Mercedes-Benz CEO questions EU’s 2035 ban on CO2-emitting vehicles – report

Mercedes-Benz CEO Ola Kaellenius has voiced strong opposition to the EU's 2035 combustion engine ban, warning it could lead to a European auto market "collapse" and competitive disadvantage given current weak EV demand, intensifying Chinese competition, and overall subdued sales. Kaellenius, who also chairs the ACEA, advocates for a technology-neutral decarbonization approach focused on incentives and affordable charging, especially as the policy is up for review later this year and the European People's Party has hinted at potential revisions. This critical stance highlights the significant pressures on European automakers, exemplified by Mercedes-Benz's recent revenue and profit declines.

Analysis

Mercedes-Benz CEO Ola Kaellenius, in his capacity as head of the European auto lobby group ACEA, has articulated a significant challenge to the European Union's 2035 combustion engine phase-out plan, warning of a potential market "collapse." This opposition is grounded in current market headwinds, including subdued electric vehicle sales, intensifying competition from Chinese manufacturers, and weak overall consumer demand. These comments carry substantial weight as they precede a scheduled policy review later this year and coincide with a draft document from the EU's largest lawmaker group, the EPP, that suggests a potential softening of the ban. The situation is further contextualized by Mercedes-Benz's own recent performance, which saw significant declines in second-quarter revenue and profit. While the company attributed the downturn to trade tariffs, the CEO's market commentary underscores a broader challenging operational environment. Kaellenius's call for a "technology-neutral" approach focusing on incentives rather than a ban frames the industry's stance as pragmatic, aiming to influence a critical regulatory decision that could reshape the competitive landscape for all European automakers.

Key Decisions for Investors

• Investors in European automotive stocks should closely monitor the EU's policy review in the latter half of the year, as any dilution of the 2035 ban could provide a significant catalyst for legacy automakers.
• The explicit warnings on weak EV demand and rising Chinese competition highlight persistent margin and market share risks for established European brands, warranting caution on their medium-term growth outlook.
• Given Mercedes-Benz's recent decline in revenue and profit, combined with the CEO's pessimistic market view, upcoming earnings reports should be scrutinized for evidence of demand stabilization and a clear strategy to navigate these competitive and regulatory pressures.