The head of Mercedes-Benz has issued one of the starkest warnings yet on the future of Europe’s car industry, saying the sector is battling unprecedented headwinds from all sides and risks “hitting a wall” unless Brussels rethinks its timetable to phase out petrol and diesel engines.
Ola Källenius, chief executive of Mercedes and president of the European Automobile Manufacturers’ Association (ACEA), said the continent’s carmakers were already contending with a toxic mix of Chinese competition, US trade tariffs, falling luxury demand and the European Commission’s looming ban on combustion-engine vehicles.
“Our industry is experiencing heavy rain, hail, storms and snow at the same time,” Mr Källenius told Handelsblatt, the German business daily. “Car manufacturing is a tough business, more so than ever.”
The Commission has ruled that, from 2035, all new cars sold in the EU must be zero-emission, in effect mandating electric vehicles (EVs) or other non-polluting alternatives. Mr Källenius said the policy was well-intentioned but dangerously detached from market realities.
“We need a reality check otherwise we are heading at full speed against a wall,” he warned. “Of course we have to decarbonise, but we must not lose sight of our economy.”
A Swede at the Helm of Germany’s Motoring Crown
The 56-year-old Swede took over the top job at Mercedes in 2019, succeeding Dieter Zetsche, who later admitted the company had used illegal “cheat” devices to understate carbon emissions. Since then, Mr Källenius has positioned himself as a champion of low and zero-emission technology, overseeing billions of euros in EV investment and a wave of electric model launches.
His latest intervention marks a shift in tone, signalling growing unease among European industry leaders about the Commission’s rigid approach. He said EU policymakers should instead focus on measures to accelerate consumer adoption, such as tax incentives and lower electricity prices at charging stations.
“The environment in which we operate is extremely complex at the moment,” he said. “Legislators must create the conditions for success, not just impose deadlines.”
Tariffs and Darwinian Competition
Mr Källenius warned that European manufacturers are under simultaneous attack from multiple directions. US tariffs on EU vehicle exports, imposed as part of an ongoing transatlantic trade dispute, have added a 15 per cent surcharge to the price of European cars in the American market.
At the same time, Chinese brands are flooding Europe with competitively priced electric models, many benefiting from generous state support at home. “The competition from China is Darwinian,” he said, implying that weaker European brands could face extinction if they cannot match China’s combination of cost efficiency and speed to market.
While Mercedes remains one of the world’s most recognised luxury marques, even its high-end clientele have been cautious. “Consumer sentiment in the high-end segments important to us has been very subdued for several years, to put it mildly,” Mr Källenius said.
Industry Bristles at Brussels’ Deadline
His remarks reflect mounting frustration within Europe’s automotive sector over the 2035 ban. Carmakers argue that the policy, while designed to cut emissions, risks triggering unintended consequences.
Mr Källenius said the prospect of an outright ban could spur a “last-chance buying spree” of petrol and diesel vehicles in the years immediately before the deadline, without delivering a corresponding environmental benefit. “That doesn’t do the climate any good,” he said.
ACEA, which represents Europe’s largest manufacturers, has been lobbying Brussels to introduce more flexibility, arguing that infrastructure, battery supply chains and consumer readiness all need to accelerate before a full transition is viable.
Pushback from Electric Vehicle Advocates
Environmental groups and EV lobbyists, however, insist that the 2035 target is both achievable and necessary. Chris Heron, secretary-general of E-Mobility Europe, said: “Now is not the moment for Europe to step back from its 2035 target but to lead decisively on the electric vehicle transition.”
He argued that any delay or dilution would leave Europe further behind China in the race to dominate next-generation vehicle technology. “With electric car sales already accelerating across 2025, the EU must hold its course and give investors certainty while stepping up industrial and demand policies: driving EV roll-out, expanding charging and scaling up battery supply chains.”
The Cost of Charging Ahead
For Mercedes and its rivals, the financial stakes are vast. Building electric cars remains more expensive than producing petrol or diesel equivalents, due largely to battery costs. Meanwhile, a patchy charging network across the EU—particularly outside major cities—has left many consumers wary of making the switch.
Mr Källenius said that cutting electricity prices at public charging points would help overcome this hesitation, along with targeted tax breaks for EV buyers. Without such measures, he suggested, the transition could stall, leaving manufacturers caught between shrinking demand for combustion engines and insufficient uptake of electric models.
A ‘Perfect Storm’—and Worse
In the interview, Mr Källenius rejected the notion that the sector was simply in a “perfect storm” of challenges. “It’s worse than that,” he said. “We’re facing every kind of weather disaster at the same time.”
That list includes volatile energy prices, higher raw material costs, and geopolitical uncertainties affecting supply chains. The war in Ukraine has disrupted supplies of key components, while trade tensions with the US and China have created fresh barriers to exports.
What Comes Next
The European Commission has so far shown little appetite for watering down the 2035 target, framing it as central to the bloc’s climate ambitions. But with major industry players sounding increasingly alarmed, pressure is likely to build in Brussels for at least a review of the policy’s timetable.
In the meantime, Mercedes is pushing ahead with its electric rollout while keeping a close eye on profitability. Mr Källenius has insisted that the company will maintain its brand’s prestige and engineering standards, even as it grapples with the transition.
“We are committed to a sustainable future,” he said, “but we must find a path that is economically and industrially sustainable as well. Otherwise, Europe risks losing not just a technology race, but a cornerstone of its industrial strength.”
The warning comes as a reminder that the road to an all-electric future may prove more treacherous than policymakers in Brussels are willing to admit—and that without changes to the current plan, Europe’s carmakers could face a collision they cannot avoid.
Main Image: — Stuttgart, Germany via Wikipedia
