STUTTGART, Germany – Mercedes-Benz is making a strategic pivot, placing greater emphasis on gas-powered vehicles while continuing its electric-car ambitions. The move comes as the luxury automaker looks to boost sales and shore up profit margins amid a tougher market environment.

As part of the shift, Mercedes-Benz’s AMG performance division is bringing back V-8 power, with senior officials confirming to a gathering of automotive industry analysts here that an all-new mild-hybrid gasoline engine will debut in a new range-topping version of the CLE coupe and cabriolet.

Between now and the end of 2027, Mercedes-Benz plans to roll out 19 new internal-combustion-engine models alongside 17 new battery-electric vehicles. The plan follows a disappointing 2024, when the company’s EV sales tumbled by 25%. Instead of chasing volume, Mercedes-Benz is doubling down on higher-end, higher-margin models – a bet that it hopes will pay off as economic uncertainty continues to weigh on consumer spending.

The renewed focus on piston power will see many upcoming Mercedes-Benz models offer the choice of an ICE or electric drivetrain – as seen with the upcoming third-generation CLA sedan, the first model to be based on the automaker’s new MMA platform.

Sagging sales of battery-electric EQE prompted shift in Mercedes’ platform strategy.

Sagging sales of battery-electric EQE prompted shift in Mercedes’ platform strategy.

The CLA sedan is the first in a family of four new compact models planned to launch by the end of 2026, including successors to the CLA Shooting Brake, GLA and GLB. ICE versions of these new models will be powered by a turbocharged 1.5L gasoline 4-cyl. developed by Mercedes-Benz and produced in China by Horse, a joint venture operated by Chinese automaker Geely and French automaker Renault.  

The shift in strategy isn’t happening in a vacuum. Mercedes-Benz is facing mounting financial challenges: Last year, its profit dropped 28% over that of 2023 to €10.4 billion ($10.8 billion), while revenue slipped 4% to €145.6 billion ($152.5 billion). Those numbers have prompted tough conversations in Stuttgart about how best to balance sales and profitability in a slower-than-expected transition from ICE models to a full-electric lineup.

Despite widespread criticism, Mercedes-Benz insists it is sticking with its “premium-first” approach adopted in 2023. “The strategy of value over volume remains intact – it has not been abandoned,” chief financial officer Harald Wilhelm says. He points out that demand for gas-powered models still significantly outpaces EV sales, reinforcing the logic behind the company’s recalibrated approach.

Beyond its internal struggles, Mercedes-Benz is also navigating a tricky global trade landscape. Rising tensions between major economies are forcing the company to rethink how and where it builds cars. To hedge against potential supply chain disruptions and tariffs, the automaker plans to expand local production operations in both China and the U.S.

One major concern? The U.S., where President Donald Trump has threatened to slap a 25% tariff on all imported vehicles starting in April. If that happens, it could create major headaches for German automakers that have traditionally relied on strong exports to the American market.

Last year, the company faced significant headwinds in key markets like China and Germany. While it managed to outperform fellow luxury rival Audi, it fell behind BMW, which posted stronger EV sales despite the industrywide slowdown.

Looking ahead, Mercedes-Benz says it will pour greater resources into growing its presence in China over the next five years. However, it confirms it will continue to steer clear of the aggressive price wars that have defined the Chinese EV market, where local brands have aggressively slashed prices to gain market share. Mercedes-Benz believes playing the discount game in the world’s largest EV market could be a long-term strategic mistake.

Mercedes-Benz CEO Ola Källenius frames the change in strategy as a careful balancing act. “To ensure the company’s future competitiveness in an increasingly uncertain world, we are taking steps to make the company leaner, faster and stronger,” he says.

Re-engineered Mercedes-AMG C 63 expected to be powered by mild-hybrid V-8.

Re-engineered Mercedes-AMG C 63 expected to be powered by mild-hybrid V-8.

The entire German automotive industry is struggling with that balancing act. Rising energy and labor costs are chipping away at its competitiveness, with rival automakers – Audi, BMW and Volkswagen included – also implementing aggressive cost-cutting measures.

Meanwhile, the announcement of a return to a signature V-8 marks a dramatic shift away from AMG’s previous downsizing strategy, which saw the brand introduce a 4-cyl. plug-in hybrid powertrain to the C63 in 2022 – a move widely criticized for diluting AMG’s identity and failing to resonate with traditional customers. It has led to a significant sales decline for one of Mercedes-AMG’s best-selling models of all time.

Major Shift to Flat-Plane V-8 Design

However, while the V-8’s return has been confirmed, it comes with a major engineering change: AMG has abandoned the traditional cross-plane crankshaft in favor of a flat-plane design.

Full details of the new engine remain under wraps, though it is said to be based on AMG’s existing twin-turbocharged 4.0L V-8 architecture. The switch to a flat-plane crankshaft promises sharper throttle response but sacrifices the deep, burbling soundtrack traditionally associated with AMG’s V-8s, including the current M178 unit.

This layout enables a more compact crankcase design, allowing AMG to fit the new engine into models not originally engineered for a V-8, such as the fifth-generation C-Class. It also allows for a higher redline and ignition cut-off.

The flat-plane design is expected to give AMG’s new engine a different firing order than the cross-plane M178 unit, and it may also incorporate a smaller compressor wheel. In its ultimate form, it’s also set to feature a mild-hybrid system with an integrated starter generator within the transmission, boosting power and efficiency, according to sources privy to its specification.

Mercedes-AMG denies widespread rumors that the new V-8 could be fitted to the C63 as a replacement for its 4-cyl. plug-in hybrid drivetrain when questioned by Wards Auto.To counter the higher-pitched, more aggressive tone of the flat-plane crank engine, AMG plans to equip future models with an artificial sound generator to recreate the signature burble of its most celebrated V-8s.