Mercedes-Benz EQ5 electric S-Class brings the fight to Tesla

Mercedes-Benz is developing a battery-powered sedan about the size of its US$90,000 flagship S-Class, challenging Tesla's Model S for high-end electric-car buyers.

The new full-size sedan, dubbed EQ S, will be part of the company's push to introduce 10 all-electric vehicles by 2022, Chief Executive Officer Dieter Zetsche said Wednesday during the presentation of the revamped Mercedes A-Class hatchback in Split, Croatia.

The EQ line will be flanked by plug-in hybrid models offering a “totally different” battery range than today, while conventional vehicles will feature so-called mild hybrids with 48-volt technology in a shift away from pure combustion power. “All vehicles will be electrified,” Zetsche said.

Mercedes, the world’s best-selling luxury-car maker, had record deliveries and profit last year as it defended the global top spot against BMW brand and Audi.

Adding smaller, affordable models like the GLA compact crossover and the CLA coupe, has helped Mercedes lure younger buyers from rivals and that trend is expected to continue with the revamped A-Class hatchback, he said.

But surging costs for the development of battery-powered cars and new digital offerings, plus possible trade barriers in the U.S. and China – Mercedes’s two largest markets – threaten to weigh on profit margins.

“We have to increase flexibility in local production as the world in general has become more volatile,” Zetsche said.

He reiterated it was too early to comment on potential risks from trade barriers, adding that recent developments in Russia related to stricter planned U.S. sanctions coincided with more encouraging signals in China about potentially easing rules for outside investors.

Mercedes sees potential for a “significant lift in volumes” as it expands its lineup of compact cars to eight from five currently, Zetsche said.