March 11, 2022 - The launch of the all-electric luxury saloon EQS and other electric models noticeably accelerated the transformation at Mercedes-Benz in 2021. Luxury and sustainability — is this a combination that goes well together? Definitely, according to Christopher Gerdes and Guido Görtler from the Mercedes-Benz strategy team.
In 2021 Ola Källenius announced a strategic shift from electric-first to electric-only. Why?
Guido Görtler: It was the outcome of a development process. For years we’ve been working not only on electric drive systems but also on the production of electric batteries. In 2014, we put the first all-electric Mercedes-Benz, the B-Class, on the road. Today we are represented on the market by electric vehicles in various segments, which we are continuously refining. One highlight was the successful launch of our new Mercedes-Benz EQ models last year. After all, a market launch of this kind is backed up by a complex interplay of planning, design, development work and production, all the way to the preparations at our showrooms. The main new aspect is the consistent decision to focus our resources entirely on electric mobility. With this clear approach in mind, we’re working on fulfilling our full potential, especially in the area of vehicle architecture and drive technology. The enthusiastic response of our customers to the EQS shows that this strategic step is paying off. Incidentally, this luxury saloon is built on a platform that was specially designed for electric vehicles.
Did the good feedback on the market motivate you to promote the transformation of drive systems even faster and more systematically?
Christopher Gerdes: It certainly helped. But ultimately, there are various aspects that have accelerated this development. Progress in technology is central. Our customers’ visibly growing demand for emission-free vehicles in the luxury segment had an impact on the speed of the transformation of drive systems. Of course, one important driver of this transformation are the legal regulations, including the discussions of driving restrictions for vehicles with combustion engines. And not to forget the downward trend of the battery costs. All of these developments are reflected in in the capital market. Companies that are relying solely on electric vehicles account for more than a third of the market capitalisation among the top 25 OEMs. Investors are not only endorsing the transformation, they reward and encourage it.
An affinity for electric vehicles in the luxury segment
Guido Görtler: In particular, in the luxury segment the demand for electric vehicles is increasing. We‘ve noticed that our customers have a strong affinity for innovative drive systems and that they are ready to actively participate in the transformation to electric mobility. For this customer group, the entry barriers are usually lower — partly because they invest more frequently in their own charging infrastructure or because they’ve gotten a taste for electric mobility via a second car.
Speaking of luxury, is a luxury car defined the same way today as it was five years ago?
Guido Görtler: The perception of luxury is also changing constantly, and especially innovations play a significant role in this. As part of the mobility revolution, people are assigning more importance to recycled materials and technology-enabled safety. Some of our customers are even explicitly demanding such features. A sustainable electric drive system can be very well integrated into a luxury vehicle, and it emphasises its premium quality. We want to use this lever to accelerate the transformation together with our customers.
How soon will Mercedes-Benz occupy a place among the top-ranking electric vehicle manufacturers?
Guido Görtler: With electric-only we’ve defined a clear plan. In 2022, we will be offering an all-electric vehicle in every segment. By 2025, we aim to have an electric version of every model. As of then, all new vehicle architectures will also be purely electric. We expect that this wide range of options will reinforce the current sales trend. In 2021, we sold over 150 per cent more all-electric Mercedes-Benz cars than in the previous year. That’s a steep ramp-up!
Increasing expertise for the technological transformation
What are the biggest challenges you’ll face along this path?
Christopher Gerdes: We have been very successful with our combustion-engine vehicles for decades. Leaving all this behind is a step that affects our company as a whole and every individual employee. We have to take this step together. With a strategic reorientation and planning, we have set the course for change. We now have to keep on developing the skills and know-how of our organisation — in every individual phase of value creation. Especially in the technology and development areas, we will continue to offer attractive jobs in the future. To this end, amongst other things we are building a competence centre for electric mobility at our main plant in Stuttgart-Untertürkheim — with a focus on battery and battery cell technologies.
Guido Görtler: With regard to our employees, we ensure comprehensive qualification for the new tasks and at the same time recruit new talents and experts - for example in battery development, but also in the areas of software and chip technology. We are succeeding by systematically implementing our sustainable business strategy and creating new and attractive fields of activity.
Christopher Gerdes: The key challenge is to build customer acceptance and trust in new technologies – conveying that we are equipping our vehicles with excellent, mature technology. This technology is environmentally friendly as well as future-proof and convenient in daily use. The expansion of the charging infrastructure also plays a role here. This is an important prerequisite for or a rapid market ramp-up. This means that the energy industry, politics and also municipalities, which often provide the space, must pull together here. After all, it is not enough just to set up the charging stations. For us to be truly sustainable on the roads in the future, we need electricity from renewable sources and a smart electric grid to which the charging stations can be connected.
A focus on high-powered battery storage units
What’s the long-term outlook for batteries?
Christopher Gerdes: We need clarity about where we will get the huge amounts of green electricity that we need for the energy and mobility transition. As manufacturers, we also need to provide answers to the growing demand for electric batteries, the corresponding raw materials and their recycling at the end of their life cycle. Our goal here is the circular economy, because the need for energy storage units is tremendous, not only in our segment. This results in technological issues, for example the need for greater energy density. This is something our development engineers are already working on intensively. Moreover, batteries should be manufactured with fewer critical materials in the future. Our goal is to ensure humane working conditions along the supply chain and avoid environmental risks. In addition, the origins of the raw materials should also become more transparent. Last but not least, we as a company have to look carefully at how we invest — in other words, how we make sources of raw materials accessible, develop factories and buy sustainable energy and even produce it ourselves. All of these measures demand our resources, and of course, that is initially reflected in the price of our vehicles. That’s why we have to prevent mobility from becoming a luxury good that some segments of our population can no longer afford.
Where exactly do you see Mercedes-Benz's responsibility in this?
Christopher Gerdes: We bear a substantial responsibility for shaping sustainable mobility, in the luxury segment and beyond. We are convinced that we are living up to this responsibility through our current strategy. Mercedes-Benz has already contributed a great deal in this area in the past. We’ve developed, tested and implemented mobility concepts — for example carsharing, the fully electric smart EQ and electric delivery vans. Now our goal is to consistently electrify our entire product portfolio.
Guido Görtler: As a luxury car manufacturer, we also see it as our responsibility to actively participate in the public discourse on the future of mobility. At the UN climate conference in November 2021, our CEO joined the representatives of five other companies, more than 30 nations and a number of cities and investors who committed themselves to the end of the combustion engine. As a manufacturer, we at Mercedes-Benz already set ourselves much more ambitious targets in 2019 with our Ambition 2039, which we have since even tightened up again: We want to completely switch to electric cars by the end of this decade, wherever the market conditions allow. This strategic step from electric-first to electric-only not only accelerates the transformation — it also underlines our claim: to be a pioneer and to keep setting standards that promote innovation across the board and enable technological progress.
Responsibility for the transformation of drive systems
However, in the decades ahead there will still be a worldwide inventory of vehicles with combustion engines…
Christopher Gerdes: Of course, every vehicle naturally has a certain lifespan. And we also have customers who very consciously think about when it makes sense for them to buy a new car. Those who can generally afford to change may be persuaded by lower operating costs of electric vehicles. These are about a third lower than the operating costs of comparable combustion-engine vehicles. In addition, it can be assumed that in the future emission-free vehicles will receive even more preferential treatment in public spaces than they do now. This might mean free access to green zones in city centres or to very centrally located parking areas.
Guido Görtler: In my opinion, consumers also bear a responsibility. Emission-free driving is an important pillar in the struggle against climate change. And that, in turn, is a challenge for our society as a whole. We’re talking about changes that every individual can and must help to shape. Otherwise it won’t work. We as a company have a responsibility to vehicles that meet the criterion of climate neutrality throughout their entire life cycle. We do this by implementing our sustainable business strategy and putting electric-only on the road.
How confident are you that we as a society will successfully implement the mobility revolution really quickly and systematically?
Guido Görtler: More than confident. In my view, electric mobility is an outstanding technology. A CO2-neutral, efficient drive system and impressive performance combined with silence and more space within the vehicle increase not only comfort but also driving pleasure. And this is exactly what it’s all about: awakening desires, creating added value and thus helping electric mobility to quickly make its breakthrough as a standard drive system.
Christopher Gerdes: There is no alternative to climate neutrality. Consequently, all of us are determined to travel the challenging route of the transformation. If society, government and companies all pull together in this respect, we can achieve a great deal.
Guido Görtler, Head of Mercedes-Benz Strategy Execution, has been employed in various positions at Mercedes-Benz Group AG since 2003. He took up his current position, where he is responsible for the management of the Mercedes-Benz Strategy, in August 2020. He holds a diploma in business administration from the Verwaltungs- & Wirtschaftsakademie, Stuttgart as part of the dual study programme at the former Daimler AG.
Christopher Gerdes is Head of the Strategy Development & Intelligence department at Mercedes-Benz Cars. Here, he is responsible for the strategy process and trend observation in the business environment. He worked in various positions in the Product Strategy, Finance & Controlling, Performance Controlling and Divisional Strategy units at Mercedes-Benz Cars and Vans from 2009 until February 2021, before he took on his current post. Christopher Gerdes studied politics and management at the University of Konstanz and in Istanbul and Shanghai.
Find this and other articles in our Sustainability Report 2021