The transition to electric cars is starting to raise some doubts. Sales of this type of technology have begun to stagnate, and it remains to be seen how far they can go in the short and medium term. The luxury segment is no exception, and while there seemed to be ample room for growth, Mercedes is struggling to make headway. Its EQS model is a prime example.
The goals. For years, European policies have pushed automakers to make the switch to electric cars. Not selling vehicles with combustion engines (or making them carbon-neutral) by 2035 is the major goal, but along the way, the European Union has set an ambitious intermediate target for 2030, with an unprecedented reduction in emissions with its Fit for 55 plan.
At the same time, the U.S. is also creating a plan to gradually reduce the volume of vehicles powered by fossil fuels. In addition, it's pressuring manufacturers produce their vehicles locally through tax incentives and tariffs.
As for China, by the time Europe and the U.S. decided to really get down to business, the Asian country was years ahead, with a much higher total production of electric than any other market and a strict control over raw materials.
The state of affairs. Sales of electric cars have been picking up. This type of technology has been growing gradually outside of China, and sales rates have doubled and tripled, making–for example–the Tesla Model Y the best-selling car in the world.
However, we’re also seeing a slowdown in sales. One that makes sense. The manufacturers have satisfied the desires of their wealthiest customers (to whom their first electric cars were sold), but it remains to be seen if they can penetrate the mid-range and the lower-middle range with vehicles that convince the general public.
This has led to a noticeable cooling of demand across all sectors. Now the question is: With a horizon full of promises of better, cheaper batteries, will electric cars become popular? The experts doubted it, at least in the short term. We’re beginning to find out if we’re facing a new glass ceiling.
The case of Mercedes. Mercedes has gone through the experience same as many other European brands. European pressures and sales in China prompted the company to announce a future electric leap in the medium term. The company had 2030 in mind; now, it’s not so sure.
Mercedes isn’t the only company that’s backing off. Volkswagen Group, another of the major conglomerates that had embraced electric cars, is beginning to view plug-in hybrids favorably as an intermediate step. BMW also isn’t achieving the expected results. And these are just a few examples.
The EQS. Mercedes, like many other companies, entered the electric car market by starting at the top. Aware that selling an electric car would come at a significant premium, one of its first vehicles it released with this technology was the Mercedes EQS, a fully electric version of its flagship sedan. The car was marketed as a turning point for the brand, its most advanced vehicle in decades, and the epitome of its technology, with a new design language both outside (bulbous shapes that strayed far from the classic Mercedes S-Class) and inside (with its mesmerizing Hyperscreen).
According to Bloomberg, the public hasn’t quite responded the way the company expected. The first units arrived in 2021, and 2,500 vehicles were sold. In 2022–the first full year with the car on the market–23,400 units were sold. However, despite the car’s expected growth, 2023 turned out to be a disastrous year, with a 40% drop and only 14,100 units sold.
The economic reasons. The case of the Mercedes EQS tells us a lot about the health of the electric car market. Bloomberg states that the price war in China has done a lot of damage to an electric car that sells for more than €100,000 in Europe (it starts at $104,000 in the U.S.) and whose price the company has refused to lower in Asia. Additionally, large discounts on vehicle rentals have been registered in the U.S., an interesting option for those who only need the car occasionally for image reasons.
The car also presents a few problems. It’s a vehicle with poor energy efficiency and a huge battery that urgently needs faster charging to significantly reduce recharging times. This is what much of the industry is betting on.
Customer perception. The second point that Bloomberg mentions is the customer perception of the Mercedes EQS. The article states that the Mercedes S-Class, with its more classic and traditional style, sold six times more than the electric model last year, pointing out that the new shapes of the electric car may have alienated a very conservative clientele. Meanwhile, BMW opted to offer a version of the 7 Series, with its square, angular shapes, even if that was not the best choice in terms of efficiency.
Another consideration is whether Mercedes has neglected rear passengers with the new EQS. It should be noted that many buyers of this car don’t actually drive it, and while BMW’s luxury sedan is highly focused on offering the best of the best (including a huge screen), Mercedes hasn’t made a car as comfortable and enjoyable in its rear seats as the S-Class. This is a real sore point in a market such as China, where that's highly valued.
Electric cars and luxury. Another challenge that electric cars are facing is the luxury segment. Recently, the CEO of Rimac–a brand that has only produced one exclusive electric supercar–blamed political decisions for the lack of sales of his company’s car. He believes that the political pressure to move towards electric cars is actually causing more and more potential buyers to avoid them.
This can't be measured by numbers, but it may be true. However, other factors must also be taken into account. First, if the mainstream market moves towards electric cars, the added value in the luxury market will be the combustion engine. This is something that companies like Porsche or Ferrari know well.
Secondly, cars like the Mercedes S-Class are purchased, in part, with the clear understanding that they depreciate much less than other vehicles. Electric vehicles are a rapidly advancing technology with ranges that improve little by little and great promises on the horizon. Buy they're not selling well in the second-hand market. This product depreciates more than other technologies, and this represents another problem for the Mercedes EQS.
Image | Mercedes
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