Mercedes-Benz rethinks EV plans, will retain combustion engines due to slower adoption

In a major strategic pivot, Mercedes-Benz has become the latest in a long list of traditional automakers reassessing their lofty electric vehicle (EV) goals. "We will keep building combustion engines well into the 2030s, longer than originally envisaged," confirmed company CEO Ola Kallenius recently, as global EV uptake lagged behind expectations.

A change in course

Kallenius told German publication Auto Motor und Sport that the brand has made a “course correction" in its transition strategy. Mercedes had previously declared it would be all-electric “where market conditions allow" by 2030. But now, the automaker acknowledges that high-tech hybrid and combustion engines will remain in its lineup for the foreseeable future.

“In today’s climate, it’s most logical for an established automaker to pursue both paths—EVs and internal combustion engines—without abandoning either," Källenius said, emphasizing the need for flexibility in light of regional demand variations and infrastructure gaps.

EV market growth persists

Though such announcements as that of Mercedes might stoke fears of the sustainability of electric mobility, market figures have a more differentiated tale to tell. Worldwide sales of EVs continue on a sharp growth trend. As per the International Energy Agency, sales of EVs increased more than 25 per cent in 2023 to 17 million units globally.

BloombergNEF's most recent Electric Vehicle Outlook again forecasts a 25 per cent increase in plug-in hybrid and EV sales in 2025, reaching as high as almost 22 million units. Significantly, China is still reigning supreme in the EV market, and it is forecast to represent nearly two-thirds of these volumes.

China remains crucial, despite headwinds

Mercedes-Benz continues to rely heavily on China as its most important market, even as the brand faced a 7 per cent year-on-year sales decline there in 2024, down to 683,600 units. Still, the company is adapting to local consumer habits. “For many Chinese buyers, their vehicle is more than just transportation—it’s a personal living space," Kallenius explained, possibly alluding to the increasing digitalization and screen-heavy interiors in recent models.

The road ahead

With Mercedes now echoing the sentiments of fellow German automakers BMW and Audi, it’s clear that Europe’s luxury carmakers are hedging their bets. All three will hold on to a dual-technology strategy—blending internal combustion engines and EVs—for the foreseeable future.

This comes as a concern for how these firms will meet the European Union's planned 2035 ban on the sale of new combustion-engine cars. Some industry players are hoping in silence for delays in regulation, but EU policymakers have demonstrated little such inclination.

Meanwhile, Mercedes-Benz looks to be bridging both worlds, walking a delicate path that is at once innovative and pragmatic.

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