A Mercedes-Benz is regardless of how it is propelled. This implies that every Mercedes is extraordinary. Its reputation stems from exceptional design, advanced technology, superb refinement and craftsmanship, a sublime ride and drivetrain, world-class safety systems, and outstanding digital solutions, whether it’s a battery-electric vehicle (BEV), a hybrid, or a car with an electrified high-tech combustion engine (ICE). Mercedes-Benz will use a consistent, status-oriented design throughout its portfolio, and buyers will first pick a model, then their desired drive type. The all-new CLA, which will be available in both BEV and ICE variants, is a significant step in this direction. And there’s more to come.
The idea provides drivetrain flexibility in the form of a fully electric vehicle with benchmark range, consumption, and charging performance, as well as a highly efficient ICE model with compact transverse high-tech electrified engines.
Despite the fact that the designs are nearly identical, the rear-wheel drive automobiles in the Core and Top-End Vehicles (TEV) classes will be built on distinct, uncompromised BEV/ICE ideas. Cutting-edge BEV and ICE vehicles may maximize their individual capabilities without losing size, elegance, convenience, or efficiency. Mercedes can provide best-in-class space and proportions while keeping costs low and production flexibility high thanks to clever modularization.
By focusing on the most promising areas, Mercedes-Benz maintains its objective to safeguard margins while the BEV share grows. Mercedes-Benz intends to increase and protect its share of Top-End Vehicles (TEV) by using the potential of its luxury brands, including the G-Class, the indisputable emblem of adventurous luxury; Maybach, the embodiment of refined luxury; and Mercedes-AMG, the performance luxury brand. The renowned G-Class lineup will be expanded with a new, smaller model. Mercedes-AMG intends to exceed the performance market by 2026, owing to a completely revamped model lineup and a strategic development of its portfolio, which will include a next-generation, high-tech electrified V8 and specialized high-performance electric cars based on AMG.EA.
The largest ever product launch promotion.
Mercedes-Benz will begin the most aggressive product launch schedule in company history this year, with the all-new CLA, followed by a substantial overhaul of the S-Class in 2026 and a spate of Mercedes-AMG debuts. Overall, Mercedes-Benz intends to release dozens of new or revised models between now and 2027.
The CLA will be available with either an electric powertrain or a 48-volt electrified high-tech four-cylinder engine mated to an electrified eight-speed dual clutch gearbox. The electric model establishes new benchmarks in its class for range, consumption, and charging power, owing to technologies from the VISION EQXX program. The product content in this class will increase, but the portfolio complexity of its family will decrease from seven to four versions.
“We will excite our customers with a full rollout of uncompromising cars. They will be an intelligent part of their life. All of them come with a fully integrated tech stack and leverage the latest developments in AI. They will be packed with advanced technologies like the latest ADAS systems and innovative tech features like a new steer-by-wire system. It all starts very soon with our new CLA, our first software-defined vehicle powered by our very own in-house operating system MB.OS. It will be followed by our new electric GLC, which is a turning point in our mid-size segment. This is the all-electric SUV our customers have been waiting for.” said Markus Schaefer, Member of the Board of Management of Mercedes-Benz Group AG. Chief Technology Officer, Development & Procurement
Intelligent, scalable modules
With the introduction of the CLA, all new Mercedes vehicles will operate on the proprietary AI-enhanced Mercedes-Benz Operating System (MB.OS), a chip-to-cloud software operating system that includes entertainment, automatic driving, comfort, and driving & charging. Mercedes-Benz will be able to provide a greater product experience since it will have complete control over all sensors and actuators. MB.OS is expandable to meet any sector and may be customized for each location. For navigation, Mercedes-Benz will utilize Google in western countries, AMAP in China, and TMAP in Korea.
The BEV drivetrain portfolio will make use of highly modular electric drive units and batteries that are scalable for all segments, including cost-effective lithium-iron-phosphate (LFP) and sophisticated nickel-manganese-cobalt (NMC) batteries, as well as high-performance round.
The CLA’s batteries have a 30% lower cost per kilowatt hour than their prior generation. Additional improvements in energy density and cost efficiency are being worked on, as well as developments in cell chemistry. Lithium-manganese oxide (LMO)/NMC blends will reduce prices while improving energy density to NMC levels.
The newly designed, versatile Electric Drive Unit 2.0 (EDU 2.0) will be available in two and four-wheel configurations across all categories.
To provide a comprehensive portfolio of electrified high-tech combustion-engine cars, Mercedes-Benz already has a full range of future-proof EU-7 compatible engines and gearboxes spanning from four to eight cylinders. In some markets, 12-cylinder engines will continue to be available.
Lead in Technology
Mercedes-Benz continues to innovate with cutting-edge technology, such as a new steer-by-wire system and a completely integrated tech stack that incorporates a water-cooled supercomputer. Mercedes-Benz will launch not just MB.OS, but also the MBUX Virtual Assistant, which has multi-agent AI capabilities. It improves the user experience by combining conversational and behavioral AI, as well as the most recent Large Language Models (LLM). It can even answer follow-up inquiries in a natural manner for up to an hour, due to memory.
MB.OS also offers advanced autonomous driving features, such as Level 2++ point-to-point navigation for difficult urban traffic. This functionality will be accessible in the all-new CLA as soon as the legislation allows. SAE Level 31 conditionally autonomous driving speeds are growing on German highways2, with the objective of deploying a 130 km/h system by the end of the decade. Mercedes-Benz became the first worldwide automaker to receive authority to test SAE Level 4 highly automated driving on specified urban routes and highways in Beijing.
Winning in China.
The S-Class is the clear market leader in its sector, while Mercedes-Benz continues to lead the categories for vehicles priced at one million RMB or more. Mercedes-Benz’s largest and greatest R&D network outside of Germany is already in China. Mercedes-Benz’s domestic facilities in Beijing and Shanghai enable the company to fully use the local ecosystem and supplier environment. This allows Mercedes-Benz to maintain its high internal standards while inventing at “China speed.” Mercedes-Benz is already setting the benchmark for navigation with lane-level navigation and 3D maps.
Using the China R&D network will allow Mercedes-Benz to improve the intelligence of its products while significantly reducing complexity and expense. Products designed for the Chinese market will be locally produced and preloaded with China-specific apps and content, such as customized infotainment and autonomous driving capabilities. As part of the anticipated product launch effort, seven models would be devoted to China, covering all categories and drivetrain options.
Despite a hard year in 2024, the Mercedes-Benz China Joint Venture activities had a high return on sales. Mercedes-Benz intends to optimize the BBAC joint venture with its partner. The goal is to reduce material costs by 10% through tighter localization of parts in the Chinese supply chain. Variable and fixed manufacturing expenses will be lowered as well. Potential changes to the dealer network and production footprint are also being considered.
R&D costs
Mercedes-Benz is prioritizing worldwide R&D resources with a sharp emphasis on the consumer. The business will continue to invest in the Mercedes-Benz Tech Stack to protect and strengthen its dominance in software and hardware. The vertical integration of MB.OS will enable a continuous, iterative approach to product development, with a stronger emphasis on software. The use of digital technologies also enables Mercedes-Benz to be more efficient in its hardware and test fleet operations.
Investments are predicted to peak in 2025 as a result of the big product launch strategy, then taper down after 2026. The majority of investments are for the CLA series of vehicles, the electrified GLC and C-Class, as well as AMG.EA models will be complete by 2027, with goods on the way. Investments in combustion engine technology will remain restricted, owing to reduced powertrain complexity and the usage of clever modularization between BEV and electrified high-tech ICE vehicles. Mercedes-Benz developed and engineered the extremely efficient four-cylinder engine for the all-new CLA, which is now being manufactured with a partner in China.
Next level performance:
Production: The Mercedes-Benz Group is adjusting its cost base through a variety of initiatives. The corporation intends to reduce manufacturing expenses by 10% by 2027 after adjusting its nominal production capacity in recent years. This, among other issues, led to the closure of facilities at Hambach (France), Iracemapolis (Brazil), and CKD plants in Russia and Indonesia. A powertrain facility in Poland is being converted into a future Van production site, while the sale of a Van plant in Argentina is another move toward adjusting the company’s worldwide production footprint.
Global passenger vehicle production capacity is expected to be lowered from 2.5 million in 2024 to between 2 and 2.2 million units by 2027, with the option to modify as the product launch campaign acquires pace. There are no plans to close factories in Germany. Production capacity at each German factory is being balanced at an average of 300,000 units. A core segment model will be added to the manufacturing lineup in Kecskemet (Hungary), where capacity is being expanded to take advantage of factor prices that are around 70% cheaper than in Germany.
Mercedes-Benz will increase its use of digitalization and artificial intelligence, using a ‘digital first’ strategy. Thanks to digital twins, Mercedes-Benz can plan possible model movements across facilities, including ramp up durations and plant retooling, without severely disrupting real-world production.
Local for local: By 2027, the percentage of local-for-local output is expected to expand from 60% to 70%. An extra Core segment model may be allotted to the United States, while a long-wheelbase variant of the GLE will be localized in China by mid-2026.
Material Costs: Suppliers work with Mercedes-Benz procurement and engineering teams to decrease material costs by questioning specifications and component design to discover areas where cost savings may be achieved via standardization and technical refinement. One effect is earlier and more thorough inclusion of important suppliers into the development process. Material costs will be managed in close conjunction with suppliers. The BEAT26 initiative intends to make long-term and sustainable improvements to Mercedes-Benz and its partners’ procurement cost structures.
Fixed expenses: Mercedes-Benz reduced fixed expenses by 19% between 2019 and 2024, net of inflation. Over the following three years, the goal is to reduce by more than 10%. To do this, the corporation is constructively debating measures with its employee council. Furthermore, possibilities are being reviewed to discover how Mercedes-Benz’s sales and financial services groups may collaborate more closely to better serve clients across all touchpoints. In addition to selling its own retail operation in Germany to established dealer groups, the firm intends to eliminate managerial roles and expand its use of digitization and generative AI to improve procedures.
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