Mercedes-Benz CEO Ola Källenius became CEO in 2019 but has been working for Mercedes since 1993 in almost every part of the company. During that period, Mercedes spent time getting a lot bigger; the company famously merged with Chrysler for a time, forming a giant called DaimlerChrysler. But, over the past few years, it’s actually been getting much smaller and more focused. The Chrysler deal was undone and, just recently, Ola spun off the truck division into its own public company called Daimler Truck, leaving Mercedes-Benz to stand alone as a premium car brand.
Car companies are either consolidating into giant conglomerates like Stellantis or shrinking and focusing like Mercedes. A lot of that is driven by the huge shift to electric vehicles and then, on top of that, to cars essentially becoming rolling computers. You’ll hear Ola refer to cars as “digital products” a lot — and to Mercedes itself as a tech company. (Actually, he says it’s a luxury and tech company.)
Mercedes now has two new EVs, the EQS and the EQE, both of which have massive infotainment screens running Mercedes’ proprietary MBUX system, which even has its own voice assistant called Hey Mercedes. I had to ask Ola about Apple’s recent announcement that the next version of CarPlay would be able to take over every display in the car, including the instrument cluster. Apple showed a Mercedes logo on a slide during that presentation — so, is Ola ready to hand over his UI to Cupertino?
Let’s find out. Ola Källenius, CEO of Mercedes-Benz. Here we go.
Ola Källenius, welcome to Decoder.
Great to be with you. Thanks.
You told me at the beginning to just introduce you as the CEO of Mercedes-Benz, but you have these complicated titles that I want to understand. You are the chairman of the board of management of the Mercedes-Benz Group AG, and you are also the head of Mercedes. Just explain what all of that means to us.
I would say that is a typical German thing. That is what it ends up as if you translate my German title. It all sounds very complicated, but the gist of it is I am the CEO of Mercedes-Benz.
I am very excited you’re here. I always joke that this is a show about org charts, so when I see stuff like that I always want to know. You are the CEO of Mercedes and have been for a while now. There is quite a lot to talk about there, but let’s start with the basics. How is Mercedes structured?
It is pretty straightforward; we are a luxury and tech car company. Naturally, we have a management board and supervisory board. We run the company functionally, as most car companies do, with an R&D department, production, operations, marketing and sales, and the other supporting functions. As you know, we used to be part of a conglomerate, called Daimler, but we decided to split the company last year. Since the beginning of this year, it has purely been Mercedes-Benz.
There is a lot in there that I want to pull out, so let’s start with that decision to split the company. You split off the truck company, which is now Daimler Truck, and you have Mercedes-Benz. If I just look around the industry, it seems like every company is going hard in one of two directions. It is either a massive consolidation — a company like Stellantis is created out of a huge merger and now they are a house of brands — or it is a reduction in brands and focus.
On the one hand, you have Stellantis, Volkswagen Group, and General Motors, which are massive house-of-brand companies. On the other hand, you have Ford, Mercedes, and Honda. You went from one to the other. There was DaimlerChrysler, which was a huge company created out of a merger. You have just gotten smaller since. Why make that decision? Why go on that path?
Daimler had forever and a day been a conglomerate with two main industrial businesses. Everybody knows Mercedes-Benz is a luxury tech car company, and Daimler Trucks is the world’s biggest commercial vehicle producer. It comes from the history of the company. Gottlieb Daimler didn’t just invent the car, he invented the truck and all other things that were propelled by a combustion engine back then.
The auto industry is going through an age of transformation, and that is really the spark that started the internal discussion to essentially break up the company and create two pure-play entities. We have to reinvent the original; what we need is speed, in decision-making and in innovation.
If you look at it, luxury cars and Class A trucks have fundamentally different customer groups. One customer group is looking for something special, going from A to B in style. The other one is looking for a high-tech, very total-cost-of-ownership-driven (TCO) transport good that comes down to the last cent per mile. We said, “Even though it’s a huge group, let’s make the company more nimble and get rid of the two-tier decision-making process, both in the management board and the supervisory boards. Let’s have an undivided 100 percent focus on our customers.”
For the truck guys, which is the smaller business inside the group, we said, “Let’s put them in the spotlight and release some entrepreneurial energy by listing this stock, so you get the whole attention of the financial market on that one stock and an entrepreneurial energy around that.” So speed and entrepreneurship are the main reasons why we split the company.
You said you had to reinvent the whole product, the whole car, which is obviously a reference to electric vehicles (EVs). There is one more split you could do, and Ford just did something along these lines. They said, “We are going to have an internal combustion business and an EV business. They are going to be different. We are going to split those up so the EV people can focus and our legacy car business can focus.” You have two products, right? You have the EQ products, which are your EVs, and you have the traditional products. Are you thinking of a further split along those lines?
Not at all, because the attitude of our brand is there is no such thing as yesterday’s business and tomorrow’s business. There is only one Mercedes-Benz, and that Mercedes-Benz is going into the future. We have made a clear and definitive decision that we are going all-in on electric. In fact, as of 2025, all new vehicle architectures for Mercedes — on which we will have several different models — will be electric-only.
We did not want to create a future team, a current team, or a past team. The psychology of the organization is that everybody is working on the future, and that future is zero-emission. It doesn’t make sense for us to split the company. We are going to take the whole company into that electric and digital future. There is one Mercedes-Benz brand promise, one team spirit, and one joint future for the business.
Let me push on that a little bit. The whole company is going in the future. You have people and plants around the world who are building gasoline engines. At the time, these engines — and Mercedes engines in particular — were one of the most stunning technological achievements in history. How do you bring all of those folks along when you switch the whole company to EVs? It doesn’t seem like you can tell your folks in Alabama who are assembling engines into internal combustion engine (ICE) cars, “Hey, focus on the EQ line.” It doesn’t seem like that would give them much to do. How do you bring that whole part of the company along?
Let’s look at this in more detail, especially the industrial footprint and the R&D footprint. You are absolutely right that our high-tech, electrified, combustion-based vehicles will continue to produce positive cash flows and delight customers around the world for many years to come, but the destination that we are going is an all-electric destination. Look at production for a second. We have plants where we build the cars, and we have plants where we build the powertrain. In our car plants, we have already more or less converted all of our assembly plants to dual-use, and they will gradually flip over, as the take rate for EVs go up, to EV only.
You rightly point out that there are dedicated facilities that build combustion engines and the transmissions to go with them. At the headquarters — one of the original locations of Mercedes and a traditional powertrain tech and production location — we have recently decided to invest hundreds of millions in industrializing both the R&D and tech center for batteries, as well as the next-gen E drivetrain. You will have a gradual switchover there as well.
Some of those factories, in terms of the physical buildings, will be retired once you step out of combustion production, but you move people across. It is already the case in R&D that the people who work on the electric drivetrain and the people who work on the combustion powertrain can almost meander back and forth between the two. Many people that used to be some of our best engineers in the combustion world are already on the electric side. We are not leaving anybody from the team behind.
We know it is a big transformation task — that it is also a people transformation and training task — but we are very confident in our aggressive goal of being able to go all-electric on the way to 2030.
2030 is an aggressive date; it is tomorrow in car terms. I’m assuming that you have a roadmap of cars that is eight years out in the future. What are the metrics that you, as CEO, look at to decide whether you are on track? What are you evaluating to say, “We are on track to hit the big goal of all-electric by 2030”?
None of us have a crystal ball, so we don’t know exactly what the dynamics in the big market are going to be in 2030. What is Europe going to look like? What is North America going to look like? Is China going to be the biggest market? What about other important markets like Japan, Korea, and so on? At this stage we have to take a little bit of a guess. You have to strategically decide who you want to be, and if you are going to try to make the market or wait for the market. We have decided that we want to make the market.
I don’t think it matters that much if it is 2030 plus-minus a couple of years here or there. As you said, 2030 really is tomorrow in terms of auto; it is next-gen architectures. That is why we made the decision that from 2025 forward, all new architectures will be EV-only. Thereby, we can put ourselves in a position to serve a market 100 percent electric if that market is ready. That is what we are going for.
What is the metric that we will watch? It is the adoption rate, the percentage of sales in the years to come. Where are we going to be in 2030? How do we ramp up once we go with this EV-only architecture? How fast does that go? We still have the opportunity to tune that and adjust a little bit. We have strategically decided Mercedes is going into this future. We are going to make the market by creating the most desirable cars, the most exciting products that are electric, digital, and, of course, beautiful.
Mercedes is a big company. It is obviously one of the most famous brands that operates around the world. You have been the CEO since 2019, and you are in the middle of this big transition. How do you make decisions? What is your decision-making framework?
How do I make decisions? I can’t just pull a manual out of the drawer and read the steps. I would say I gather a lot of information. I am curious and listen to a lot of people, and I like differing opinions so that I’m not just talking to a bunch of yes-men. If you are at the top of a company in a hierarchy, people have a tendency to tell you what they think you want to hear. I try to go through that challenge of speaking to people I know will say what I don’t want to hear. Sometimes you have to then sit back to digest and compute.
I actually had this experience at the beginning of the pandemic when we were all in lockdown. I chose to do the lockdown in the office, even if I was sitting more or less alone, because I wasn’t traveling anymore. I had much more time to reflect than I had before. Sitting alone in the evening after a marathon of video conferences was a time to reflect and digest information. Use a little bit of your intuition in your experience to make a decision and try to win your team around to that decision. None of us have the crystal ball. We just have to go with judgment calls to try to look into the future. You guess what is going to happen to make the best play for your company. It is a combination of those things.
You describe the products as electric and digital, and you have referred to Mercedes as a tech company several times now. What do you mean by digital products? What do you mean by Mercedes as a tech company?
Next to the revolution that is going on on the drivetrain — switching from one technology to another — I think we are also seeing a paradigm shift of how we approach software and the electronic architecture in a vehicle. For the last three decades or so, it has been a task to integrate a bunch of ECUs, small computers, that came with software packages. We were the ultimate vehicle integrators, taking all these ECUs, all these software packages, all those functions, and making them into a coherent product that works in all dimensions.
I think we have come to the end of that era now, and it is almost like you start with a white sheet of paper. We call it MBOS, the Mercedes-Benz Operating System. “Let’s stand back here and see if this is going to work as we get more processing power, better sensors, and better software. We can use artificial intelligence; we have a learning vehicle.” We said, “No, that American quilt of ECUs that you have to sew together is not going to work. It is going to be too complicated.”
We are now creating one holistic software stack. Yes, that stack has different layers and several domains, but we architect it as one house with different rooms. Together with that comes a consolidated EE architecture, that means less computers and less ECUs, but more powerful computers. This whole construct is done totally over the air and downloadable. You can address every single aspect and function of the car with more technology and better software as the vehicle is in the market. It is a paradigm shift; it is going to make the product better and fresher.
In the past, when you bought your car and drove off the lot, it was the peak technology of that product. From that point forward, it started to age. In the case of a Mercedes, it ages like a French wine, so it could also get better with time. Now, when you drive off the lot, you don’t reach peak technology, because we can send more technology to you after the purchase. That is what the digital side is all about.
I have heard this theme from many folks in the auto industry. You are basically saying the car is now a rolling computer. One of the jokes I make on Decoder all the time is that the second you add a computer to something, you inherit a bunch of very familiar computer problems. You need to care for those computers, you have interface issues, there are bugs, you need to do security updates, and so on. There is not only the opportunity to do software updates over the air, but the expectation from a customer that you will do endless software updates, which will obviously incur a cost.
How are you thinking about all those computer problems? Are you just dedicating lots of people to software now? Are you thinking there is a point at which you will stop updating because Mercedes owners will get new cars? That seems like the central challenge to making anything a computer. You are inheriting all of the problems of the computer industry while still having to make the cars work well.
This is the thing with automotive, it is not something that you have sitting still on your desk at home in ambient temperature at all times. This is a moving machine that can go from -40 degrees Celsius to 60 degrees Celsius, shaking and moving all the time. It is a bigger challenge to take that computer into automotive grade, but it is one that we have been working on for 100-plus years.
We are making that computer more robust, if you will. The download capability and keeping it fresh are both hugely important. We are not waiting for our first full MBOS version that we will launch in the latter half of 2024. We actually started four years ago, in 2018, with what we call MBUX, our infotainment domain. We have gathered a lot of experience in the last four years with millions of connected cars, keeping them fresh and making sure that everything is perfect. It’s not like what you experience with your computer, where every time you do a software dump and turn it on it doesn’t work. That would not be a great thing with a car. It has to work at all times, and it needs to be reliable and safe.
In terms of job profiles, you are absolutely right. We are adding a lot of software engineers. In the past, the work was done by our suppliers, by our partners, and now we do more of it in-house. It is really important to get the architect’s drawing for the fundamentals of the MBOS software stack. The infotainment domain — navigation, communication, entertainment, and so on — is only one domain. You have the drive domain, you have the autonomous drive domain, you have the whole body domain. You have to get all of those things to speak to each other, so the infrastructure layer and the middleware of your software stack horizontally goes across.
It is very important to get that right, and that is why we take so much time in the concept engineering of the software stack as we go into an era where the whole car is downloadable. You are right, you cannot leave that car stranded out there. Customers would not accept that, so we will keep those alive, but maybe a bit like Apple does with iOS and the iPhone. You can constantly update your iPhone with the latest software. You don’t do a generation for two or three years, kill it, then start another generation from scratch. It is like adding water to a flowing river that never ends, which means more software dumps onto the main stack. That is why you have to also look at backwards compatibility when you develop this.
Apple is a really good comparison. Actually, all the smartphone makers are really good comparisons. I have often heard of the modern EV described as a cell phone on wheels.
The benefit that Apple and Google have is that they are constantly monetizing their operating systems. Every time you push a button in iOS to buy something, Apple takes 30 percent of that transaction. Google obviously has the same rules, and they also have a massive advertising business across the web. All of that subsidizes the software work in iOS and Android that enables them to keep pushing those updates out to people. That business model is fundamentally understandable.
If I drive a car I bought from you off the lot, you are now committed to spending money to update that car forever. Where do you see the backend of revenue that makes that commitment worthwhile? Are you just thinking, “Mercedes are really expensive, so we will just price all that margin in at the beginning and hope it works out”?
I think it is a bit of both. If you get yourself the new EQS and get that absolutely insane hyperscreen that covers the whole dashboard, that in itself is almost like tech art. It’s that beautiful. You don’t charge just for the screen, you charge for the functionality that comes with it.
Now that you have the car in the field, where is the potential for recurring revenues? I see good potential for this. One of the most obvious domains is getting from A to B. As we add more autonomous functions to the vehicle and through software updates, it becomes more and more capable. We have a supercomputer processor in the vehicle and enough storage space so that we can make the car better over the years. I definitely think that we can monetize that. Smart charging is another domain.
In the infotainment domain, we’ll have to see. You can get much of the infotainment domain with your smartphone, but the way you present it in the car turns it into a holistic experience. Even your car could be in autonomous mode and a 4D cinema. We have loud speaker boosters in the seat to give you 4D sound. It’s amazing. If you get an S-Class or an EQS or something, you try that out, it kind of blows you away. You can even work with the car to use your air conditioning, your sound, and your lights to create the best movie experience that you have ever had. Could you monetize that? Probably.
Could you put digital art onto the passenger front screen of your car to just enjoy? Could you maybe even sell NFTs? Who knows? I think we have to be creative about it. One thing we know for sure is that the digital side of the vehicle — in our case, also the aesthetic, luxury digital feel of the vehicle — is a crucial buying criteria. It is an absolute must for us to invest in this field.
It needs to feel like a Mercedes; it cannot be too generic. Yes, the functionality needs to be clear and intuitive, but Mercedes needs to go a little bit beyond that aesthetically when we think about how to integrate the body functions of the vehicle with that digital world. Do I think we can make money with it? Yes. Do I know exactly how much? No, but there is potential there. If we want to reap the benefit of that potential, we have to have the technology in the car. That is why we are doing this.
Right now, it sounds like you are at a place where luxury buyers — especially Mercedes buyers — are expecting things like the hyperscreen, so you have to invest in them and put them there. That also helps you with your long-term architecture plans. Somewhere down the line, you mentioned that you are going to start building systems that collect revenue over time. That sounds like subscriptions to artwork or enabling the 4D cinema mode in the car. Is that how you’re thinking? Are you eventually going to subscribe to features in the car?
Yes. I think you need to offer customers both. Some customers don’t look at the price, they just want the best, most desirable product. “Whatever it costs, just let me pay now and that’s it.” You have to have that option, but I think you can add functionality as you go along. You let people choose what they want through the app store. We have the app store today. When I get the financial report every month, I look at how much money we generate through the app store. That is true digital, recurring revenue. We are not at the stage yet where I have to do an ad hoc for a positive profit warning, but every month I see that the number is bigger than before.
Here, the analogy with smartphones works again. It is not about just selling your 2.5 million vehicles or whatever a year. Your install base should grow and grow, so that one day you have tens of millions of vehicles. Then if you start monetizing some per month in that install base, the lever actually starts looking quite attractive. I think we are onto something here. It is too early to say how much this economic potential is, but it is there.
If you want to capture it, you need to do things like MBOS. You have to have that technological infrastructure of your car and, of course, the cloud infrastructure that goes with that — because much of the intelligence and your customer profile is in the cloud, just like in a smartphone. You have to have all those building blocks. If you do not have those, you certainly are not going to get that revenue. We are putting all the building blocks in place.
That is a pretty striking vision of the future of the car. You mentioned the hyperscreen. If listeners have not seen the hyperscreen in the EQS or the EQE, go look at a picture and come back. It is a wild design concept in these cars. It is actually shipping, and it’s amazing.
I was just at WWDC a couple days ago, and Apple showed a vision for the future of CarPlay that would take over all of those screens. They were very aggressive about it. They said, “This is the future of CarPlay. We are going to take over all these screens, including your instrument cluster and your speedometer. We are going to take over the entire hyperscreen.” They then said, “We are working with our partners,” and showed a Mercedes logo. Would you let Apple plug in a phone and take over the entire user interface of the car?
I think Mercedes customers expect access to a holistic Mercedes-Benz universe. It is not just about the physical product; it is also about the digital interface. You have your Mercedes me ID, and with that, you can turn on the air conditioning or the heating in the car from the sofa in your living room. You even have things like urban guard, where you use the sensors of the car to check if your car is safe. You could maybe even check if your driveway is safe in the future. There are so many aspects, so many domains, to autonomous drive and so on. I don’t think that you can rip out one piece of it and just say, “Here’s an island sitting on its own. The mainland of the car and all the other islands around the car are not integrated into that.”
We are very much looking at providing a holistic Mercedes experience. It is physical and it is digital. It is beautiful and it is intuitive. Does that mean that it is a closed environment? Of course not. You have to speak to the ecosystems of the platform companies. You can choose to have Apple CarPlay in our cars today if that is more convenient for you. It covers some functions, but it does not cover all the functions of the car. I doubt that it ever will, because every single car maker has its own interface for all those different functions, down to the massage seat or whatever it may be.
A Mercedes, of course, is usually a little bit more than in cars in the volume segment. If you want a holistic and coherent experience in that car, you are going to stick to the Mercedes ecosystem, yet have an open-source mentality of MBOS to interact with other ecosystems that the customers also use.
Let me ask that question more directly. Apple wants to create a version of CarPlay where you plug in the phone and it takes over all the screens. Are you going to let them do that?
I watched that video. We will see what we do with them. We will have to discuss that. Our clear goal is to have a Mercedes experience through and through.
Were you surprised when you saw the Mercedes logo on that slide?
No, not at all, because we have worked together with Apple for years. We have a very good relationship with them, and decided early on that the CarPlay function is something that customers may want to use. We will have to discuss how we further develop that relationship.
I’m always curious how those slides come up, because the implication is, “We just showed you a thing, and we are now going to show you a bunch of logos. All of the brands that we are showing you will do this version of CarPlay.” You have now said pretty directly that you are not going to let Apple take over the instrument cluster and all the other screens. So how do you see that tension playing out? How do those conversations with Apple and Google go?
I don’t want to jump the gun here. It is something we have to sit down and discuss with them, so I can only speak for what we are doing. Our goal is clear with MBOS and the infotainment domain, which again, is one of several domains, including the instrument cluster. Don’t worry, you will have a true Mercedes luxury feel in every Mercedes in the future.
We have mostly been talking about EVs. You said they are the future that the company is transitioning to, but they are still at the very beginning stages. You have the EQS and the EQE out as gas prices around the world are skyrocketing. I am curious. Are you seeing buyers’ interest shift to EVs more aggressively because of gas prices, or has that just been happening on its own?
A total cost of ownership for people that buy an EQS or buy an EQE might not be their primary buying reason. They want the best, most beautiful product. They don’t sit down at the kitchen table to do an exact TCO calculation at how many miles the cross-over is. It may not be their number one criteria, but you are right. As the price of fossil fuel increases and you take into account the side effects of burning fossil fuels and CO2, yes, the TCO equation shifts more towards clean and less-expensive electricity.
Throughout this decade, I believe that some regulators and politicians around the world will want to tilt that scale in favor of fossil-free energy sources, as in electricity produced by non-fossil-based power plants. The TCO will switch towards EV, even though the variable cost of an EV is higher than what we were used to in the combustion era.
Is that specific to Mercedes? You are basically saying Mercedes buyers are pretty wealthy. The marginal cost of gas goes up and down, but they don’t feel it. When I talk to the CEOs of volume car brands at the lower end of the market, they are feeling the pressure of gas prices making people want hybrids and EVs. The demand is moving. You can justify a new car purchase if you are going to spend less on gas when gas is over $5 a gallon. Are you saying the Mercedes market segment is less responsive to that kind of pricing pressure?
No. I didn’t want to suggest that our customers are not economically aware or economically astute. They usually are very much so. I just said that it may not be their number-one buying criteria, but it is a criteria. I think that trend will accelerate the positive shift towards EVs throughout this decade.
One of the things that strikes me about the EQS and the EQE is that they are both large sedans. You have a smaller electric SUV that is not for sale in the States. The US is an SUV country. I’m told that you used to live in Alabama when you worked at that plant for Mercedes. Why do large sedans in the States when the market seems to be moving to SUVs?
You need not worry. Both the EQS and the EQE sedans have sibling cars that we are industrializing in our operations in Alabama, a place that is very dear to my heart. I spent a total of six years in Alabama. I love it and have great friends down there. We have put $1 billion-plus into that operation to get it EV-ready. I was there in March, opening our brand-new battery plant that will serve the main assembly plant in Alabama. The EQS SUV startup production has already started. We will launch that in the early fall. The EQE, a slightly higher-volume SUV, is coming at the beginning of next year. We are also launching the EQB in the US more or less as we speak, which is an SUV one size down that will also be available.
If I look three or four years into the future, every conceivable SUV variant that Mercedes puts into the market will have a full, dedicated EV version of it, and all of them will come to the US. By the way, SUVs are not just a US thing. It’s a world thing. Although the sedan segments are strong in China and Europe, the SUV is just as popular.
Wait. Wait. Are you saying there is going to be an electric G-Wagen?
I am absolutely saying there is going to be an electric G-Wagen. It is only 24 months away, so it is coming soon.
Is that thing going to have a range of 50 miles? That is the least aerodynamic car in the market.
Its aerodynamics are ever so slightly worse than the EQS sedan. I agree with that, but the iconic shape is in a class of its own. I recently joked that it’s like the Birkin bag of Mercedes. Everybody wants one and the waiting time is really long. It may even be the most desirable car in our portfolio.
Jokes aside, we will put a sizable battery into it, with subtle changes on the aerodynamic side that will not destroy the iconic shape, but at least improve it from where it sits today. It will have a drivetrain that will blow your mind. Literally, on a soft surface, you can turn on a dime. You can have two wheels going forward and two wheels going backward. We call it the G turn. On a dime, it just turns itself 180 degrees and you can go in the other direction.
The drivetrain is crazy good. My boss, Bernd Pischetsrieder, and I took it for a spin in the fall when we were meeting the G guys developing this vehicle in Austria. We went onto the dedicated, very harsh test track that they have there. Bernd has been in the auto industry for 40-plus years, so he has seen everything. We stepped out of the car and we went, “Wow, from this point forward going off-road is electric.” Yes, absolutely. G is going electric.
That is very exciting. I feel like I should just do the rest of the show on G-Wagen, but there are other questions to ask. You mentioned a large battery in the forthcoming G-Wagen. When I think about Mercedes as a whole, you historically made a lot of grand tours, large sedans and large SUVs that are meant to go long distances. Range anxieties are broadly still the issue with EVs that I think people care about. On the battery side, do you see developments coming that allow you to get to the longer ranges beyond the 300 miles everybody sees now?
I do, but I think we may have a market development from a consumer demand point of view that goes in two directions. I definitely see batteries coming with higher energy density. Even in the lithium-ion technologies that we are in now, that gets better and better, there is still some legroom for energy density improvement there.
Then you have some of the more game-changing technologies that are in the pipeline but are not yet ready for industrialization. One is the silicon-based anode — or almost all-silicon anode — which we have worked on together with an American startup company called Sila. We just recently announced that we will put the first application of Sila technology into a version of the electric G, and that should improve the energy density by at least 20 percent, maybe even 30 percent. I am quite excited about that.
There are different horses in the race for solid state, which everyone talks about. When that comes to fruition, it is another opportunity. It is not yet in automotive-grade industrial volumes, but that could very possibly happen sometime between 2025 and 2030. Those things will lead to even higher ranges.
If I use the European standard with the EQS sedan, the WLTP certification values it up to 780 kilometers, in real-life driving somewhere north of 600 kilometers, which takes care of almost all use cases. Very few times do you really run out of juice if you have one of those cars, but we will go beyond that.
As charging infrastructure proliferates — we will have it in more places and more public fast charging available — I think many customers are going to realize that you don’t need that range. Ninety-nine percent of your trips are below 100 kilometers anyway. If it is not the commuter car going from New York City to LA every other week, you are going to be fine with a range that is somewhere between 200 and 300 miles, or perhaps even less than that.
You should go for a smaller battery with less-expensive technology and optimize the variable cost of the product instead. In the old world where you had an E 200, an E 250, an E 350, or an E 450, it was all about displacement and horsepower. The new currency is efficiency and range. You have an entry model for those that need less range, then you have the ultimate for people that do take longer trips quite often, to go skiing every weekend or whatever they do.
We will work on both things, but there is a common denominator, and that is efficiency. Efficiency is the new currency. Next to perfecting the drivetrain, we look at every aspect of the car, from the aerodynamics to the rolling resistance. We did kind of a fun thing, a science project that we called EQXX, where we challenged the engineers to go 1,000 real-life kilometers on one charge. The restriction they had was that they were not allowed to put a monster battery in it, because you can always do it with a very big battery. With the size of battery that we have in production today, around 100 kilowatt hours, they made it.
They drove from south of Stuttgart to the south of France in a sedan that could carry four people on one charge, and even had 140 kilometers to spare. It was a little bit too extreme from a narrow point of view, but some of those technologies are already going to be in cars from Mercedes in two to three years. It is not science fiction. It is not fantasy. It’s coming.
Most people don’t need a massive range. On the flip side of it, sometimes you do. Even if you buy the smaller car, sometimes you may want to go on the trip. That is when the charging network becomes really important. I would say Tesla’s main advantage is the Supercharger network. We have seen other car companies come to the realization that their charging networks are not up to snuff to compete with Tesla. I just talked to Ford CEO Jim Farley on the site, and he said, “Look, we launched the Mach-E and now we are doing the F-150 Lightning. We know we have to get better at charging.”
They have deployed a team of people to go around checking for bad chargers in the Electrify America network that they are partnered with. I think a Mercedes customer rolling up to some gas station off the side of the highway in an EQE with a broken charger is not a luxury experience. It’s not a luxury experience in a Mach-E, and it is certainly not a luxury experience in an EQE. Is that something you are thinking about? “We have to make that experience as good as the Supercharger experience”?
The experience has to be convenient, intuitive, fast, and it needs to work. Up until now, we have done mainly two things, and we will do more. The first — and I think we were probably the fastest doing this — was putting together the most comprehensive roaming system of every available charging point in the world. I think we have 750,000-plus charging points that you can access through Mercedes me Charge. Very few, if any, manufacturers have the width of that.
It is almost like in Europe with cell phones; if you go from country to country, you need to have a roaming agreement. We did that very quickly. It is a good start, but it is not enough. On top of that, we have developed what we call Plug & Charge, which I actually tested with my colleague, Markus Schäfer, when we drove from Atlanta to Alabama for the opening of that battery plant. He just stopped in the middle of nowhere in Alabama to see if Plug & Charge works.
So what does Plug & Charge mean? You go up to that charging station, you plug in, and then you leave. The whole payment and everything is frictionless. The car recognizes it’s this specific charging. It could be anybody from any provider. That makes the convenient thing even better than if you just have a proprietary charging network, because you can go anywhere and everywhere. Having said that, is that enough? No. I kind of agree with Jim here, we need to do more. We are actively looking at how we can engage and create more or even specific Mercedes charging points. It is a little bit too early to tell on this specific podcast, but stay tuned.
We are an active member of one consortium in Europe that is called Ionity, which is building a fast-charging network along the highways across all of Europe. Just six months ago, we decided to travel through that network. With three or four other partners, we are doing a high-quality one for the community.
We also speak to the energy and utility companies, who are now rapidly getting into this scene. I’m talking about the Shells and the BPs, those types of guys, and also utility companies. Many people have recognized this is a space where money can be made as transportation switches to electric. We have done a lot, but we haven’t done enough, and we are going to do more.
Do you talk to Tesla about opening the Supercharger network? They have made a lot of noises about it in the past. There are some European countries where they are required to have it open. Are those ongoing conversations?
I read about that, but have not specifically spoken to anybody at Tesla about it.
Do you ever think that you should just wild out on Twitter like Elon Musk? Has that ever come to you? Do you have a PR person who comes and says, “You should just do some Elon stuff online”?
I am on LinkedIn, which I guess is Instagram for adults. That is as far as I have dared to venture in social media. I am quite active there, and use it as a communication tool to attract talent for Mercedes and to tell the world what is going on. I have not yet become a Twitter person. Who knows? If I have something meaningful to say, maybe I will do it, but LinkedIn has worked quite well for us so far.
That is the best LinkedIn plug we have ever had. I will tell you, just don’t become a Twitter person. It’s bad for you. It’s bad for me.
Let’s talk about Tesla for a minute. Obviously, they are the elephant in the room whenever we talk about EVs. They have dominant market share with the 3, and they have dominant mind share because of Elon. Do you think your strategy is taking share away from Tesla for EVs total? Is it growing share? Is it maintaining your share of luxury vehicles with switching the mix? What do you think about that?
Any time an industry goes through a transformation or a disruption, it is not unusual that new players look at that industry and go, “Wow. I could do that.” New entrants usually act as a catalyst to accelerate the transformation. That is what we are seeing now, whether it is new entrants from the United States or new entrants from China. We are watching very carefully, and we take them very seriously. Some competent players are there with interesting products. But we don’t discount the usual suspect. Why should we? Those are also capable and competent competitors in the same kind of transformation race we are in.
If you watch and benchmark the competition and try to run in 10 different directions and be somebody you are not, you are definitely going to lose. You have to take a step back and ask, “What is my brand promise? Who am I? What is the soul of Mercedes-Benz? What do Mercedes-Benz customers expect? What have we given them over the decades?”
In its absolute core, Mercedes is a blend between a tech and a luxury company. We stem from innovation. A joke inside the company is that we are a startup, we just happen to be 136 years old. In our DNA, we have this inner unrest for what’s next and we always look beyond. Technology innovation is one piece of the Mercedes persona, and the other is luxury, the aesthetics. If you take a walk around the Mercedes museum and go through the decades, you see Clark Gable’s car, you see the Gullwing, you see all these beautiful pieces of art. You understand that if you want to make a Mercedes, you have to fulfill both promises. In the future, it is an absolute given that you need to decrease and ultimately eliminate your ecological footprint in a sustainable way.
With that mission in mind, we are 100 percent focused on giving our customers the Mercedes experience of the future. Being the combo between luxury and tech is a strength. Some companies are tech, but not really luxury. Some companies are luxury, but not really tech. We think we are the best of both worlds. You have to be competent in both disciplines if you want to win this game.
All of those little details count. How quiet is the car? How sublime is the ride and drive? Even if you know nothing about cars, does it just feel right? Everything kind of comes together. That is what we are focused on, and we think we have a good foundation. We take nothing for granted; we are not complacent. We have to earn our right to maintain this legacy. That is why we are investing so much into these new technologies and exciting products, and we will see how the market shakes out.
Two questions. First, some companies being “tech but not luxury’’ is a very pointed description. Is that a reference to Tesla?
I usually don’t comment on any one competitor. You will not draw out a review from me of any one competitor. I will talk about Mercedes, and Mercedes is a blend of both.
It’s my job to try. I will say, the walls are very evident with European CEOs, so I won’t push any further. This leads to my second question. It was not really about Tesla, but about where you see market share for EVs coming from. Is it conquest of the existing share, of which Tesla dominates, or is it growing the overall share and taking it from your ICE vehicles?
Let’s start from another point. The concept of individual freedom and individual mobility is something that we have been reminded of in the past couple of years with the pandemic. We need a safe space, a cocoon, where you can feel safe going from A to B. In the future, we believe people are going to want to move more into that premium and luxury segment, where they have their own beautiful, safe cocoon. We think most people will appreciate that. We think the luxury end of personal mobility is definitely a growth industry. As far as Mercedes is concerned, that luxury will turn itself into zero emissions. One hundred percent of the volume one day will be electric. 30 plus X. We shall see.
On the road to that, I actually think we will have this twilight zone for many years where there will not be 100 percent cannibalization between EVs and combustion. We actually have a little growth boost through all the electric vehicles that we are adding in parallel. Regardless of the size of the market in 2030, 2035, or 2040, the end game is to get to a 100 percent zero emission and completely replace the previous technology.
I want to end talking about autonomy. We have talked around it a bunch, but not about it. It is the future. Mercedes has very advanced driver assistance features in the cars today. Some cars claim they even have level three autonomy when it comes to parking garages, where you push the button and it can drive through the parking garage to park itself. When do you think the steering wheel is going away?
We are in the middle of the journey of driving assistance systems turning into fully autonomous vehicles that can go anywhere by themselves. It is one of the most exciting journeys. It is one of the most disruptive technologies, more disruptive in a way than the switch of the drivetrain, because it is going to make traffic so much safer. Once the computer knows how to make all those decisions, it will make fewer mistakes than humans.
We are super excited about this since safety is one of the core values of Mercedes. You are right that we have actually certified the first level three vehicle here in Europe, in Germany. In some driving situations, you push the button and take that giant leap of actually handing over the responsibility to the computer. The lawyers get to sweat too, because they hand over the product liability to the computer. It is not a step that you take lightly. If that was us putting the first flag on the moon, then we now need to build a moon base.
Together with Bosch, we have also developed a level four system, where you don’t even have to be in the car. If you go to the airport in Stuttgart, you can just drop your car in a zone. In that parking garage — with some technology that is actually in the building as well — the car can guide itself without you being in it. You can go check in without wasting time looking for a parking spot in the garage. We all know the experience, right? It’s just tedious and not fun. It’s better if you could just let that be done by a computer. I think that we will have an absolute revolution on these technologies in this decade. In some of the applications, especially for shared mobility, I can see the steering wheel disappearing.
Do you have a timeline? You have level three and level four. Level five is the last level. These definitions are fuzzy. Do you have a timeline in your head for the last disruption, where most people will get in their car — steering wheel or not — and not have to operate it?
It is quite expensive technology, especially if you want to go to level three or beyond . As you say, the lines get a little bit blurred there. Once you get some sort of full autonomy, there is a lot of computing power, a lot of sensing, a lot of backend, and so on. It is not something you can put in a $10,000 car, but you can put it in an $80,000 to $100,000 car in the beginning. I think we will surely be deep into the ‘30s before the whole world goes to that. I do think a lot of things will happen in this decade on the way there. We will have level two systems that will feel like level four systems. You are still responsible, but the car can do almost everything. Super assistance.
We will have more situations where you can drive level three. We will also have more examples of the valet parking level four that I mentioned. It will be a gradual shift into that world. It’s not black and white, where you flick a switch and go from all manual to all autonomous. It is step by step. Together with Nvidia, we are now working on our next generation of autonomous automated drive systems. Those are going to be in the market towards the end of 2024 into 2025. I am quite excited about what we are doing there. We have very good cooperation with them and we are moving fast.
I want to end on a very big-think question that is appropriate for Mercedes in particular. There is a 2003 SL500 for sale down the street from me, and I look at it all the time. It’s beautiful. You also called the Gullwing Mercedes a piece of art. Every time I look at that SL500, it just has the world’s worst infotainment stacking. I’m sorry, but it is very dated. It’s an old screen with a bunch of buttons. When I think about that Gullwing, nothing about it is dated. It is timeless.
As you think about turning cars into computers, with all of these screens and software, and think about the timeless quality of Mercedes, which you have brought up over and over again, do you worry that it will become like the iPhone 4? Is it a beautiful object I have in my home that is effectively useless because the infrastructure of software and cloud computing will not be there in the future? Or do you think you can still make the products timeless?
First of all, I would like to say, what are you waiting for? Reward yourself.
I have to send a kid to college.
Yeah, yeah. Do it. What is an education compared to driving a Mercedes? You have to get your priorities right.
When I first graduated from law school and I was a baby lawyer, I bought a C300. That was my moment, and that moment has passed.
Well, it can happen again. We have to talk after this podcast. You are asking how we make sure that it doesn’t get dated in the digital age. It comes back to what we talked about before. You have to look at that software stack as a river, not as a pond. You have to be able to think about backwards compatibility. If I look at an old Gullwing from 1955, can you guarantee backwards compatibility for 50 or 70-plus years? I don’t know, man.
The Gullwing doesn’t have any computers in it, right? You just have to put gas in it.
We will have to figure that out. I can promise that you will still have an exciting drive and that might be worth it.
That is a great place to end it, Ola. Thank you so much for coming on Decoder.
Thank you for having me.
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