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An interview with Ola Källenius on Mercedes-Benz’s road to electrification.
Back in 2019 Mercedes-Benz announced that it would go fully electric by 2030 where markets allow, and the brand is rapidly heading towards that goal. Every new platform and powertrain developed by Mercedes starting from 2025 will be electric, with the current set of gas engines designed to last through the next few product life cycles until being phased out.
Even more importantly, according to Mercedes-Benz’s chairman of the board and CEO Ola Källenius, Mercedes will be completely carbon-neutral by 2039, a plan it calls Ambition 2039. This was derived from the Paris Climate Agreement, which aims for the world to be net zero by 2050. I sat down with Källenius at a roundtable in Vienna during the first drive of the new E-Class – still an internal-combustion car, but one with electrified powertrains – to learn more about Mercedes’ decarbonization plans, EV strategy, and overall outlook on the future of the automotive industry.
“Mercedes-Benz is a brand that stands for the promise of a better future, and that better future is fundamentally a zero-emissions business,” says Källenius, adding that the decarbonization goal will happen in just three product life cycles. He also believes that Mercedes could actually hit its decarbonization goal a little early, closer to the start of the 2030s than the end.
It’s not just people inside the company that want this to happen, either. “There’s not a single long investor in Mercedes stock that doesn’t believe the company needs to decarbonize,” Källenius says. “Even if there weren’t regulatory will, we’re at the point where the financial market made up its mind that a sustainable business strategy is the one that is more economically safe.” He adds that even investors with fossil-based revenue streams are heavily investing in new verticals.
Källenius also thinks aggressively pursuing decarbonization will let Mercedes stay nimble. “We already have strategic clarity; we know what the journey and destination is, and it’s zero emissions,” he says. “But during this transformation, which is more than a decade long and it’s difficult to judge exactly when and what will happen, we need tactical flexibility and we have that.” This means that when the industry gets to the point where the new technology unseats the incumbent technology and there is exponential growth, Mercedes needs to be (and already is) in a position where it doesn’t fall behind. Källenius describes Mercedes as being its own venture capitalist, as it’s in control over financing for its transition to EVs.
All of Mercedes’ global assembly plants have already been made powertrain flexible, so a shift to more EV production will be easy, Källenius argues. Mercedes recently transformed its Alabama facility to produce the EQE and EQS SUVs for global consumption, for example.
Also important to decarbonization is the manufacturing process. “The defining challenge of our generation is to take care of the CO2 problem,” says Källenius, “and it has to be from A to Z, all the suppliers, all our operations, the car itself and the car in use. The twin of the CO2 problem is a circular economy. How do we reduce the use of primary materials in the production of goods? It’s an even bigger problem to solve technologically and economically.” For most current car manufacturers the secondary material content – materials that have been used or recycled – is between 20 to 30 percent. Mercedes is targeting 40 percent by 2030. “That might not sound ambitious, but believe me, engineering-wise it’s unbelievably ambitious,” Källenius says.
The idea is to decouple economic growth from resource usage growth, especially when it comes to EV batteries as they are made up of precious materials like lithium, manganese and cobalt. Mercedes is building its own experimental battery recycling and research factory along with some partners, and prototypes have already been developed that can get recycling quotes into “the deep 90 percent” range. It’s also working with German chemical companies to go through every polymer category and figure out recycling options category by category. Källenius says that one day batteries coming back from vehicles will be “the biggest virtual mine in the world.”
You might think it would be hard to get Mercedes’ suppliers and partners on board with the Ambition 2039 plan, but according to Källenius that wasn’t the case. “When we defined Ambition 2039 it only works if all our suppliers go CO2 neutral as well. If you’re not on board with the program, you’re not on board,” says Källenius. “If all things are equal from performance to quality and price, in a competitive bid if one company has a better plan for decarbonization than the other, that could be the kind of thing that tips the scale.”
Once a year Mercedes holds a conference where it invites 500 of its most important suppliers to go over the year’s results and plan for the future, and at the first one in 2019 after announcing Ambition 2039 the company told its suppliers that it expected each one to come up with an equivalent plan. “The reaction back then from some of the more progressive companies was ‘welcome to the club, you are preaching to the choir,’ and for many in the room it was ‘oh shit, these guys are serious,’” remembers Källenius. “Now I would say 90 percent of our suppliers have a plan.”
Some of Mercedes’ steel suppliers are already deep into carbon-free steel production, with the first results to be in production cars in less than two years. One of the companies, the Swedish firms H2GS, should be carbon-free by 2030 thanks to the use of hydroelectric power. As another example, Mercedes is working with an aluminum producer to reduce its carbon footprint by 70 percent. “Ten years ago, pretty much everyone around the table would’ve said ‘that’s not possible, it’s not gonna happen,’” says Källenius. “Now it’s happening.”
Källenius says the two core technologies driving the shift to EVs are the electric drivetrains and the software, and vertical integration is extremely important to both. For instance, Mercedes owns everything about its powertrains all the way down to the battery chemistry.
The vertical integration is tougher when it comes to the digital side of things. Traditionally electronic architectures in cars have been decentralized – when automakers buy an ECU they buy an entire software package along with it, and the car manufacturer then integrates the functionality. “We said we need to control the brain and central nervous system of the car,” says Källenius. Having this much centralized control over the software means updates and improvements can be made much quicker than before.
The new E-Class is the first Mercedes to have the updated MBUX operating system and cloud infrastructure, in which every single line of code has been programmed by Mercedes for the first time.
Like nearly every other carmaker, Mercedes recently announced that its future EVs will use the NACS charge port pioneered by Tesla. NACS will soon become an SAE standard, which Källenius says played into the decision to switch. “We always do what we think is best for the customer in terms of convenience, and the most likely scenario is NACS,” says Källenius. The first NACS-equipped Benzes won’t start coming out until around 2025, and in the meantime the brand will offer an adapter for existing EVs with the CCS charge port.
Automakers have never historically worked on gas station infrastructure, leaving that to energy companies, but in the electric era that is changing too. Accessible fast charging is potentially the largest pain point for EV customers, so more car companies are figuring out their own solutions to help aid the lagging infrastructure. Later this year Mercedes will open its first high-speed charging stations in the US, with 10,000 coming to America, China and Europe by the end of the decade as part of a multi-billion-dollar investment. The switch to NACS will help in the meantime, allowing Mercedes EV drivers to use Tesla’s expansive Supercharger network. “While we’re building our charging infrastructure, why not offer the Mercedes customer access to the 12,000 chargers built by another company,” Källenius says, “it will create more convenience and maybe take away a little bit of doubt for people that are thinking about buying an EV.”
When it comes to passenger cars Källenius says EVs are the clear way forward versus hydrogen or other synthetic fuels, but those solutions could have other uses. Shipping is one of the biggest issues when it comes to decarbonization; for mass-volume models it’s easy enough to build a local factory in China or the U.S., but for a low-volume model like the SL sports car it’s not economically feasible to have multiple production locations. Mercedes is maximizing its use of shipping by rail, especially in countries like Germany where it’s more feasible, and it’s experimenting with using hydrogen for semi trucks. Overseas and air shipping is even tougher to decarbonize, but synthetic fuels could help with that in the future too.
Källenius just celebrated his 30th anniversary at Mercedes, and he says right now is the most exciting time to be in the industry because everything is changing.
“We have to reinvent the original invention.,” he says. “We have got to be Gottlieb Daimler and Karl Benz again.”
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.