Automotive News Europe — 2024-05-15
Automotive Industry
With EV demand slumping, Mercedes will stop developing the MB.EA architecture for future E-Class and S-Class models. Instead, it will continue to refine the existing EVA2 platform.
Mercedes-Benz is halting development of the MB.EA full-electric platform for larger models such as the S-Class and E-Class as the transition to electric vehicles slows and development costs for electric vehicles continue to rise.
Instead of the MB.EA Large architecture planned to launch in 2028, the company's existing Electric Vehicle Architecture (EVA2) will be further developed for cost reasons, the German business newspaper Handelsblatt reported on Monday, 13 May 2024.
Mercedes expects to develop internal-combustion and electric cars in parallel for longer than originally thought, well into the 2030s.
Mercedes confirmed the Handelsblatt report to Automotive News Europe sister publication Automobilwoche. "The pace of transformation will be determined by market conditions and the wishes of our customers," the company said.
2030 EV goal in jeopardy
Mercedes-Benz Group CEO Ola Kallenius said in February 2024 that the goal of switching completely to electric cars by 2030 would not be achieved under current market conditions, as demand would not keep pace.
Mercedes expects electrified cars – full-electric and plug-in hybrid -- to account for up to half of sales by the end of the decade.
Internal combustion engine (ICE) models could be sold "well into the 30s" if there is sufficient demand, Kallenius said last week.
In February 2024, the company cautioned that EVs would remain pricier than ICE cars for years because of slower-than-expected demand and acknowledged the underwhelming consumer appetite for EVs.
Mercedes is still planning the launch of an all-electric G-Class off-roader, which was unveiled at the Beijing auto show earlier this month (May 2024).
The company reported a 30% drop in first-quarter earnings before interest and tax (EBIT) to €3.86 bn ($4.13 bn).
Mercedes faces a multitude of challenges — from low-priced Chinese competitors to spiraling expenses for its in-house operating system MB.OS—as it overhauls its sales model and sells off its last remaining company-owned stores to private investors.
Mercedes is planning to move to a so-called agency model in which the company would control inventory and offer set prices via online sales.
Automakers in Europe are facing slowing EV sales as enthusiasm for the vehicles cools amid a phasing out of generous subsidies introduced to encourage demand.
A price war among EV makers led by Tesla is also affecting margins.
EV, digital transitions
Gartner analyst Pedro Pacheco said that Mercedes is among many legacy automakers struggling to manage the twin transformational challenges — digitalization and electrification — facing the industry.
"They have all encountered headwinds, where maybe the EV sales weren't so great or the margins weren't as high as expected," Pacheco said. "They started getting a little bit afraid and now they're backtracking on their initial commitments to electrification."
He said that while EV sales continued to grow, that growth is slowing, and uncertainty in the marketplace is pushing legacy automakers into defensive mode.
"I understand the position of these legacy OEMs, but the problem is they have too much risk aversion," Pacheco said. "The tendency is to fall back into the old established product and milk the cash cow until the very end."
He said that the ambiguity of trying to operate with two different product categories can be very confusing to consumers and investors.
"The market is now in a sort of hangover, especially in the largest market, Germany, where they have pulled out all the financial incentives for buying an EV," he said.