Ola Kallenius: "China is pragmatic while Europe decarbonizes through Dacronian sanctions."

The year 2025 hasn't gotten off to a good start for Mercedes-Benz Cars: between January and March, sales fell by 3.6% (446,300 units, 20% of which were electric cars); revenue reached €33.2 billion (-7.4%); net profit stood at €1.73 billion (-42.8%); and the operating margin fell to 7.3% (9% of 2024). With these headwinds, it's a good time for CEO Ola Kallenius to answer our questions. Also because in January he took over as president of Acea, the European association of car manufacturers, taking over from Luca de Meo.

You say it takes a lot of patience to develop the electric vehicle market, especially in the premium segment. Where are we at?

In Europe, almost 50% of registrations are electrified cars, but a substantial portion are equipped with various hybrid systems. Our EQS (sedan) and EQE (SUV) are the best-selling luxury electric vehicles, but the number of internal combustion cars is higher. I think the situation will gradually change, and the new CLA will help achieve this: it's not just one car, but a series of electric vehicles that will arrive in two or three years. We'll also see steady, organic growth with the GLC and the electric G-Class.

You're investing heavily to set the trend in the battery-powered van segment and unveiled the concept for the future electric V-Class in Shanghai . How important is this segment to you?

It's key, also for China. We'll begin production of the new Grand Limousines next year [Editor's note: some of them will be made in Vitoria, Spain ].

You've talked about China, and battery-powered cars with combustion engines that extend range are gaining popularity there [REEV in the jargon]. Are you considering them?

Any type of hybrid has great potential, and there are four or five ways to solve that equation. We could consider electric ranges of 250 km or more, and yes, it's a trend in China. For the US and Europe, the equivalent is the plug-in hybrid (PHEV), and our offering of these is the broadest among luxury brands, with sales growth in 2024 and this year. It's a formula that offers the best of both worlds, and I think it will last at least until the end of the decade and coexist with battery electrics for a long time. Since we started offering a range of more than 100 kilometers according to the WLTP cycle, our customers have changed their habits and now drive in electric mode from Monday to Friday.

In China, foreign mass-market car manufacturers have lost almost half of their customers in just 18 months, and although the situation in the premium segment is not as critical, are they very worried?

I'd say it's the most challenging market thanks to the prosperous economy and strong consumer confidence, while in Europe, customers are cautious and conservative. Furthermore, there are an extraordinary number of brands, and others continue to emerge, fighting for a piece of the pie. It's similar to what happened more than 100 years ago, when there were hundreds of them and only about 40 survived in the 1950s. This creates a fierce competitive environment and increased price pressure, affecting everyone, including the luxury segment. Even so, we were the top premium foreign manufacturer in 2024 and we're maintaining that position this year.

In the past, power, handling, image, and quality gave luxury brands an advantage. Today, many customers seem to value their children being greeted by name when they get into their new Chinese car or being able to sing karaoke. How can we deal with this?

A. Especially with a younger customer, like the Chinese, the digital experience is essential, with smart cockpits, point-to-point navigation, and so on. Plus, in the future, our cars will have a screen running the length of the dashboard so you can go online, play games, sing karaoke, watch a movie... whatever. Because in China, cars are also used for that when they're stopped. But it would be a mistake to think that the other attributes, the ones you mentioned, are no longer valued. These are the aspects that define Mercedes-Benz and are essential to the success of a premium brand.

A recent fatal accident involving a Xiaomi vehicle has prompted the Chinese government to increase its oversight of ADAS technologies that enable autonomous driving. Are different procedures required in China?

At Mercedes-Benz, we're the first to sell cars with Level 3 autonomous driving (out of five). It's already operating at 95 km/h in Germany, and we'll continue to develop it. So we speak with knowledge. At Level 3, it's the computer that drives in various situations. At Level 2, humans and machines work together, but the driver remains responsible. What China has asked is for manufacturers to be very careful not to give the impression that the car is doing things it can't. It's an approach we've been taking for 30 years.

There has also been talk of having greater control over battery production to prevent the serious accidents that have occurred...

If we compare the three major regions, Europe regulates, and then companies move forward; in China, companies move forward, and then regulation occurs; and the US is somewhere in between, with the peculiarity of self-regulation, so companies have to cover their backs in case they end up in court. But, in general, all regulators have the same goal: to protect citizens. Our brand already complies with these standards for batteries.

Have you calculated the impact of Trump's tariffs?

A. The debate is ongoing, and we'll react when the standards are defined. That said, I'm glad that, starting in the 1990s, we've moved from Made in Germany to Made by Mercedes-Benz. That's why we have a considerable manufacturing presence globally, specifically in North America. But we also depend on our ability to import and export in all directions, so restrictions like these aren't good for global trade in general, and they will also affect us.

Chinese competition, US tariffs, low consumer confidence in Europe, changing technology... is this the perfect storm for the automotive industry?

Running a car company isn't easy, and it doesn't mean a peaceful life. But it's true: in my 32 years in the industry, I've never experienced such difficult times.

The apparent volatility of the Trump administration must be a nightmare when it comes to making strategic decisions...

Its economy has a GDP larger than that of Europe and China combined. It's not a question of whether you're present in that market, but how. Therefore, long-term policy won't change direction; we simply have to see how policies change and adapt. The same is true for China. And then other regions emerge, such as India (where we were the number one premium brand in 2024), with which the EU is holding trade talks to intensify cooperation. Perhaps tensions with the US will boost other bilateral trade relations; you never know...

As president of Acea, do you see the possibility of changing the tariffs the EU imposed on China and setting "minimum prices" for imported electric vehicles?

I've always been very clear: we must create win-win situations. The debate about a level playing field in an open market economy is always legitimate, but a simple tariff barrier is the most blunt instrument if we want to maintain fair negotiations. We have asked for a fair and intelligent solution, and we are working on it.

Vans are detrimental to brands' average CO2 emissions [10 g/km for Mercedes-Benz]. Do you advocate a system that separates their sales from those of passenger cars?

When the CO2 emissions schedule was established, five or six years ago, no one considered vans. As president of Acea, I'm glad we've been given three years to comply with the CAFE standard, but the assessment will likely be done in general terms rather than for a specific vehicle segment. Indeed, vans take up more space, are heavier, and have worse aerodynamics, but if you calculate per capita, they could be more efficient, since, on average, they transport more people every day. In this regard, the EU could learn from China. There, they adopt pragmatic, market-oriented decarbonization regulations, such as subsidies; they don't work by simply applying drastic sanctions. And so far, that method has been more effective.