Mercedes‑Benz CEO Ola Källenius warns that the EU’s relaxed EV targets, combined with strict rules, could curb demand and shrink Europe’s car market. Read more now.
On the eve of unveiling its flagship S‑Class, Mercedes‑Benz Chief Executive Officer Ola Källenius sounded an alarm about the European Union’s latest plans to ease electric‑vehicle (EV) targets. While the EU hopes the new flexibility will spur faster adoption of clean cars, Källenius warns that the accompanying detailed constraints could actually dampen demand and shrink the continent’s automotive market.
What the EU is proposing
In December 2025 the European Commission released a set of proposals that would push the ban on internal‑combustion engine sales from the current 2035 deadline to a later, more graduated timeline. The plan allows manufacturers to keep selling plug‑in hybrids (PHEVs) and extended‑range electric vehicles (EREVs) beyond 2035, provided they meet strict CO₂‑reduction offsets such as using lower‑emission steel or sustainable fuels.
Källenius’ perspective
“The door is only ajar,” Källenius told reporters, emphasizing that the liberalised target is still surrounded by heavy‑handed rules tied to each country’s per‑capita GDP. He warned that this approach “carries a huge risk that the market size will contract during the transition”.
Speaking as both the head of Mercedes‑Benz and the chair of the European Automobile Manufacturers Association (ACEA), he stressed that vague flexibility without clear, uniform standards could fragment the market, making it harder for manufacturers to plan production and for consumers to trust the shift to electrified models.
Why the S‑Class matters
The upcoming S‑Class is positioned as Mercedes‑Benz’s cornerstone model to revive growth after a challenging 2024. The luxury sedan is expected to showcase the brand’s latest hybrid and fully electric technologies, serving as a bellwether for the company’s broader electrification strategy.
“We see the S‑Class as a catalyst for our comeback,” Källenius said. “But its success depends on a level playing field across Europe, not a patchwork of nation‑specific limits.”
Implications for the industry
- Production planning: Manufacturers would need to balance PHEV inventories with pure‑EV output, potentially leading to over‑stock of less‑desired models.
- Cost pressures: Meeting CO₂ offsets through lighter steel or sustainable fuels adds to vehicle price, which could deter price‑sensitive buyers.
- Consumer confidence: Inconsistent rules may confuse shoppers about long‑term ownership costs and resale values.
As the EU moves toward finalising the proposal, Källenius urged policymakers to consider the broader market impact. “A flexible, yet coherent framework will unlock the true benefits of electrification,” he concluded.
Mercedes‑Benz remains committed to expanding its EV lineup, but the CEO’s warning highlights a delicate balancing act between regulatory ambition and realistic market dynamics.