Mercedes CEO says Europe’s gas crisis will accelerate its shift to renewables & More News

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Hong Kong
CNN Business

Europe’s gas crisis will be “a catalyst” for Mercedes-Benz to push deeper into clean energy, says its CEO.

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In an interview Sunday, Ola Källenius told CNN Business that the automaker had been leaning more toward wind energy for its operations due to the long-running power crunch, which has weighed on millions of households across the region since Russia’s invasion of Ukraine.

Mercedes has also begun taking steps to cut down its use of natural gas at the company’s factories in Germany by roughly half, though it intends to “keep full production” by switching to electric and other power sources, he said.

“We feel that for the short term, we are in a relatively strong position to deal with this challenge,” Källenius added.

“If you look at it from a longer, mid-to-longer-term position, actually I think this could even be a catalyst to go faster into renewables.”

Since it invaded Ukraine nearly eight months ago, Russia has sharply reduced its supply of gas to Germany and other EU countries.

For many households, the fear was that Russia would turn off the tap completely this winter. The German government had already set in motion a crisis management plan that could see rationing gas to businesses if that happened.

However, data from trade group Gas Infrastructure Europe shows that gas storage facilities have well exceeded a target set by EU officials — suggesting that Europe has enough gas to get through the season without any severe supply shocks.

Companies have already made contingencies. Mercedes has taken the “precautionary” measures of stockpiling certain vehicle components that are made using natural gas, “to make sure that we have parts in the system” in case of any gas shortages this winter, according to Källenius.

But in recent months, the automaker has also decided to forge ahead on two large projects that could serve it well into the future, starting with the construction of an on-site wind farm that will eventually provide more than 15% of its electricity needs across Germany.

The group has also signed on to use a wind energy facility in the Baltic Sea that will “add another 25%” of capacity, said Källenius.

“We’re going to diversify, we’re going to make ourselves more resilient, and of course we’re going to go carbon-free,” he added.

The objectives have the potential to dovetail with the company’s broader ambitions.

Like other global automakers, Mercedes is currently working to expand its lineup of electric vehicles as it seeks to catch up with industry pioneer Tesla

(TSLA). The German giant has outlined goals for half its sales to come from electric cars by 2025, and for the brand to “go all electric” by 2030.

This year, the company announced a plan to invest more than 60 billion euros ($58.5 billion) into an “emissions-free future,” from 2022 to 2026.

Källenius spoke to CNN Business on Sunday from the Paris Motor Show, where he unveiled the company’s latest electric offering, the EQE sports utility vehicle. He called the car one of the most important launches in Mercedes’ history, saying that it would finally allow the company to have an electric option across all its vehicle classes.

“The E-class SUV segment is one of our best [sellers] across the world. That’s why this vehicle is so important for us,” said Källenius, gesturing to the model seen behind him on a video call. He called the mid-size SUV “the last piece of the puzzle” for Mercedes.

The launch comes as concern grows over consumer appetite for new cars and other goods, particularly as the global economic outlook continues to darken.

Last week, the International Monetary Fund downgraded its forecast for the world economy yet again, predicting that “for many people, 2023 will feel like a recession.”

Källenius acknowledged that there were “clouds looming,” particularly with headwinds including inflation.

But he struck a sanguine note, saying that luxury goods tended to be relatively shielded from ups and downs in the economy.

“Generally when you go through different economic cycles, the luxury segment seems to be a little bit more robust, but you adjust to demand,” said Källenius.

“I think we have the flexibility in our production system to also cope with differences in the economic cycle.”

Mercedes sold nearly 529,000 vehicles in the third quarter of 2022, up about 40% from the approximately 377,000 vehicle sales logged in the same period last year.

Anna Cooban contributed to this report.

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