The company doubts the world’s readiness to transition exclusively to electric vehicles
Mercedes-Benz — the latest automaker to scale back its EV ambitions. In 2021, the company published an electrification plan that would see it sell only battery-electric vehicles from 2030, at least in countries with suitable infrastructure. On February 22, Mercedes presented its annual results for 2023, from which it became clear that the company doubts that markets will be ready to accept only electric vehicles by that date.
Mercedes isn't abandoning electric vehicles, but now says it expects half of all sales in the second half of this decade to be electrified vehicles, including hybrids and battery-electric vehicles. The company said it is taking the necessary steps to transition to an all-electric model, but also aims to meet different customer needs by offering options with an all-electric powertrain or electrified internal combustion engines until at least the 2030s.
This change has long been discussed in Mercedes conference rooms. CEO Ola Källenius warned in September 2022 that even Europe would not be ready for an all-electric lineup by 2030.
For electric vehicle fans, this is yet another example of corporate response to declining consumer demand. It is believed that electric vehicles have become one of the new technologies that go through a cycle of hype, first generating high expectations and then disappointment.
Global electric vehicle sales grew 31% in 2023, but that's half the growth rate achieved in 2022. In the US, automakers such as Ford and General Motors have already admitted that their electric vehicle plans were too ambitious or did not target the right market segments, such as full-size pickup trucks. Even startups like Rivian and Lucid are predicting significant production cuts in 2024.
Car dealers who are skeptical of electric vehicles could be blamed for this. They, receiving record profits, complain that they have to master new technology. But one of the reasons many consumers don't feel confident buying electric vehicles is discomfort. An electric vehicle owner who can charge at home knows that he will wake up every morning with a fully charged battery, but this contrasts with the need for weekly or more frequent visits to gas stations. In addition, drivers are accustomed to fast refueling, which is problematic for electric vehicles even with fast charging.
Electric vehicles also remain more expensive compared to internal combustion engine vehicles. This is due to the high cost of lithium-ion batteries. Once the price of batteries drops below $100 per kWh, the cost of electric vehicles could become equal to the price of cars with internal combustion engines.
Battery prices are gradually falling, but this is not happening fast enough. In November, BloombergNEF published a study that showed battery prices fell 14% year-on-year, but at more than $130 per kWh, it's clear why electric vehicles still cost thousands of dollars more than their gas-powered counterparts.
Instead, we can expect more adoption of hybrid electric vehicles and PHEVs (plug-in hybrids). Hybrid vehicles provide a cost-effective alternative to simply burning liquid hydrocarbons and help reduce carbon dioxide emissions.