Mercedes Commits to Continued Production of Gas-Powered Engines Despite Slower Transition to EVs
The company said it has set up its plants to be flexible, allowing customers to decide which type of engine they prefer to buy.
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 Wednesday.
The German automaker previously aimed to produce a fully electric new car fleet by 2030 but Mr. Källenius says 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 its 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 continued.
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 of its drive systems up to date and “then the customer decides.”
“We will build perfect Mercedes for every wish,” he added.
The company will remain focused on increasing sales of its highest-end vehicles, including AMG performance models, EQS, G-Wagon SUV, and 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 strategy.
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 over $65,000 per vehicle, according to company data. It marked a loss of $4.7 billion for 2023 in the same segment.
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 100,000 deliveries in the last quarter of 2023, marking a year-over-year drop in sales. 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 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.
