Mercedes-Benz’s message for Tesla: ‘We want to be most desirable electric vehicle luxury brand’

(NEW YORK) — German automaker Mercedes-Benz has seen its share of the U.S. luxury market slip as customers traded in their V8 sedans and sport utility vehicles for Teslas. Now, the company is following in Tesla’s footsteps by building out its own charging network, accelerating its electrified fleet and adding Level 3 autonomous driving technology to its vehicles.

Mercedes’ goal is simple: Become the “most desirable electric vehicle luxury brand,” according to Dimitris Psillakis, president and CEO of Mercedes-Benz North America.

Psillakis is helping oversee the company’s aggressive push toward EVs. The first Mercedes EV, the futuristic EQS sedan, debuted in October of 2021. Four more models, including three electric SUVs, promptly followed. The EQS SUV and EQE SUV are built at the company’s Tuscaloosa, Alabama, plant. Mercedes’ brand-new factory in Bibb County supplies the lithium-ion batteries. Mercedes aims to go fully electric by 2030.

“To be the most desirable electric vehicle luxury brand, we have to strike a balance between good products and good design but also supportive service,” Psillakis told ABC News. “We don’t see Tesla as a luxury competitor … we see Tesla as a disruptor in the automotive sector, especially when it comes to electric vehicles.”

Mercedes’ strategy seems to be working. It sold 7,341 EVs in the first quarter of 2023, an increase of 251% versus the prior year. Electric vehicles now account for 12% of the company’s sales in the U.S., the company said.

“Luxury buyers are more interested in EVs. They have higher disposable income and are tech orientated,” Jessica Caldwell, executive director of insights at Edmunds, told ABC News. “Tesla redefined what it means to be luxury … but its market share is now decreasing. Tesla peaked in 2019 when it controlled 80% of the market.”

EVs now make up 6% of the U.S. automotive market. Range anxiety and public charging availability are still top reasons drivers are not switching to electrics, Caldwell said.

“Charging is still a big roadblock for customers,” she said. “Mercedes’ charging stations are a reassurance to customers and a good, though expensive, marketing strategy.”

The company’s charging network, which launches first in the U.S. and Canada and will be open to non-Mercedes models, could solve the country’s EV charging dilemma.

“The logic behind it is better service, convenience and taking away some worries customers have today on electric vehicles,” Psillakis said. “We care about the product … it’s our responsibility to offer the best convenience to our customers.”

Tony Quiroga, editor-in-chief of Car and Driver, said Tesla’s highly dependable supercharger network and extended-range models earned it a dedicated fan base. Premium brands like Mercedes are still struggling to overtake the ubiquitous Tesla Model 3 and Model Y, he argued, though Mercedes may be closing the gap. Tesla’s aging fleet could also convince consumers to look elsewhere, he argued.

“Mercedes doesn’t want to take a backseat to Tesla,” he told ABC News. “A charging network can be a big win for Mercedes.”

Quiroga pointed out that two Mercedes EVs — the EQ S450+ and EQ S580 — beat their EPA range estimates when Car and Driver staff conducted their extensive 75 mph tests on the vehicles.

“It’s very rare when a car beats its EPA numbers,” he said.

And Mercedes’ EV momentum will give it an edge over the competition, according to Robby Degraff, an analyst at AutoPacific.

“They’ve really hit all the right segments so far, from the larger EQS SUV to the EQE sedan,” he told ABC News. “If a loyal S-Class owner wants to go all-in on electrification, there should absolutely be a comparable EV, like the EQS sedan. That’s an approach and strategy I think Mercedes-Benz has really nailed down.”

Mercedes recently revealed the Mercedes-Maybach EQS 680 SUV, the first EV from the uber exclusive marque. The full-size SUV utilizes technology from the EQS SUV and is fitted with sustainably processed leather. Many of the vehicle’s parts and components are made from resource-saving materials, including secondary steel and recycled aluminum.

EVs, however, are expensive and Psillakis said Mercedes is not immune to rising interest rates and economic uncertainty.

“Obviously it’s affecting us, but we have a wide range of products in terms of style prices,” he said. “There is high demand for the new GLC. This vehicle is not affected at the moment by any high interest rates or inflation.”

EVs are one part of Mercedes’ long game; the company scored a “monumental achievement” when Nevada regulators certified its autonomous driving for public roads earlier this year. “Drive Pilot” will be included for model year 2024 S-Class and EQS models and is the only SEA Level 3 automated driving system approved by lawmakers, according to Mercedes. Psillakis said California may be the next state to approve the system, which operates at speeds up to 40 mph and is more technologically advanced than Tesla’s Autopilot feature.

“We have to make sure the expectation to customers is the right one and make sure the system is delivering,” Psillakis said.

The attention on EVs has not stopped Mercedes from perfecting its gas-powered SUVs and high-performance AMG models. Last month Mercedes revealed an updated E-Class midsize sedan and introduced the plug-in hybrid GLE 450e 4MATIC SUV. A new 2024 GLS model range will arrive in U.S. dealerships later this year.

“Mercedes is operating two companies at the same time,” said Caldwell. “Mercedes has an expansive EV lineup but the internal combustion vehicles are paying the bills. It’s expensive to run these two companies in parallel.”

Degraff said Mercedes’ internal combustion vehicles are still highly desirable and sought after by enthusiasts.

“Mercedes-Benz has been able to crank out seriously eye-watering performance just by tapping into mild hybridization and plug-in hybrids,” he said.

Psillakis dismissed concerns that the company’s fabled AMG division would lose its cachet in an EV world.

“EQS is electric and it is an AMG,” he said. “Yes, I do miss the sounds of a V8 engine. Do I miss the fun? The torque? The performance? No. AMG is not only sounds and horsepower. It’s also exclusivity, design and performance, which you can get in electric vehicles too.”

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