“Significantly more” is being invested in the S-Class compared to a typical facelift.
After acknowledging that its electrification goals have been overly ambitious, Mercedes is now investing heavily in combustion engines. In an interview with the German publication Wirtschaftswoche, CEO Ola Källenius stated that ICE technology “will last well into the 2030s.” To ensure gas engines comply with increasingly stringent regulations, substantial investments are necessary.
This year alone, the three-pointed star is allocating €14 billion (about $15 billion at current exchange rates) to its passenger car division. These funds are designated for “high-tech combustion technology,” as well as electrification and digitalization. Although the Swedish-German business executive did not specify the exact amount Mercedes is spending on ICE, he admitted it is “more money than previously planned.”
Källenius mentioned the S-Class and its mid-cycle update planned for 2026: “We have invested significantly more in the model update of the new combustion engine S-Class than we typically spend on a facelift.” Mercedes aims to keep its conventional powertrains at “the very highest technological level.” Without substantial investment in gasoline and diesel engines, the luxury brand “would suddenly stall our combustion engine business in 2027 or 2028.”
He was referring to the Euro 7 and China 7 regulations, which require engines to be updated to run cleaner and meet stricter emissions rules. Mercedes aims to adjust all “relevant combustion engines and transmission combinations” to avoid massive fines. Källenius mentioned that future engines will be partially electrified, indicating more hybrids in the lineup.
Mercedes recognizes the need to adapt as the transition to EVs hasn’t progressed as planned. Three years ago, the company projected that plug-in hybrids and fully electric cars would comprise about 50 percent of annual sales by 2025. However, this target now seems unlikely. At one point, Mercedes even stated it would go fully electric by 2030 in certain countries “where market conditions allow.”
Facing this reality, Mercedes has had to readjust its goals. It now aims for hybrids and electric cars to make up half of its deliveries by the end of the decade. The ultimate objective of becoming carbon neutral by 2040 remains unchanged, according to Källenius.
He dismissed rumors about the company canceling the development of a platform for the next-generation EQS, stating, “The project is running at high speed.” Additionally, Mercedes is not abandoning plans for the promised eight gigafactories to build batteries for its electric ambitions. However, these facilities will be ready “a little later” than originally planned.
Earlier this year, an interesting report emerged about Mercedes testing the EQS with a range-extending combustion engine. The electric vehicle was allegedly equipped with a small two-cylinder, 1.0-liter turbocharged engine mounted at the front. However, these trials were reportedly halted.
Mercedes has a deal with Geely to collaborate on hybrid engines, which will also be used in Volvo models. The Chinese automotive giant has expertise in range extenders and a separate deal with Renault. Geely’s newly formed Horse division specializes in combustion engines, including those developed as range extenders.
