Mercedes adds AMG, Maybach EVs to meet emissions targets

To drive business in the next decade, Mercedes-Benz is counting heavily on its premium subbrands. Part of that plan will see the luxury automaker introduce electric variants of its high-performance Mercedes-AMG brand, its ultraluxury Mercedes-Maybach brand and the G-Class off- roader.

Electrifying those high-end nameplates would allow Mercedes to meet escalating vehicle emissions targets — especially in Europe and China — without compromising the driving performance customers expect.

Daimler CEO Ola Källenius described the decision as a "deliberate strategy" toward decarbonization.

"We believe as a society and as an industry, we are on a path toward CO2 neutrality," Källenius said in a media roundtable last week. "We have said we want to do it on the passenger-car side within three life cycles. So, if that is the ultimate goal, we need to get on with it."

The urgency to hit emission targets and avoid costly fines is driving Mercedes to rethink its broader product line. Daimler's passenger-car brand estimates at least 50 percent of its sedans, coupes and utility vehicles will be electrified by 2030, while the number of combustion-engine variants will fall by 70.

To get there, the German automaker expects to globally launch five battery-electric vehicles and 20 plug-in hybrids by the end of 2021, growing to more than 10 BEVs and 25 plug-in hybrids by 2025. It currently has just two electric vehicles, the EQC compact crossover and the EQV minivan.

"We feel that for the master brand, Mercedes, including the subbrands, there is very good growth and profit opportunity for us with electrification," Källenius said.

Increasingly stringent limits on greenhouse gas emissions from transportation in Europe and China are forcing the auto industry to deploy more electrified powertrains just to be able to sell vehicles.

Guidehouse Insights analyst Sam Abuelsamid believes Europe's current emission standard cannot be reasonably met with just internal-combustion-engine vehicles. "Any automaker that doesn't move aggressively to launch vehicles with at least some zero-emissions capability will simply not be competitive, at least in Europe and China," he said.

When it comes to electrification, Mercedes has some catching up to do with competitors, said Richard Hilgert, Morningstar senior equity analyst. Mercedes has not "spent as early on the technology as the other manufacturers did, and they got the ball rolling a little bit slower," he said.

The AMG nameplate, known for its throaty V-6 and V-8 engines, is expected to receive an electric variant next year.

Targeting the AMG line for electrification could give Mercedes the biggest bang for its buck in reducing overall fleet emissions.

"These vehicles are usually the ones that have lower fuel economy because they have larger-displacement engines in them," Hilgert said.

Advances in battery and e-motor technology mean EVs are no longer a compromise.

"An electric powertrain produces a nice boost in low-end torque," Hilgert said. "For AMG, that means pretty good acceleration performance, and for G that means good towing performance."

Mercedes expects to launch an all- electric Maybach in "about three years or so, maybe a little shorter," Källenius said. The automaker has expanded the lineup, with an SUV coming later this year.

Electrification suits the tony subbrand, for which drive comfort carries a premium. Electric motors are virtually silent in operation, noted Conrad Layson, analyst with AutoForecast Solutions.

"Maybach and S-Class will notice a vast improvement in noise, vibration and harshness figures," Layson said.

Premium vehicles drive larger profits and can help fund the development of new technologies. And bringing electrification to six-figure vehicles — and their well-heeled customers — is an easier sell.

There is more willingness to pay extra for electrification at the premium end of the market, especially if the powertrain also provides a boost in performance, Abuelsamid said.

"While AMG customers appreciate the sound and feel of internal-combustion engines, if a downsized engine can still provide the visceral appeal in combination with even higher performance in a PHEV or even a full BEV," he said, "it can still be appealing."