Few firms have been as famous for as long as Mercedes-Benz. From its Stuttgart headquarters, the German giant has pumped out elegant, lightning-fast cars for almost as long as they’ve existed. But spend time examining the company and it’s clear that much of this success is based on a deep well of flexibility. Andrea Valentino speaks to with Ola Källenius, CEO at Mercedes, to explore links between racing and road cars, the challenges caused by the supply chain crisis – and why long-term fans can still expect a satisfying drive even as the brand veers towards an electric future.
If you ever find yourself in Boma, a crumbling colonial port on the banks of the Congo, you might find something that surprises you. Dodge the potholed roads and the dust, and go to the Fischer House, once owned by some local bigwig. Look between the villa’s paint-flecked columns and you’ll soon see it – its tyres flat, its engine naked, its chassis chocolate with rust. It may not look like it now, but this car was once part of a miraculous history. It first came to Boma in 1895, when the town was still ruled by the King of the Belgians, and represents the first automobile ever to appear in the Congo. That, in itself, would be remarkable enough – today the Democratic Republic of the Congo only has about 1,500 miles of paved highway. But what makes the Boma car even more special is how it got there. It was sailed, painstakingly, from Germany, in a journey that would have taken over three weeks. And why not? A Mercedes-Benz is a status symbol anywhere, even in a land without roads.
That, of course, was merely the beginning. Over the decades, Mercedes- Benz has become one of the most intoxicating luxury car brands on earth, outselling everyone but BMW – and not even Mercedes-Benz’s German rival has a Janis Joplin song named after them. Yet if the Stuttgart giant has travelled aeons from those sepia-tinged days in Boma, becoming the must-have accessory for despots and business titans everywhere, sweeping the field on racetracks the world over, selling 734,000 models last year in China alone, the firm is hardly spinning its wheels. Between deep investments in new digital technology, and major advances into electrification, Mercedes-Benz is undoubtedly a manufacturer with plans. “We are aware of the unique history and great importance of this brand,” is how the firm’s CEO, Ola Källenius, puts it, “and will continue to develop it for the future.”
Yet as Källenius would surely be the first to admit, actually keeping such a distinguished company relevant in the 21st century is far from straightforward. From a supply chain crisis to struggles around globalisation, Källenius is obliged to juggle a circus tent of priorities. Then there are questions around his own role. Whatever the mysterious Fischer may have done, the modern CEO is expected to lead with thoughtfulness, empowering staff even as they’re held accountable for their actions. It goes without saying that none of this is easy. Get it right, however, and Källenius can give Mercedes-Benz pole position in an industry advancing at speed.
Showing your mittel
A Mercedes-Benz may now be rusting by the Congo, but this is a company that’s always had a Teutonic heart. A member of the country’s high society for almost 140 years, it ultimately traces its roots to 1886, when Karl Benz patented the first internal combustion engine ever seen in a motorcar. Adopting its famous three-pointed star past the turn of the century, the first vehicles actually branded Mercedes-Benz rolled off the production line at the height of the Weimar Republic. From there, the manufacturer has clambered through the peaks and troughs of German history, building engines for Messerschmitts before sparking the nation’s post-war economic boom. These transformations continue: in February the firm finally abandoned its official Daimler moniker and embraced the Mercedes- Benz name loved and envied the world over.
Ola Källenius, too, represents something novel for Mercedes. The first non-German to ever become the firm’s CEO, the Swede has climbed his way up the corporate staircase over nearly 30 years, along with working on everything from high performance engines to sales and marketing. Yet if he’s the only foreigner to occupy the top spot at Mercedes-Benz, Källenius clearly wears the responsibility loosely. As he says, the name on his passport is far less relevant, especially for a firm with manufacturing locations in 17 countries and offices in 93, than maintaining “our leading position” in a hectic marketplace.
There’s certainly plenty to be getting on with. When Källenius began his professional journey, working as a manager at a Mercedes factory in Alabama, innovations like autonomous cars and emission-free vehicles were “pure science fiction”. Nowadays, they’re central planks of the firm’s strategy, with sales of plug-in and batterypowered Mercedes cars reaching 67,800 in the first quarter of 2022 alone. That’s echoed by ambitious investment targets: late last year, the company announced a €60bn fund to support electrification, digitalisation and automation through 2026. If that weren’t enough, Källenius is similarly busy protecting his huge supply chain, which according to the company website now constitutes around approximately 40,000 direct suppliers. Together with the continuing fallout of Covid-19 – like many other automotive manufacturers, Mercedes was forced to stop production across its European factories – and it’d be an understatement to say that Källenius has had a busy few years.
Yet examine the statistics and it’s equally clear that Mercedes has faced the storm admirably. Those impressive plug-in sales figures are merely the start. All told, Mercedes-Benz saw 2021 revenue reach €168bn, even as fixed costs across the company dropped by 16%. Ask Källenius and he chalks these impressive figures down to the “implementation of our refocused strategy” – which among other things involves separating the firm’s sprawling truck division from the cars and vans Mercedes is famous for. All the while, Källenius is laser-focused on the immense power of electrification. “At Mercedes-Benz,” he explains, “we’re getting ready to go 100% electric by the end of the decade where market conditions allow. I am confident this is the right thing to do – for our planet, for our industry and for our company.”
Quite aside from the raw numbers, this feels sensible. As Källenius says, the business case for a deeper focus on electrification is “improving” all the time, with governments constantly prodding manufacturers towards a greener tomorrow. Customers are having a say too: in June, a full 71% of Americans reported an interest in buying an electric vehicle. And beyond the financials, Källenius suggests his firm has altruistic reasons to act too. “There is, of course, also an ethical dimension here,” he stresses. “The role of companies as social actors is becoming ever more important. It’s essential to also take into account the accompanying circumstances of business decisions. And rightly so.”
Electric wheel
At first glance, the Vision AMG looks much the same as any other Mercedes-Benz. For starters, there isn’t an angle in sight. Rather, the car’s lines flow like butter around the chassis of the car, windscreen and bumper blurring seamlessly together. Look under the bonnet and everything feels very Mercedes too. Boasting fancy axial flux motors, the car will pack a punch every bit as strong as iconic cars like the SL 65 or the SLR McLaren.
Altogether, though, the Vision AMG nonetheless promises to be a class apart – as a fully electric car. Nor is the Vision, due to go on sale in 2025, by any means alone. As part of its broad thrust towards a new electric future, Mercedes-Benz is developing a raft of other petrol-free vehicles, encompassing everything from hatchbacks to vans. Though he’s clearly excited about these developments, Källenius is similarly eager to stress that the plush sophistication that brought Mercedes even to the banks of the Congo isn’t going anywhere. “I can promise you,” he says, “that an electrified Mercedes-Benz will have all of the qualities and features you love about our combustion engine cars: outstanding design, cutting-edge technology, maximum safety and exceptional driving performance. Plus, they will also have the latest software and digital technology. In short, in the electric era we will continue to build the world’s most desirable cars.”
In part, this confidence is probably down to how Mercedes develops new models, a philosophy which elegantly blends traditional sports cars and the glamour of the racing track. A case in point is the Mercedes- AMG ONE. Taking the power unit of a Formula One car – recall that Lewis Hamilton won six out of his seven championships in a Mercedes – Källenius and his team have integrated it into a road car. And though only 275 Mercedes-AMG ONE’s are due to be built, the scheme is certainly more than a mere vanity project. Thanks to its partnership with the Mercedes F1 team, and in particular the latter’s familiarity with electric engines, Mercedes-Benz was able to prototype another sports car that travelled all the way from Stuttgart to Silverstone on a single battery charge.
Not that everything can be achieved by leaning on Mercedes-Benz’s racing heritage. As Källenius concedes, supply chain issues continue to take up a substantial chunk of his time, with the CEO noting that an ongoing shortage of semiconductors, vital everywhere from air-conditioning systems to touchscreen platforms, is proving especially troublesome. To solve that particular challenge – partly precipitated by lockdowns in China and partly by broader labour shortages – Källenius suggests his firm could one day partner with a major tech company to “shape the next generation of processors together”. And though no agreement has yet been reached, a stronger relationship with a Samsung or an Intel doubtless makes sense, if nothing else given how important these chips are to ensuring Mercedes-Benz’s new fleet of electric vehicles run smoothly.
In a similar vein, Källenius is equally conscious about what the semiconductor shortage could say about the wider economic climate. Mercedes-Benz itself may be firmly in the black, but between the looming risk of a global recession and the challenges posed by a deglobalising world, Källenius understands how fragile the world economy currently is. Especially given the global nature of Mercedes-Benz as a firm, at any rate, he believes it’s worth fighting for.
The Vision AMG is due to go on sale in 2025 and promises to be a class apart from other
electric vehicles.
“Globalisation has led to impressive growth during the past decades,” he argues. “And we would regress if each country were to operate for itself in the future. We should therefore defend globalisation, examine where it has its weaknesses and where more security or new sources are needed along the supply chain.” Like its broader march to the electrical uplands, technology is crucial here. In October, to give one example, Microsoft and Mercedes inked a deal to use big data to sharpen efficiency across 30 of the manufacturer’s plants.
Car and collected
As this relationship with Microsoft implies, Källenius is presiding over a range of internal reforms, even as Mercedes transforms the cars it markets to the public. As so often, Covid-19 has proved a lively catalyst, with Källenius explaining how he’s gone from spending half his working life on business trips to running a “global business from home.” That’s a shift shadowed by how he approaches his colleagues. Empowering staff and giving them the independence to make business decisions is fundamental to how Källenius runs his business – though, as he says, “greater freedom goes hand-in-hand with greater accountability”.
That’s presumably true for the man himself as well. Mercedes-Benz may currently be performing well – it has plans to bolster software development even as e-mobility soars – but Källenius admits that the pressures of the job can sometimes be daunting. Lucky, then, that he can find time to unwind beyond his Stuttgart office. Apart from being an enthusiastic F1 fan, he also enjoys a range of American sports. “In my youth I tried my luck as quarterback,” he jokes, “but quickly learned that I should focus on academics.” Like so many CEOs, moreover, family is a vital crutch here, with Källenius noting that he’s enjoying spending time with his wife now that the kids have flown the nest. A nice image, even as his company builds status symbols for a new generation, and the Boma wreck lies testament to how far they’ve all come.