Mercedes-Benz is changing. For the German luxury brand that popularized the four-stroke combustion engine, the shift to electrification and carbon neutrality is about much more than propulsion. Like every other established and startup automaker, the industry faces an unprecedented crossroad where digitization, electrification, energy, and ownership models converge. To call it an inflection point would be reductive.
How Mercedes-Benz pivots to electrification and embraces digitization could serve as either a boilerplate or a cautionary tale for other automakers. The latest person overseeing this seismic paradigm shift is Ola Källenius, CEO of Mercedes-Benz AG and Chairman of the Board from May 22, 2019 thru May 2024.
The tall Swede, with a depth of automotive knowledge matched only by his breadth of global business affairs, has worked for Mercedes since 1993, with a brief stop at McLaren, and has held Mercedes leadership positions covering everything from engine emissions systems to AMG performance.
On the opening of the Paris auto show, Mr. Källenius sat down with Green Car Reports and a small group of journalists following the launch of the 2023 Mercedes-Benz EQE SUV. The electric crossover promises to be the volume model in the brand’s growing EQ electric family in North America.
From the imminent U.S. arrival of the EQC electric compact crossover and subsequent launch of the peerless electric G Wagen to the urgency for the brand to decarbonize by 2039, the affable executive maintained his infectious optimism—even hours after his beloved Alabama Crimson Tide suffered an upset loss to the Tennesee Volunteers in collegiate football.
“We have a chance,” he said, referring to vying for the national championship in postseason seeding.
Same could be said for Mercedes leading the way in this new era as it had in the combustion era.
This interview has been edited and reference points in brackets have been added for clarity.
Ola Källenius, CEO of Mercedes-Benz
How are you driving sustainable demand for the EV transformation?
I think what we’re now seeing on this journey to complete zero emission, and we’re saying let’s go there as quickly as we can—even though it is a 10+-year journey—if we look at how that is developing now, right now as we sit here in 2022, we are now beyond the early adopter phase and we are starting the mass adoption phase.
The momentum is almost building on its own. It’s not a coincidence that now that we come back to Paris after two years and the pandemic, that we make a big splash with two electric vehicles. We will continue to spread the word.
What are your concerns about infrastructure?
We are part of a consortium here in Europe with Ionity to build infrastructure. Many players are stepping in, the energy companies are also stepping in. There’s a lot of momentum in it. But it’s still very much underdeveloped. In Japan there’s a long way to go. That’s one of the markets where the distance is a little bit longer.
We as a company are looking at what else we can do to complement it. We have the biggest and best roaming system in the world now, at over 850,000 public charging points. We’re looking at what else we can do to build momentum, build trust in the product, create convenience for the customer. Watch this space. More to come.
Ola Källenius, CEO of Mercedes-Benz
What else is being done in terms of expediency and efficiency?
Efficiency is the new currency. In the EQXX we wanted to demonstrate what is possible. Then one can ask yourself, was that just a science project with something that is in the far distinct future? No. The EQXX has phenomenal efficiency. [It gets up to 8.6 kwh per 100km of real driving]. It’s a car you can put on the street, but without certain energy users such as massage seats, or 15-speaker Dolby Atmos. But once you transport that into a Mercedes luxury tech vehicle, some of the technologies from the EQXX will already be with us in the next architectures that are coming on at the end of 2024 and 2025.
The MMA, our entry-level lux vehicles [which currently is the A-Class, B-Class, CLA-Class, GLA and EQA, and GLB and EQB]; MB.EA, some of the core lux positions; and of course we will proliferate it throughout our whole portfolio. So you have a next gen with significant efficiency gains to come in the ‘24-’25-’26 model year time frame, which is literally around the corner. Paired with that, we’re also making progress on energy density. So better efficiency gives longer range and more energy density gives longer range. So both are happening in parallel.
The EQG platform is a dedicated platform. Is there anything it is limited by?
The G-Wagen has cult status, it’s just unique. The G will always remain a G. It’s not on a platform. It’s its own vehicle. Full stop. And it will remain its own vehicle. We’re not going to do a G off, let’s say, the EVA2 platform. The G stays the G. Now we have decided to electrify the G, we gotta do it, it was absolutely obvious. We’re working on it, in the year 2024 we intend to come to market.
We’re looking at some exciting technologies there with silicone anodes [Mercedes is partnering with the California-based startup Sila Nano to make more efficient silicon anodes]. We will have one high energy-density battery cell that we’re working on for this vehicle. And the powertrain itself will be, from a performance point of view, phenomenal.
I had the opportunity late last fall to take an early powertrain mule for a spin in our off-road facility outside of Graz—we make this vehicle in Austria, as you know. We were in the car for an hour and we did everything, like every angle, everything you can imagine, it’s pretty comprehensive terrain we built up there. And we walked out of the car and were like, from now on going off-road is electric.
It is mind blowing. I know I’m raising expectations here…but it was so competent, so easy to drive it. It will have phenomenal performance on and off the road coupled with the most energy-dense battery that we can find in a vehicle that is slightly aerodynamically challenged.
Is the G-Wagen going to be the only vehicle to have the 800-volt architecture?
We will gradually switch over to 800-volt architecture. The carrier of the next generation, the very first with 800-volt, will be the MMA architecture.
2021 Mercedes-Benz EQC
Will we see an EQC in the next generation for North America?
Absolutely. [The MB.EA platform for mid-size and large vehicles is expected around 2025]
How do you see a path forward working together with partners and where do you see a need to be distinct [Mercedes announced a partnership with Apple Music and Universal Music Group this week]?
It’s one of the cornerstones of how we deal with that. Let me start from the top. We fundamentally believe as an automotive OEM, you have to be the architect of your operating system. Let me expand on that. The operating system that we’re developing we call MB OS. It’s not just about the software stack and the different domains within the software stack. It’s about the corresponding software. You can’t look at this in one dimension, you always look at hardware and software together.
We made the decision a few years ago that now that we are on this paradigm shift of how software is deployed in the car, that we must be the architect of it. But it goes beyond the car. It’s car, cloud, and the unique customer ID and everything that happens customer-facing in your marketing and sales system. It’s really a triangle.
If you have decided that you are the architect of this building but you still need to finish the building and put furniture into the rooms and all those things, while you do that you have to have almost like an open source mentality. You’re not creating a fortress, where you sit inside a fortress and you can’t communicate anything else. You want to build bridges to tech companies and other players relevant to the consumer.
So we cooperate with several big tech companies, whether it’s well-known ones from the U.S. or in China, because China has its own ecosystem, or in other countries around the world.
Ola Källenius, CEO of Mercedes-Benz
What is the status of the new gigafactory locations?
The U.S. one is being built now. We announced most recently we’re doing one in Hungary with CATL. You know we have a shareholding in ACC [Automotive Cell Company]. ACC has announced three plants, not dedicated to us, but the two starting customers are Stellantis and Mercedes. In China we are pretty much decked out. So we’re moving fast on this.
What progress is being made on battery recycling?
We’re building our own recycling plant in southern Germany as we speak so that we also learn what the latest and greatest recycling technologies will be. And we work with some of the leading players in the space. If I look at the best recycling technology that are in the pipeline, of the precious materials that we have in lithium-ion batteries, we could get north of 90% recycling quota out of those once we get them out of service.
They have a very high economic value. So by definition, this is going to have a—like steel is recycled today, no one throws away steel—so one day the recycling of batteries will be the biggest virtual mine in the world. But it’s probably at least 10 years away. Because before meaningful volume comes back from the market, we’re going to be some time in the 2030s. So we need to now develop the technology and start building the infrastructure to get ready for this. But we don’t need it next year, we need it gradually.
What can you say about the profitability of the EQ range?
What we have said is that the contribution of especially the EVA2 vehicles [the EQE and EQS sedans and SUVs] are healthy from the word go, whereas we don’t disclose individual profit margins on vehicles and we won’t. In our financial market communication, where we put out the weather chart of where we want to be in different economic climates, we have also said that once we are on the other side of the transformation, this weather chart also applies to the company in those conditions. It is absolutely clear on the way to 2030—and beyond—to be as robustly profitable in an electric era as in the combustion era.