The world has become more complicated. We are going through a once-in-a-century transformation to zero emission and digital, in an environment that sometimes feels like a category 5 hurricane. Now is the time to take a pragmatic approach. If we don't decide our destiny, others will. China has become the biggest auto exporting nation. To meet their competitiveness, we must first improve our own. The solution to being challenged is not to build a wall, but to improve competitiveness. The European market is shrinking while China and the US have recovered. We need to significantly increase the sense of urgency. The DAGY report contained inconvenient truths and clear recipes, but one year later, little progress has been made. We need a big change. Electrification will be heterogeneous. Mercedes-Benz is in 150 markets. Technology openness is needed. We need to move from absolutistic targets with draconian penalties to a market-driven approach with investment in infrastructure. Worst case, if the consumer is not convinced, they will keep old cars, collapsing the market. That would be bad for decarbonization and wipe out many suppliers. We stand shoulder to shoulder with KPA and ASA: we need change.
Thank you very much, Ola. Maybe you can join me. Thank you for this very interesting presentation. We will meet with Stephan Janson later. You said we can't run the race without the same rules. So what do you ask for today? Is it a change of the European path to decarbonization? Do we have to change the 2045 goal? What would be your request?
I would start by saying what we as an industry are doing. We are investing in R&D at the highest level in history, filing more patents than ever, creating hundreds of choices for electrification. We are doing our part. What we need from policymakers is to prevent the market from becoming smaller. We have to open up 2035 and make it technology flexible. The main road is electrification, but you cannot dictate to the consumer. Allow hybrids, blend in non-fossil fuels. A 5% blend on 250 million vehicles reduces CO2 equivalent to 100% of new zero-emission registrations. Separate swim lanes for LCV and heavy duty. The 2030 targets look unachievable. I would look at 2035 as the milestone, agree on a flexible scenario, then work backwards from that. Also incentivize European content in decarbonization goals, but it must be market-driven. Invest in infrastructure across all 27 EU countries.
You just mentioned European content. How should that be implemented? Does it have to be mixed with tariffs and commercial war, or is it something completely different?
My advice would be handle with care. If done wrong, it would drive inflation and reduce competitiveness. Any market distortion, whether tariffs or other methods, has to be carefully thought through. We need to make vehicles more affordable, so adding elements in the wrong way will drive prices up.
It's interesting because Carlos Tavares said last week that if we do local content, we will have more expensive cars and Chinese shareholders. Do you think the same?
Our founding fathers invented the automobile in 1886. By 1898, we set up shop in the US. If we expect entrepreneurs to restrict where they do business, we are mistaken. We should strive for open and free markets. But if another football team plays with a 12th man, you need to address that. Europe, as an export champion, should not be the drivers of protectionism. We should uphold free trade.
So you would say that tariffs might give us a little time but we won't be competitive?
Work on our own policies to not make ourselves less competitive. Most of the regulation in the last 10 years has lowered our competitiveness. Turn that tide. The competitiveness work is the job of the company. For Europe as an economic region, focus on strengthening competitiveness first. On trade policy, handle with care, level playing field yes, pure protectionism no.
You speak about competitiveness of the European industry. How do you explain the difficulties on the Chinese market, especially for German manufacturers?
Two things are happening in China. For a long time it was cruise control, always growing. In the last 2-3 years, China has its own structural issues. Consumer sentiment is subdued. Additionally, over 100 players are vying for a market that may support 30-40. This is creating unbelievable competitive intensity. Companies must decide how much to participate without burning cash. The Chinese auto market is almost as big as Europe and the US combined. But there is also a term 'involution' where the government says competition has gone too far. Many provinces subsidized car companies, but that is becoming more difficult. The next years will be very intense.
What about the American market? How do you deal with the new regulations, tariffs, and local content rules?
Mercedes-Benz is one of the biggest industrial exporters from Europe to the US. We have strong operations in the US. Paying 15% tariff instead of 2.5% is painful. But the US economy is a $30 trillion economy with policies that deregulate their own market, making it more interesting to invest there. Even with short-term pain, we see the US as a growth market and will invest more. We've been there for over 100 years.
You talk about consolidation in the Chinese market. What about the European group? Is there still room for consolidation among big European brands?
Absolutely. The European automotive industry has many strengths: innovation, engineering, strong brands. The EU created a common market, but each country still has its own consumer preferences and national regulations, which should be harmonized. You need 27 game plans. The key is great product at affordable prices. Affordability is partly down to regulation, so dialogue with Brussels is important.
