and it will remain so for the foreseeable future,” Källenius said.

Mercedes aims to reduce the cost of the battery by 30% “in the coming years” by optimising cell and module design, using LFP and pressing suppliers for better deals.