Mercedes CEO Claims Combustion Bans Will Collapse European Market

The European Union’s plan to ban the sale of combustion-driven vehicles by 2035 is presently up for review and Mercedes-Benz CEO Ola Källenius has publicly called into question its saliency. Despite having attempted to pivot its lineup to cater toward electric vehicles, the company has grown concerned that EV mandates will functionally cripple the automotive market.

Källenius’ assertion, according to Reuters, is that the ban would simply encourage a glut of non-electric purchases going into 2035 only to be followed by a prolonged period of diminished sales. He claimed that, under the current government-sanctioned strategy, the European automotive market would eventually collapse.

"We need a reality check. Otherwise we are heading at full speed against a wall," Mercedes CEO Ola Kaellenius told Germany’s Handelsblatt in an interview.

From Reuters:

Kaellenius argued that consumers would simply hurry to buy cars with petrol or diesel engines ahead of the ban.

Currently serving as head of the European auto lobby ACEA, the German auto boss has instead called for tax incentives and cheap power prices at charging stations to encourage the switch to electric cars.

"Of course we have to decarbonise, but it has to be done in a technology-neutral way. We must not lose sight of our economy," Kaellenius said.

Despite seeing a strong push from Western governments and the automotive industry, all-electric vehicle sales have yet to see the kind of demand both groups originally anticipated (50 percent of the market by 2025). While European countries tend to see the highest take rates of anywhere on the planet, demand still varies widely between countries. The United Kingdom estimates that about 30 percent of its new vehicle market is electrified and Norway claims roughly 90 percent. Germany and France are likewise supposed to be hovering around 27 percent.

But Eastern European nations (e.g. Croatia, Poland, Romania, Slovakia) and Italy are lucky to break out of the single digits. Poland currently estimates only about 5 percent of its new vehicle registrations pertain to electrics. The United States, which drives a significant amount of global sales, isn’t much higher with an EV market share of about 8 percent. Canada and Australia are presently hovering around 13 percent.

At this point, the rampant politicizing of all-electric vehicles has completely jumped the shark. EVs were initially promoted as cutting-edge tech that would offset any forthcoming environmental crisis. Then, they became subsidized by the government and served as a badge of honor for left-leaning regions and their like-minded constituents. You weren’t just purchasing an electric car, you were buying into a marketing ethos that simultaneously let you feel like you were sticking it to your political rivals. Meanwhile, some right-leaning shoppers were doing the inverse by buying some of the largest gasoline-powered trucks ever produced.

But this admittedly false dichotomy has started to erode. As the public became increasingly aware of how electric vehicles were manufactured, past assertions that they were ecologically friendly have come into doubt. Tesla CEO Elon Musk endorsing Donald Trump, only to rebuke him several months later, likewise complicated the faux politicization of modern powertrains.

We’ve actually seen several countries experience a sudden drop in EV sales growth coinciding with political perceptions surrounding Elon Musk. Since electrics were primarily purchased by left-leaning buyers to begin with, Tesla sales have indeed declined in Europe. While many buyers pivoted to rival brands, especially those stemming from China, overall sales growth within the region has clearly slowed down.

However, the final straw has undoubtedly been economic factors. While EVs work extremely well for some households, they’re often a poor fit for families seeking catch-all transportation at an affordable price. Most electrics tend to end in the hands of individuals with above-average incomes living in populated areas with shorter average driving distances — often as a leased secondary vehicle.

Mercedes knows this better than anyone. Despite German automakers being among the first to try their hands at building high-volume EVs, they’ve had a difficult time turning that into profitability. The Mercedes EQB, EQE, and EQS have all seen noteworthy sales declines — with the EQS being an abject sales failure almost immediately.

In practically every instance, Mercedes customers vastly prefer the combustion-reliant version of every single electrified variant manufactured. The issue has become such a problem that dealers have been complaining to the manufacturer for several years now.

"Our industry is experiencing heavy rain, hail, storms, and snow at the same time. Car manufacturing is a tough business, more so than ever," Källenius told Handelsblatt.

That said, Mercedes doesn’t plan on abandoning EVs. Leadership believes that it needs more all-electric options in the mid-range segments and plans on “going on the offensive” with electrified versions of the GLC and C-Class.

However, based on Källenius’ other statements, it sounds like the company doesn’t believe an entirely electric fleet is in the cards anytime soon. Mercedes is hardly the only brand with that sentiment. Most global automakers have grown concerned that rampant electrification may not be sustainable, especially as government subsidies begin to evaporate.

Even China, the nation that arguably has the most to gain from worldwide EV mandates, has drawn down its own financial support of EVs. At the same time, Western auto brands are finding themselves losing ground there. This is due to domestic Chinese brands offering improved products at significantly lower prices, particularly in regard to electric vehicles. Chinese customers are increasingly opting to buy from Chinese brands as market growth appears to have slowed. This has left Western brands choosing to tamp down investments within Central Asia.

[Images: Mercedes-Benz]

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