The automotive industry is experiencing a pivotal shift, with Mercedes-Benz becoming the latest major player to recalibrate its strategy amid evolving global market dynamics. In a move that signals a broader industry-wide recalibration, the German luxury automaker announced a renewed focus on combustion engine vehicles while keeping electric vehicle (EV) development in its sights. This balancing act reflects a growing sentiment across the sector as carmakers adapt to economic pressures, fluctuating consumer demand, and changing political landscapes—particularly under the new U.S. administration.
On February 20, Mercedes-Benz revealed plans to launch 19 new combustion engine models alongside 17 battery-electric vehicles by 2027. This pivot underscores a growing realization that the industry’s transition to electric power may require more time and flexibility than initially anticipated. The shift comes after Mercedes-Benz experienced a significant decline in EV sales—down by a quarter in 2023—while its combustion models continued to drive the bulk of its revenue.
Also, don’t forget that you can get discounted new car pricing with a free quote through qualified local dealer partners.
The automaker also announced aggressive cost-cutting measures, including a 10% reduction in production costs by 2027 and a 20% cut by 2030. With earnings expected to drop further in 2025 following a 30% slump last year, Mercedes-Benz is looking to preserve profitability by doubling down on its high-margin, top-end combustion models.
“We are not abandoning our value-over-volume strategy,” CFO Harald Wilhelm reassured investors, emphasizing that traditional combustion engine cars remain a crucial profit driver.
While Mercedes-Benz’s strategy might seem like a retreat from electrification, it mirrors a broader recalibration happening across the global automotive landscape. Automakers are increasingly recognizing that the road to an all-electric future is more complex than anticipated. Economic uncertainties, supply chain challenges, and uneven charging infrastructure have all tempered the once rapid push toward EVs.
Adding to the complexity is the political landscape in the United States. The Biden administration had championed electrification with tax incentives and environmental mandates, but with president Trump’s recent moves, the industry is bracing for potential shifts. Trump has criticized electric vehicle policies and threatened tariffs on imported cars, prompting manufacturers like Mercedes-Benz to localize production in China and the U.S. to hedge against trade uncertainties.
This political uncertainty has prompted automakers to hedge their bets. Even as brands like Ford, General Motors, and Volkswagen continue investing heavily in electric platforms, they are simultaneously revisiting their internal combustion engine (ICE) lineups. Consumers, especially in key markets like North America, continue to favor gasoline-powered SUVs and trucks, driving home the need for a dual-track approach.
Mercedes-Benz’s move is not an abandonment of electrification but rather a recalibration. The company’s plan to introduce 17 new electric models by 2027 signals that it remains committed to future EV growth. However, the automaker is adopting a more pragmatic stance, acknowledging that profitability and customer demand still heavily favor combustion models—particularly in the luxury segment.
This pragmatic approach is increasingly becoming the industry norm. Ford recently delayed the production of some electric trucks, while General Motors scaled back its EV production targets. Even Tesla, the global EV leader, has shown signs of slowing growth, facing increasing competition from Chinese brands like BYD and mounting pressure to cut prices.
For Mercedes-Benz, China remains a critical battleground. The company’s performance in the region fell short compared to rivals, with BMW outperforming thanks to stronger EV sales. Mercedes-Benz aims to regain its footing without engaging in what CTO Markus Schaefer called “irrational” price wars—a reference to aggressive price cuts by Tesla and domestic Chinese automakers.
The luxury segment also faces headwinds. While Mercedes-Benz continues to prioritize high-margin, low-volume sales, the strategy has come under scrutiny as economic uncertainties weigh on premium car buyers. Investors are watching closely to see whether this approach can weather the storm or if adjustments will be necessary.
Mercedes-Benz’s recalibration is not an isolated event but part of a broader industry trend. Automakers are navigating a delicate balancing act: advancing toward electrification while ensuring that their combustion engine offerings remain robust and profitable. The shift highlights the complexities of the transition—far from a straight path, it is a winding road shaped by consumer preferences, geopolitical tensions, and economic realities.
For consumers, this means more choice in the coming years. Whether you prefer the classic roar of a high-performance V8 or the silent rush of an electric luxury sedan, automakers like Mercedes-Benz are ensuring that both options remain firmly on the table. The future of driving will likely be a blend of both worlds—where combustion and electric coexist, at least for the foreseeable future.
As the global automotive industry recalibrates, Mercedes-Benz’s strategy reflects a broader reality: the combustion engine is not fading into obscurity just yet. With the U.S. political landscape potentially shifting and global market pressures mounting, automakers are hedging their bets—embracing electrification while keeping one foot firmly planted in their combustion-powered roots. For now, the future of the auto industry is not electric or combustion—it’s both.
