Automakers across the globe have been ratcheting back their EV plans in recent months. And Mercedes-Benz just did so in a significant way. The brand had been pledging to be all-electric by 2030; however, a recently prepared document for investors shifts that target dramatically.

Mercedes now plans to hit a target of “up to 50 percent” sales of EVs and hybrids sometime in the 2020s, according to the document. In it, Mercedes confirms it “will be able to cater to different customer needs until well into the 2030s” with internal combustion cars and SUVs.

Here’s why Mercedes made this dramatic shift.

EV sales growth is tapering off

Broadly speaking, EV sales grew substantially in 2023 in America. A total of 317,168 units sold and an 8.1 percent market share in Q4 were both records. But that only represented 40 percent growth … which marked a decline from the previous two quarters, and was down from 54 percent in Q4 2022. Manufacturers are worried the rate will taper off even further. It’s a lot harder to see Mercedes riding an exponential growth curve up to 100 percent EV sales in just six years.

Early adopters were low-hanging fruit. Getting EVs to the majority of buyers, however, phase will require building the cars people want (i.e. family-sized crossovers) at an affordable price. Charging and charging infrastructure must improve dramatically, and resolving those issues will be thorny and expensive. The money to fund all that comes from … continuing to sell gasoline-powered cars.

Mercedes-Benz

Mercedes-Benz’s profits dipped in Q4 2023

Mercedes’s profits fell from 3.98 billion euros to 3.12 billion in the fourth quarter, a fall of 21.7 percent. This drop comes when Mercedes has been increasing profits to improve the margins on its vehicle. And it comes when shareholders have shifted their mentality from “Why aren’t you doing enough to beat Tesla in the future?” back to “Why aren’t you making us more money?”

Simply put, manufacturers don’t make money on electric cars right now. And EV price margins are worsening as Tesla lowers prices dramatically to spur demand and continued growth against a growing competitor base. The base-model Tesla Model Y is now about $35,000 cheaper than the equivalent Mercede-Benzs EQE SUV.

Given the choice to hold firm to its 2030 pledge out of principle or to affirm to investors that it plans to continue to be a viable, profitable manufacturer of vehicles, Mercedes unsurprisingly chose the latter.

What does Mercedes’s EV shift mean in practice?

Maybe not a whole lot. Rhetorical shifts are like tacking a 20-foot sailboat; changing the trajectory of global automobile production is more like the proverbial ocean liner. Mercedes’s current EV plans remain largely intact.

Mercedes-Benz still plans to roll out three new scalable modern EV platforms to underpin new vehicles. The brand is still investing in the global production of batteries, increasing their capability (with solid-state may be coming later this decade) and reducing the production cost.

We still expect the all-electric EQG to make its way to customers (perhaps with a choreographed tank turn) on schedule later this year. And remember, Mercedes is still subject to emissions regulations. Selling combustion vehicles into the 2030s may not mean developing another generation of raucous AMG V8s.