Two weeks ago at the IAA Mobility show in Munich, Mercedes revealed the future to the world, putting its peers on notice and telling them to catch up.
To date, most electric-only startups such as Tesla, Rivian, or Lucid have revolved around a single product. And most traditional automakers have either introduced novelty "future-mobiles," or integrated electric formats into their less desirable entry-level models. Mercedes is the first company to show us what a cohesive, multifaceted electric product offering backed by over 100 years of engineering chops can look like.
Instead of being reactive, Mercedes has gone on the offensive, pledging to introduce no more new gas-powered cars after 2025, and to be a fully electric company by 2030. Wasting no time, they introduced the world to four new Mercedes-Benz electric models across their sub-brands: the Mercedes-AMG EQS 53 4MATIC+, the first battery-electric AMG model; the Concept Mercedes-Maybach EQS, the first battery-electric Maybach; the EQE, the smaller, lower-priced, and more accessible sibling to the EQS; and of course, the Concept EQG, a near production electric G-Wagon.
I sat with Ola Källenius, Head of Mercedes-Benz and Chairman of Daimler AG, Mercedes-Benz’s parent company, to discuss how the electric future will affect performance, sustainability, and what the circular economy means not only for the brand, but for society as a whole.
Let's start with the idea of battery serviceability and how to approach it. Because we can look at the car behind you — a 300SL Gullwing — and people will be excited about that for 100 years. But one area of concern I have with electric cars is an accelerated path to obsolescence. When I think of battery degradation, I always compare it to an iPhone: there's a big market for one- or two-year-old iPhones, but there isn't really a secondary market for five-year-old iPhones. How do you address battery serviceability? At what point does the actual physical footprint of the battery become the focus, along with the battery efficiency, to move forward?
It really starts with software and the battery management system, because how you extract the energy and put energy back into each and every one of those individual cells is going to decide how far you can stretch the life of that battery. I think the whole industry is going into uncharted waters.
One thing we do see is that usually when you define a load cycle for a car, you have a punishing profile of how you test those batteries. And then, in the real world, you find out that 90 percent of customers don't drive that way, so the individual driving style can add to that as well. And then you ask, "So what happens if something happens to the battery down the line?"
We already have what we call a remanufacturing process in place, physically, where a battery that has maybe lost some cells can be taken out of the vehicle, have some of those cells replaced and put back into the vehicle again, so you can stretch the life even further. You can get the performance to come back to nearer to what you had initially.
Is there a target lifespan with that?
We have these 300,000-kilometer lifespans and whatnot. But when we're looking at this car, usually it goes longer. What we put in on the EQS is 10 years. So, long life, long-range. Remanufacturing is one part of the story, but for the whole circular economy aspect of this, there needs to be a second life strategy for these batteries as well. We have a special company that actually takes old batteries and makes them into industrial storage units. You literally take the battery modules out of the car and you produce a stationary storage for industrial use or backup power.
Got it. Like a generator.
It's like a power source. And then you have that driving some electric motor of some kind.
The third is recycling. We have to get into a real recycling circle with the top companies in the recycling business that we are working with; we're looking at technologies that should be able to extract 90 percent plus of the original material. We have made a decision to build our first owned recycling facility. All of these things are years away because the cars are only now coming into the market in bigger volumes. So it's not something that probably will happen until 2030, or maybe beyond that.
Well, that's the question, right? We're only really dealing with, in a mass-market sense, 10 years of data.
The first baby steps are a very big transformation. We are working on these things to make sure that we extend the life to the maximum and that we have a 360-degree game plan to deal with resources; the batteries are very expensive because they have expensive materials. You want to extract those materials and be able to use them again, as is the case with steel and other metals. They don't get lost, they get captured again, and get recycled.
In terms of range? Now that I drive around with the EQS more often, it's almost like I've stopped thinking about the range, because it's adequate; it's enough. There will be more and more charging infrastructure. I have a wall box at home, meaning I essentially live at the gas station. I always leave my home with a fully charged vehicle. So there will come a point during this transformation where many customers may choose to just have a smaller battery because they don't need more. And they have the infrastructure available to them in the geographical area that they generally operate in.
And what do you think the impetus behind the customer decision for that would be?
That's a value proposition related to price. Which, for a luxury brand, is a lesser factor, but if you take a typical Mercedes household with two people, they have two Mercedes; one bigger, one smaller — the one that is a little bit smaller is the one that you use in the city and so on. And the bigger one is the one if you want to go on a longer road trip. it's wholly possible that one of those vehicles will have a larger battery.
I can see such scenarios coming, but it is still early days. Technology is improving. Efficiency is improving. The efficiency for large luxury vehicles, like the EQS, is phenomenal... 0.20 drag coefficients, the lowest of any production car. So how we reduce the need to use energy is also one of the major engineering targets in this new era.
So, what's that metric for you? Because, for the first time, Elon Musk said Tesla won't make bigger batteries than they’re making now. Now the conversation is just how much density and efficiency can we fit in this physical format. Is there an internal parameter for Mercedes in that respect, that’s already established?
Absolutely. If you talk energy efficiency, it's how many kilowatt-hours as a whole, the whole machine functions: do you use per hundred kilometers, or if you convert that to kilowatt-hours per mile and so on. But yes, that efficiency target is paramount when we define a new architecture and define a new model. And it's not just about the propulsion, it's about heating and cooling and every other electrical use in and around the vehicles. So you look at the total energy balance of the vehicle, but drag and rolling resistance are the two biggest things to overcome on the energy side.
So you've committed to the path to electrification, but going back to the conversation about all facets of battery performance — I am a really big believer, especially for performance cars, in hybrid technology. So I look at the AMG Project One you have on display, and I look at the new AMG GT E Performance…
The four-door GT with a Formula One-inspired engine. If you get to drive that, do a race start and then get an appointment at the surgeon so you can get the smile off of your face afterwards.
I'm a big believer in hybrids. But you're doing AMG Project One, Aston Martin is doing Valkyrie, I'm sure Porsche is going to do whatever they're going to do after seeing how that turns out. And on that 10-year cycle of hypercar introductions, by the time the next successor comes and it's fully electric, my mind immediately says: “You can't have a car like that and it weighs two tons.” Are you confident that 10 years from now, or whenever the time comes, that battery technology will be where it needs to be, to be light enough and efficient enough to make that happen?
We have made a decision on that. We're going to develop a fully dedicated performance electric architecture tailor made for AMG that we will launch towards the back end of 2025. With the, at that time, latest and greatest battery technology, the cooling. So you can actually do a lap at the track. One has to realize though, that continuous laps, as in tens of laps on a race track with a battery-powered vehicle, are further away. They're further away, but we're going to take a real stab at going as far as we can in that 2025 timeframe. Where we are in 2030, engineers around the world, and certainly our engineers, keep on surprising us positively with their progress. So, of course we will be another significant step along in 2030. How far will we go? I don't know at this stage. What I do know is that we're going for it.
So you've developed the thesis to do that and the plan to invest the significant engineering power that you have to succeed at that goal. How does the notion of lightness play into that? I think you have a unique benefit — AMGs are already heavy as far as performance cars are concerned, but what is the conversation around lightness as it relates to performance and battery integration?
Working myself for four and a half years in Formula 1 and three and a half years at AMG, I totally get where you're coming from. At the same time, you can't abolish the laws of physics. So you work with this constraint and this compromise and you squeeze and you squeeze and you squeeze, but weight will always also be one of the targets.
Cars like the EQS and all of your peers’ cars are still very expensive. They're not mass market yet. Most of the places where the raw materials are being mined are primarily in the developing world, places where labor laws are not as sophisticated as in Europe or the US. You touched on re-extracting materials in the recycling phase, but in terms of the actual initial phase of battery production, what goes into ensuring ethical mining, and how do you source those raw materials?
There's clearly a conversation about it, but across all businesses. The regulatory environment for supply chains is tightening significantly. Germany is introducing a new law with regard to supply chain and how you have to create transparency throughout your supply chain. We have not been waiting for this. This is something that we have been working on, especially regarding the different battery materials. We're going as far as not just accepting the Tier One standard, saying, “everything is fine,” but actually doing audits all the way down.
Your own internal audits?
Yes, that, and work with external auditors that we send places to make sure that artisan mining is not blended into more standardized and industrial mining, those types of things. This is going to be a challenge for all industries. But the regulatory environment is forcing all businesses to pay much more attention to this. So in our overall sustainable business strategy, where we talk about CO2 and resource preservation, human rights in the supply chain is one of them. So we work across the whole definition of sustainability, when we go about doing this, including direct sourcing. In this case, we have struck our first deal where we're sourcing the lithium ourselves.
What do you mean by sourcing it yourself?
We are buying the lithium that eventually goes into the battery cell. That then goes to the module that goes to the battery system, where we provide our suppliers with lithium, from a source that we know and contract with after we do our own due diligence.
To date, electric mobility developments have really revolved around this arms race to “I can do this and I can do that,” all of which are largely singular tasks in terms of performance metrics. But you don't seem to fall into that. The performance is there because there's a value in electric performance, but it's not the basis upon which it exists for Mercedes. Can you speak to that?
You have to look at the essence of the Mercedes brand. It's all about a combination of luxury brand and a tech brand. It's not just tech. Tech is not one dimensional, by the way, it's multidimensional; it's a decathlon. So everything counts in a Mercedes; when you look at that 300SL Gullwing, that was the most modern car of its time. When the original Gullwing was made and it was presented, people were looking at the car saying, “Oh my goodness, this is a UFO!”
And now we are looking at that as perhaps one of the most beautiful classic cars of all time. Now, when you look at EQS, I have the same feeling. A UFO has landed. What the hell is going on here? This one bow design and very large wheelbase, the hyper screen that blows you away, and all those different things. The aesthetic qualities, what materials you use, high tech, all of it comes together. So if we were able to give you that feeling yesterday, it's about much more than just one dimension. I'm glad you said that, because that was our goal, to show the whole range of the brand. Then you have those other brands — AMG, Maybach, G, and so on. It's almost like they represent tribes within the tribe.
Are you in the performance crew? Do you want sophisticated luxury, such as with the Maybach? Are you a “transcends all marketing logic” G fan, adventurous luxury and so on? We are now transporting that brand promise into the future. There's no doubt in my mind that every progressive company, every innovative company has to have a path towards net zero. That's the only business strategy that you can have. You have to put your capital and your resources on the technology that takes your product into a sustainable future, while protecting the brand values that we have built up over 100 years.
Well, that's a good segue. So what is the particular legislation, geographically, that is dictating the overall strategy? For example, I live in LA, and I know historically, everyone built cars to California spec because it was the most restrictive spec. So if you built a California car, it was fine everywhere. What is the most restrictive element today? And what do you think about markets like the US, no doubt a very large market for Mercedes globally, that might be behind and almost antagonistic to your strategy. How do you reconcile the legislation versus the customer response?
For the longest time, it was about fleet averages, fuel consumption, and so on. Once you've made the ultimate commitment to go zero, which is what we have done with our Ambition 2039, it's almost like those things lose meaning. Yes, you have the very ambitious legislation in Europe. The Biden administration has presented a very ambitious path for the United States. China has something a little bit similar. All of those are not miles apart. But if you want to go to zero, it doesn't matter what the fleet average is anymore. On the way there, yes, clearly you have to have a path. But we have made up our minds, we have flipped the mental switch, we've flicked the capital allocation switch and the engineering switch. We're going for it.