Mercedes-Benz CEO Ola Källenius has warned that the European auto industry risks ‘collapse’ if the European Union’s planned 2035 ban on the sale of new internal combustion engine (ICE) vehicles goes ahead without adjustments. Speaking to German business daily Handelsblatt, Källenius said a “reality check” was needed, cautioning that Europe could be “driving full throttle against the wall” if the deadline remains unchanged.
Källenius, who also heads the European Automobile Manufacturers Association (ACEA), reiterated the sector’s commitment to decarbonization but argued that it must be pursued in a ‘technology-neutral’ manner that does not undermine economic stability. While ACEA has previously supported a 100% cut in CO₂ emissions from new vehicles by 2035, effectively banning ICE sales, Källenius suggested the timeline should be more flexible.
He dismissed the idea of further tariffs on imported cars, calling them the “crudest instrument,” and instead urged policymakers to focus on boosting EV adoption through measures such as cheaper charging costs. “Of course, we have to decarbonize, but… we must not lose sight of our economy. That’s no use to our climate,” he said.
The remarks follow similar warnings from former Stellantis CEO Carlos Tavares, who cautioned about the social consequences of a strict ICE ban. While some regions, such as Australia’s Capital Territory, have announced their own 2035 bans, Australia has no national plan in place.
Mercedes-Benz itself has faced recent challenges in the EV market. The company suspended sales of some electric models in the U.S. due to slow demand and saw global EV sales drop 24% in 2024, contributing to an overall 4% decline in deliveries to 2.4 million units. In Australia, the brand has resorted to discounts of up to $70,000 on select EVs, with only the EQB and EQE SUV models achieving year-on-year sales growth in 2025.
The automaker is now phasing out its separate ‘EQ’ branding, aligning the design of future EVs with its conventional models. Its next major launch, the GLC with EQ Technology, will debut at the IAA Mobility Show next month in Munich, going head-to-head with BMW’s new iX3, the first of BMW’s ‘Neue Klasse’ generation of EVs.
Källenius said the industry faces a convergence of pressures, from trade tensions and tariffs to slowing EV demand. “Our industry is experiencing heavy rain, hail, storms, and snow at the same time. Auto construction is a tough business, more than ever,” he said.
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