Mercedes-Benz Shifts Focus Back to Combustion Engines Amid EV Slowdown

Mercedes-Benz, the iconic German luxury carmaker, is now changing its strategy with greater focus on more internal combustion engine (ICE) cars. The luxury automaker has stated that it will produce 19 new combustion engine models and 17 battery-electric models by the end of 2027. It comes after Mercedes-Benz slowed down its EV sales and profitability, prompting it to change its investment strategy.

Why Is Mercedes Scaling Back EV Investments?

Despite huge investments in EVs, Mercedes-Benz saw its sales of electric vehicles decline by 25% in 2024, and its net profits fell by 28%. The decelerating pace of EV adoption worldwide, rising production expenses, and customers’ hesitation due to infrastructure limitations have prevented automakers from being able to maintain profitability on their own with EVs.

In addition, despite the fact that Mercedes earlier targeted the transition to an electric future by 2030, CEO Ola Källenius later established the prerequisite that demand for internal combustion engines is still strong. This has made the company diversify its portfolio by still developing ICE and hybrid variants alongside EVs.

Strategic Moves

• Expanding ICE and Hybrid Models: Mercedes plans to launch 19 new combustion engine vehicles to cater to markets where EV adoption is slower.Hybridization will be a major focus, allowing Mercedes to maintain fuel efficiency while still complying with emissions regulations.
• Cost-Cutting Measures: The company aims to reduce production costs by 10% by 2027, ensuring better profitability across all segments.Workforce reductions are expected, particularly in China, where up to 15% of jobs in financing and sales could be cut.
• Localising Production to Reduce Costs: To mitigate trade tensions and tariffs, Mercedes will increase production in China and the United States, reducing dependency on imports and improving supply chain efficiency.

Strategy In A Changing Automotive Market

Mercedes is not alone in taking this path. Other manufacturers like General Motors, BMW, and Porsche have also invested fresh money in ICE and hybrid cars to stay in the black.

While EVs are still on the horizon, low consumer adoption, battery cost, and charging infrastructure concerns have forced most manufacturers to rethink their all-electric strategy. A hybrid strategy with hybrids, plug-in hybrids, and ICE cars seems to be the way now.

Final Thoughts

In the meantime, Mercedes-Benz is bending to the dictates of the marketplace rather than trying to force its way to an all-electric future. While its EV model lineup will expand, its combustion engines will remain a part of its business plan for the near future.

This step is a signal of a new auto era in which profitability and customer demand, rather than regulatory targets, are dictating the pace of electrification. Whether or not this strategy will keep subsidizing Mercedes’ luxury brand reputation and long-term success is debatable, but for now, the internal combustion engine is not disappearing—at least not yet.