Mercedes-Benz CEO Ola Källenius explains why EVs are still the future

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Nelai Patel

Hello and welcome to Decoder. I'm Nelai Patel, editor in chief of the Verge, and decoder is my show about big ideas and other problems. Today I'm talking to Mercedes Benz CEO ola Schlanius. Ola is a repeat decoder guest. He was last on the show a couple years ago, and he promised me he'd come back when Mercedes was ready to launch an EV version of the G Wagon, the company's legendary off road vehicle.

And it's here. The new G 580 with EQ technology is officially, that's the whole name. It's going to start at over $150,000, and it represents a symbolic milestone in the company's electrification efforts. Ola and I talked all about it, what it means for Mercedes overall EV strategy, and whether the EQ branding is long for this world. Of course, we also talked about the EV market in general.

A lot has changed since Ola was last on the show in 2022. Back then, he said Mercedes would have an all EV lineup by 2030, which was a very trendy thing to say back then. But like so many other automakers, Mercedes has been walking that back a little lately, and I asked Ola why and what a more realistic timeline might look like. You'll hear him talk about why he doesn't see the slightly more extended timeline as a setback at all, and why he and the company are still absolutely committed to phasing out gas over the long term. Ola and I also spent some time talking about what's happening inside cars lately as more and more automakers tried to build unique software interfaces and experiences instead of just handing everything over to smartphone systems like Apple CarPlay and Android Auto.

Mercedes in particular has something called the hyperscreen, a stunning display that stretches across the entire dashboard. It runs mbux or mBux, which is Mercedes custom operating system. And it offers apps and games, even productivity software like Zoom. I asked Ola if Mercedes would ever use something like apples next generation of Carplay, which would take over the entire hyperscreen, including the instrument cluster, and he flatly said no and explained why in some detail. Theres a lot more in this conversation, including union efforts in Alabama, how Ola sees AI playing out in cars, the reveal of an upcoming electric C Class that Ola promised me that I would love, and even a few mentions of Nick Saban.

Ola Schlanius

It's a lot. You're gonna like this one. Okay. Ole Schlanius, CEO of Mercedes Benz. Here we go.

Nelai Patel

Alois Lanius, you are the CEO of Mercedes Benz. Welcome back to Decoder. Great to be back on the show. I am very excited to talk to you again. You were last on the show in 2022.

That was a different time. I would say emotionally, economically, in the car market, it felt very different. So we have a lot to talk about. A lot of things have changed. Mercedes approach to EV's has changed.

There's quite a lot there. But I want to call out two things. You made two comments on the show that I want to explicitly follow up on. First, you promised you would be back when the electric G wagon was ready, and it's here and you are back. So we are going to talk about the electric G wagon.

Second, you told me at the end of that episode to reward myself and go buy a Mercedes. And I did that. I bought one. But now I think it's time for me to buy something new, and I want to talk about that as well. So that's the second promise that I wanted to follow up on from that episode.

Let's start with the EV lineup in general. With the EV market in general. The last time you were here, Mercedes, every car company was announcing plans to go all electric. The Mercedes target was 2030. All electric, no ice vehicles in the lineup.

You told me then, plus or minus a couple of years doesn't matter. But in February of this year, you said 2030 is no longer a realistic milestone and that customers and market conditions will set the pace of the transformation from Ice to all EV's, what happened there? What made you see that? Okay, 2030 isn't going to hit. We are going to have to move this a couple of years.

Ola Schlanius

So let's start to talk about the destination. Has the destination changed? Absolutely not. We're on our way to a future which is going to be zero emission. So that quest is the same.

And if I go one step back, when we five years ago, launched what we call ambition 2039, we set as an overriding goal for the company. We want to future proof our business, and we want to turn our business into a CO2 neutral business by the end of the next decade. And that is in all dimensions, not just about the product lineup. It's, of course, about the supply chain. It's about our own operations.

The product, of course, that's the obvious thing, but also the product in use. So we're looking at this from a to z, the whole value chain. So if you're on this 20 year quest to, by the end of the next decade, get there, then you need to move in all dimensions. And now let me jump to the product. Your specific question.

And I said back then, for the careful listener, we will be ready in 2030 to go all electric where market conditions allow. That was the sentence I used back in 2022, actually back in 2020. But when we talked in 2022, I know that people exercise an element of selective listening when you talk to people in all sorts of venues. So what stuck with people was, okay, 2030, the product lineup is going to be all electric. But I put in back then where market conditions allow for a reason, or for two reasons, really.

It's a systemic shift. It's not just about the product. We can control that. I mean, it is the charging infrastructure. It is the general switch over to non fossil based energy sources, et cetera.

So it's a much bigger systemic shift that we're talking about. It is influenced by policy and incentivization in different markets around the world. And the world is a heterogeneous place. So I said that for a reason. Now, was that so?

I could say, oh, change my mind. We're not going to do it. No. And this is the next thing that is very, very important. We are preparing the whole Mercedes lineup from top to bottom, from the S class down to the entry levels, like the CLA, the GLA, and those vehicles in this decade.

So by the end of this decade, for 2030, we will have a full lineup. So if there are markets that are ready to go for it. Maybe it's Norway that will be the first one to go all electric. We shall see. But that investment, that putting our money where our mouth is and investing tens of billions into the architectures, to the underlying technology that I'm sure we will talk about.

All of that is happening. But we also have to recognize now that the EV adoption in terms of the market acceptance, the customers now going from early adopter phase is over. Now we need mass adaptation adoption, the buildup of charging infrastructure, all those different things, enabling factors that. If you had asked me three years ago, I would have thought the gradient would be steeper at this stage in the transformation. Although I'm very much still convinced about the destination, as I mentioned, now you can see that the gradient is not as steep.

So it's wholly possible that in many or major markets they will not be there by 2030. In such a situation, if you are an established manufacturer like Mercedes Benz, with a loyal customer and fan base. And again, thank you for joining that. By the way, you cannot just tell the customer in 2030 that maybe wants a high tech electrified combustion product for us. Sorry, shop is closed.

We're not going to sell to you anymore. That would not be economically sensible and I'm sure the customer wouldn't want that. So we have this, what I call tactical flexibility. And as I sit here today in 2024, based upon the data that I see, I think this is going to go into the thirties. How long?

Hard to say. A mini caveat there. Humans have a tendency to, when they look out the window and it's sunny, to think that tomorrow it's going to be sunny. It's going to be sunny for the rest of the month or whatever. And if it's raining, you have that.

So this that you maybe the pendulum in terms of the mood swings to the left and then to the right, we should not discard scenarios by which the trajectory and the gradient of that BV adoption picks up pace during the second half of this decade. So we are preparing ourselves for an all out launch of EV products. But if you go into Mercedes showroom, you will see on par, technologically, on par, you know, with the new operating system and everything that's going on. On the technological side, digital experience, autonomous driving, what have you, that will be available in our combustion products as well. I mean, the customer expects coherence from us.

They walk into the showroom and they get that and last maybe anecdote there. Today we have 350 american dealers here in Stuttgart looking at the products of the future. The whole lineup. That's my next appointment. I'm going to have dinner with them on the dinner speaker.

So we are showing now our dealer partners around the world what the product pipeline looks like for the next couple or three years. And just before going into this podcast here, I just called the guys. So what's the atmosphere in the room? And they were like, they are very excited. They were even standing ovations when some of the products were rolled in.

Let's be in terms of product and technology here, positive about the transformation. The big winner of the transformation is the customer. I mean it's just getting better every day. The Riesling is flowing at the dealer confluence in Stuttgart. That's what I'm hearing.

Nelai Patel

That's what I'm hearing there. Or maybe a beer. We're in Germany. That's true. You mentioned early adopters.

I want to key on that for 1 second. This is the conventional wisdom. We were in the pandemic. There was a massive flood in the car market. Lots and lots of people bought cars.

The price of the cars skyrocketed. It seemed like Tesla in particular had perfectly elastic demand. They just sold every single car they were going to make. That looked like EV demand to a lot of people. It might have confused a lot of people.

It might have confused a lot of governments into accelerating their transition plans. Is that your view of it? That was just overheated early adopter action and now we're back to a regular car market. Maybe it's some of it, but I've been in the auto industry for 31 years now and I've seen peaks and troughs and ups and downs and different economic cycles. But I've never seen any business, including the other business, being able to abolish gravity.

Ola Schlanius

So there is a certain inertia and a certain speed to everything. And once you go from early adoption to mass adoption, one thing that the consumer will never not want to have is the complete freedom and individual mobility. So if we look at this now as a system, there is a significant effort ahead of us in building up charging infrastructure. In fact, since you and I talked last, you probably have seen announcement from Mercedes, both through consortiums with other manufacturers, but also standalone, that we are now over the next years, five, six, seven years, putting billions into charging infrastructure. Mercedes doesn't build gas stations today.

It's not our business. We're a car company, nor do we have to. But to avoid this little bit chicken or egg situation that you can get into when you want to take the step to mass adoption. But even more importantly, send a signal to Mercedes customers. We got your back.

We're investing for you. We want you to have convenience. We're actually trying to accelerate and enable. So we're part of the systemic shift as well. But early adoption, that is always chapter one in the book.

Now we're in chapter two. Chapter two is just a much longer chapter. Let me ask you just a question about the charging infrastructure piece. The transition EV's is a lot of change, especially for a company like Mercedes, right? Historic strength in building internal combustion engines and all the things you have to do that.

Nelai Patel

The last time you were here, we talked about moving that strength into building EV's and all the different things you might have to do that's en route. Now you've got to go build gas stations, you got to build charging infrastructure. You have to sign on deals with electric companies. All this other stuff that is new, like a new set of capabilities. One, how do you make sure that you're going to be good at that?

And two, where does the margin to fund all that build out come from? So if auto industry was always being a decathlonist, it's not just a hundred meter dash or long jump or whatever. If you want to be successful in the auto industry, you're a decathlonist. And the sum of all your skills need to lead to the Olympic gold medal or whatever you're fighting for to win. With the transformation, we're adding two or three disciplines.

Ola Schlanius

The EV drivetrain for sure. Everything that's happening on the digital side for sure. But also now some things that were maybe not on the cards, where you go vertically into the energy distribution as well. We have a competent team that actually works with enabling factors for customers since a long, long time. It's the Mercedes Benz mobility team that has done everything from mobility services, that does of course, the financial, insurance and those services.

So this whole know how of how to create services in around the vehicle to make the ownership experience better. We have some foundation know how there, but maybe we have not yet in our previous life understood the complete landscape of the US electricity market. So you got to partner with people and we have selected what we consider the best partners in the business. And we're doing this in joint owned new entities that we have built up. And then we have a lot of, especially young people in the company that just pick up on a task like that.

And it seems like four weeks later they read everything that you can possibly read on the topic and they use their intelligence, their energy and everything to step into it. So there. We're becoming a startup again, so you have to. So it's not, it's not ten sports anymore, it's twelve sports, 1314 sports, whatever that you have to master as CEO. How are you keeping track of your mastery level?

I think this goes for any position, but it also goes for the CEO. Don't believe that you know everything. Lifelong learning, stay curious, read a lot, speak to people. Of course, use your experience. But you have to open your mind.

This technological shift is too big to kind of rest on your old know how. It's not going to be enough. Let me ask in a more specific way. Building charging infrastructure is very hard, very capital intensive, physically intensive. You have to put chargers in places, in the right places at the right time for people who are making long journeys.

Nelai Patel

You've partnered with Tesla. You're going to use the NACs connector. You're going to be part of the supercharger network. You're building your own network next to it. How do you know if you're winning.

Ola Schlanius

In this game, in consortium or piggybacking off of what other already have built up a tactical decision to improve the customer experience about the customer. But if we go deeper into charging. So what do you need to know? I mean, location, of course, location, location, location. You need to know the driving patterns of where your customers drive, what is relevant to them.

Through our connected data fleet, we have all of that anonymized, of course, so we know the routes where we need to be. You then need to team up with partners that know people in real estate and or other companies that have real estate in the right locations. You got to look at per location, how many actual charging points per charging location makes sense. What's the density in terms of charging speed? And all the Mercedes are going to be high power charging.

And the next gen EV vehicles with 800 volts systems and everything are going to be even more high power charging. So of course go for high power charging so that you can charge the vehicle very quickly. You look at utilization. What is the minimum utilization? You mentioned capital.

What's the minimal utilization? You need to make money. It needs to be business in its own right, for sure. You have an investing phase and you plant your vines and maybe your first good wine from the vines is five or six years later, and then the asset starts paying off. Of course, the spreadsheet is involved as well.

We're looking at this. What does this look like financially, in our view? It's not like winner takes all. There can only be one charging company. It's the only one that can make money?

No, but you need to have a minimal, minimal critical mass for it to make money and also carry the fixed cost. So we have done some careful calculations on that and now we're on our way. The first stations are now up in the US, up in Europe, up in China. We're looking at Korea, we're looking at Japan, we're looking at other places. We partnered with our dealers in India and very quickly put up a range of charging options in India along the main driving routes and things like that.

So things are moving here. Do you think we're going to get to a place where, I don't know, there's a Tesla charging station and a Mercedes charging station and a Rivian charging station, all in the corner of an intersection, like, we have gas stations today, and they'll just advertise their rates and it will be that kind of business. Not impossible. A lot of free land out there for this. We have not claimed every little piece of land where you can dig for gold here.

It's still a lot of it is open. I asked that question because if that's the end state, that market operates on relatively razor thin margins. It's the gas market, and the prices fluctuate. Everyone's always aware of it and literally, you see gas stations next to each other trying to beat each other by $0.10. If you end up in that situation, will all of this forward investment have been worth it?

If we get into a place ten years from now or whatever, where the market starts consolidating? Well, maybe the market consolidates. We shall see. I don't know. Our primary goal would be, number one, customer experience.

Take care of the customer, make sure that our customer has what they expect from Mercedes. Number two, to make money. And we will then weigh our options and see what the best route forward is.

Nelai Patel

We've got to take a quick break. When we come back, we'll be getting into the big decoder questions.

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Nelai Patel

Welcome back. I'm talking to Mercedes Benz CEO Ola Schlenius. We're about to dive into structure and. How that focuses your work. I think this is a good place to ask some pretty classic decoder questions.

The last time you were on the show in 2022, we talked about the structure of Mercedes, which at the time was going through, being streamlined into Mercedes Benz group after the spin off of Daimler truck. It's been a few years. How has that gone? Are you more focused? Is that structure still the same, or are there more changes?

Ola Schlanius

I think we're more focused. We had a hypothesis, even though Daimler had been together for more than 100 years, with cars and vans on the one side and trucks and buses on the other side, if you now look back at the spin off and from a financial point of view, that you unlock the conglomerate discount and you create value for your shareholders, and a spin off was just that. We gave shareholders shares in two companies instead of one company. Now, a couple or three years later, did that happen? Absolutely, it did.

So the financial hypothesis so far, and I know you got to win every football game one at a time, I realized that. But so far, that worked out really, really well for shareholders. And the feedback that we have received from our shareholders were. That was absolutely the right strategic move when it comes to the focus. So when you're not then in, I don't know, big management meetings and so talking about everything, and then half of the audience is listening, or to half, and the other half is listening to the other, do you get more focused?

Absolutely. You do. I'm sure that goes for the truck guys. You have to ask them. But they are.

Now they're in the spotlight of the financial market. They're publicly listed on the Frankfurt Stock Exchange, but it's all about trucks and buses for them. It's all about luxury cars and premium vans for us. So we have streamlined the organization and really tried to do a very, very simple thing. Build the world's most desirable cars, make our customers happy, and also make a little bit of money out of that.

Nelai Patel

It's funny that you run Mercedes and I run a team of 70, and I think I have meetings where only half the people are listening. The problems are the same no matter how big you are. Have you changed anything about how Mercedes group is structured after the spin off? Right. Because you've been able to focus, there has to be some benefits you've seen that have led you to structural changes on your own.

Ola Schlanius

Yes. Whether the spin off in its own right was the only catalyst for that or the transformation in general. I think maybe it's a mix of everything there. An organization is not a static thing that just sits there and nothing ever happens. I think we are constantly evolving, but much of our structure is centered in and around the product.

And I guess that's how a car company is run. You have the functions, R and D, production, marketing and sales and so on, and the other functions around that. But it's so much centered around the product and there from time to time we also make organizational changes, but only if they make sense does it make us faster. Do we get to the right answer in a better way. Those types of things where it's constant change at the moment is on the process side, and especially through digitalization.

And now with Genai entering the stage, yet another tool in the toolbox, we're in the sandbox, and they throw us another thing that we can play with. So on the process side, I would say there is even more change to make things faster, more productive, higher quality. I mean, the simulation tools just get better and better and better based upon 75 years of research in safety. One of the hallmarks of Mercedes were the trailblazers. In the auto industry of safety, we have so much data now that our simulation models for simulated crash are so good in terms of the correlation to what happens in the real world, and we still crash a lot of vehicles, but the simulation data is so good that we literally can simulate hundreds of variants of those crashes without even building a car.

But you got to get it right. So there is a revolution going on in how we do the business, not just on the product side. What do you think the biggest change you've made has been in the past two years? The biggest change has been in and around digitalization, rearranging our processes in and around the digital tools that steadily become available. Give me an example.

Take an example. In production, we have been working on the virtual factory for, I don't know, 25 years, but the latest extension to our hungarian plant, where we will build the next gen, like the CLA, for instance, that we showed at the Munich auto show in, in September. The digital tools that are available now to make a complete digital replica of the plant before you even pour one bucket of concrete, and the ability to move into that in like a 3d fashion down to the last station in assembly and looking from all angles at the assembly moves and everything, it's like you can build the whole factory and go through a whole series of iterations of that that would have led to physical changes. If you did this like in the old days, where you did everything physical, it is scary good. So your ability to then, once you go into the hardware to have a first time write ratio, there is much higher saves cost, saves time.

Nelai Patel

So we had Matthew Ball on the show a while back, he wrote a book called the Metaverse. This was a big part of his pitch about the metaverse. To us, you'd have digital twins of real world factories and other facilities. You'd be able to put people in virtual environments. That would lead to a result where you are right the first time, when you actually build the physical environment, and then you can obviously iterate virtually before you iterate physically and bring down the factory production time and all that stuff.

That's a big bet. That's the pitch, but you have to go get it right and do it, and it has to work between that pitch and investment in those kinds of technologies, the investments in charging, these are huge decisions that fall on you to invest in these things and bet the company on them. How do you make decisions? Has that changed as more and more digital technologies enter the fray and more and more capital investments seem like the numbers are going up. Of course, on any one business decision, you make assumptions.

Ola Schlanius

You put the finances on a piece of paper, you calculate it, but not everything. You can have 100% predictability. It's just not how it works, especially also on the digital side. In some cases, you just have to have believe. You see a digital product coming and you go like, wow, this is a great idea.

100% agree with what you just said. The digital twin is not just a factory. We have a digital twin of the product as well. And we use that term digital twin. I mean, you just look at that and go like, that is intuitively right.

No matter what the spreadsheet says, don't spend too much money on calculating how many hours do you save and what's the cost in dollars per hour and so on. Maybe you can do that to comfort yourself that you're making the right investment decision, but you have to marry that to a. This looks right. Let's go. Let's do this now and give it to the engineers, let them play with the toy and just unlock the potential of it.

So you do a mix of those two things. But you're right, the level of investment is high. The auto industry and our company, we have never invested on a higher level than we're doing now. Mostly in product, of course, but also into enabling technologies like the ones that we just talked about. I want to ask about one big decision, and I really just want to talk about the G wagon.

Nelai Patel

Let's be honest. This is all me eating the vegetables before I get talk about G wagon. Auto industry is in a time of massive investment, in a time of changes to manufacturing, of bringing down costs by using digital technologies, potentially with AI. Your workers in Germany and across Europe widely unionized. There's a union campaign in Alabama right now at your factory there.

There's controversy around it. Are you going to let that go through? I mean, the issue that unions have in America, the UAW has, is that the transition to EV manufacturing will reduce jobs or reduce pay in some way. So Alabama is dear to my heart. I worked in that plant twice in my career.

Ola Schlanius

In fact, I kind of started my career out of the trainee program there. I founded my family in Alabama. Two of my kids are born there. I feel like in Alabamian. I'm a Crimson Tide fan for the football fans out there.

Maybe some of you know that Nick Saban, I mean, the goat, as far as college, college football coaches is concerned, he's a Mercedes dealer. He's here this week. Of course he is. He's here this week. I'm having dinner with him tomorrow because he's part of that, looking at the products that I.

That I. That I mention. I just want to be clear. You've now revealed that Nick Saban gets his own dinner. I just want to be.

Nelai Patel

There's the dinner for everybody. I consider him a friend. I consider him a friend. And I was there when he won his first championship with Alabama. Obviously, I'd won a championship with LSU.

Ola Schlanius

So I'm emotionally committed to the United States. I'm emotionally committed to Alabama and to that plant. We have a fantastic team there. I mean, it's second to none. The passion that they have to build the greatest cars and all that, the atmosphere, people going the extra mile, all of that.

That one team culture is unique, and ultimately it will be the team members that decide what they want to do going forward. And there you have it. So it's great that you love Alabama. It's great that you love Nick Saban. The union there is saying Mercedes is union busting.

Nelai Patel

They want to decide. They've asked for an election. Do you want this process to be as contentious as it seems like it. Might be when unionization campaigns happen around the world? Of course, there will always be some emotions around that.

Ola Schlanius

I think that is inevitable. But it comes back to one simple fact. The team members, they have their future in their hands and they make that choice. So that's it. Well, we'll see what happens there.

Nelai Patel

We're definitely tracking because it's very interesting. The big three have sort of embraced their unions, but outside of that, not so much. That movement is starting to grow with EV's. It seems like the auto union movement is going to happen in parallel with the EV transition, at least in the United States. And I think it seems like that is yet another thing to manage as part of the transition.

If you want to be all EV's by mid two thousand thirty s, the labor issue is one you're going to have to solve. Well, I don't know if that's the dynamic behind this particular situation. We operate in about 150 countries around the world. We don't have production operations in that many countries, but we have production operations in many countries. Of course, in our home in Germany, in several other countries in Europe.

Ola Schlanius

We're in the United States. We are in China. We are in Mexico. We're in South Africa. We are in Thailand, we're in India.

We're almost everywhere. Each country has their own systems. Also in terms of labor representation, as you know, we have labour representation here in Germany. It's part of the traditional. We work well with them.

And we have some countries where there is no labor participation in an organized way. So as you go around the world, you have different. But one thing. If you go around the world, which is never different, there's always one Mercedes culture. There's one Mercedes standard.

If you go into that plant in Alabama, if you go into a plant here outside Stuttgart, if you go into one, I was in Beijing this week. You go into that plant or in India or anywhere, you see the same thing. You see the same standards, you see the same technology, you see the same precision, you see the same passion and dedication to quality. You see the same way how we work. You see the same way how we have a people culture.

That's the one Mercedes team that never changes. All right, where is the g wagon being built? You mentioned all those places. Where is the G 580 being built? In grazing, Austria.

Graz, Austria was the place that was selected in a joint venture which would call Steyr, Steyrpuch at the time, which is today Magna, part of the canadian very large automotive supplier, industrial group. So since 1979, now the home of the GE has been Graz, Austria, in Styria, a beautiful part of the country. And we have an additional benefit of being exactly there. They have a mountain next to the plant. This mountain is called the Shekel.

Actually, it's privately owned since decades, I don't know. Centuries, don't know. But since decades, it's privately owned. This mountain that is one of the roughest off road tracks in the world. And we have from the owner a special permit to test our vehicles on the shackle.

If you look carefully in the door sill of a g, you see a little plaque which says, shuckle tested. You're only a real g if you've done that. And you can actually become a. Not anybody, but since I work at the company, I have become a member of the exclusive club that I have my own plaque. I have earned the plaque of shekel proofed.

I gotta tell you this story. This is many years ago. I got this. They put you in a g, and you are supposed to negotiate the whole mountain and get to the top. Okay, fair enough.

I've done a reasonable amount of off road driving in my days. When I was up for, quote unquote, the test, I started going. I actually hit in the middle of the mountain, a very sharp rock back then, so a tire blew. And those are sturdy tires. So my particular experience included a switch of tire.

The engineers helped me. I have to give them credit for that. And I came up to the top, slightly sweaty, palms, proud of myself. I'm sure that the professional drivers were giggling behind my back. But anyway, I made it to the top.

At the top, there's a hut. There. You drink a schnapps, a typical austrian schnapps, which is called zilbenschnaps. Try it. If you try, it doesn't taste that good.

But you don't think about that when you're at the top. You think you have earned the plaque. You haven't. Now comes the most exciting part. You need to go down with a professional driver, the way down, and you take one of those guys that have done that for, I don't know, 2025 years.

The only difference is he takes you down that mountain sometimes at 40, 50 miles an hour. You need to have a lot of. Belief those are narrow roads or a lot of schnapps. Yeah, there are a lot of rocks, there are a lot of trees. It's steep, you get to the bottom.

Needless to say, I survived, otherwise we wouldn't have this conversation. I've earned my plaque. So not only has tyre been a good place for us to do this, or grazed the city, we have the perfect conditions for that unique, adventurous product. So it's an electric G wagon. It's a G 580.

Nelai Patel

You've been showing it off in camouflage forever. At CES, I saw three or four of them do the circle turn all in a row together. It was very entertaining. I want to call something out here. It is not the EQG, which is how you've named all the other EV models you have it is the G 580 with EQ technology.

And it seems like at some point, EQ as a brand has to fade away. Is this the first step of that fading away? In a certain phase of going towards electric? You over index on this is electric. But in the end, every Mercedes is a Mercedes.

Ola Schlanius

The EQS is a Mercedes. The S class is a Mercedes. I drive the EQs SUV. That's my company car. Love it to death.

Best car I've ever driven. But we will over time here in terms of nomenclature to make sure that we then, at the end, don't confuse the customer. That zipper comes together. So it's the G class and it is electric. Hence, on the fender, EQ technology.

In the fall, I got to drive a prototype of that electric G up and down the shuttle mountain no less than five times. We had a press event. And here it comes. There's one thing that can ever be a surprise and that you have to stick to. A g needs to look like a g.

Never mess with the styling. The g remains the g. It needs to have phenomenal class leading off road capabilities.

And of course, I've driven the mountain with the incredible combustion based products and with all the differentials and everything you have the electric g, it's so precise. I mean, the software feels the surface and can, with millimeter precision, adjust every single tire and put the exact right torque and everything to it. It is was unbelievably easy to get up the mountain. I need to probably send you some pictures of some of the situations that I were in. I was joking to the engineers as I came up.

My mother could do this with that statement. I'm not saying that my mother is not a good driver. In fact, she is a better driver than I and probably has a 60 year record of no accidents and stuff like that. But maybe her daily drive is not hardcore off roading, but it is so easy. Anybody can more or less negotiate that vehicle with the electric g.

So I think the tailor made electric drivetrain that we have made for that car, it kind of opens up a new dimension of off roading. So, first of all, I feel like some hardcore off road fans are going to have a lot of feelings about EV's making it so easy that anybody can do it, especially on trails, that hard. That's one thing we should set that aside. That could be a whole hour of just people feeling that way. But there's something else here that I think is interesting.

Nelai Patel

That you said it has to look like a g, right? This is an iconic car design, and you've added an electric drivetrain to it. You can go buy essentially the same design with a gas drivetrain in it and have a different experience. That has not been a Mercedes approach. Right.

The S Class and EQs look radically different from each other. Inside they're very similar, but outside look very different. They have different brand names. This is where I'm saying I have a c 450 AMG. I would love to get C class EV.

You don't make one yet. You might, but I would like it to look like the current C class, not whatever design language is happening on the EQ side. Is this something that you're thinking about changing as well? Because the G wagon is the first one where you see it's the same essential design with different drivetrains. Take the EQS sedan, for instance, the most slippery car in the world.

Ola Schlanius

So here you have this huge luxury limousine, 5 meters, 20 long or whatever, with all the Mercedes belts and whistles, everything that you can think of, including the insane hyperscreen and all that stuff. And yes, for that car, the sibling car to the traditional S class form follows function. We built the machine that we just now updated coming in this summer here, with a drag coefficient of 0.2. And now in WLTP, certification values up to 828 km range. I mean, it's phenomenal for a vehicle like that.

Futuristic, perhaps, maybe a little bit more early adopter language than mass adoption. Granted, but we have, like, the highest customer satisfaction ratings of any car on that one. You can't do that to the G. The G is the g and the shape is what it is. And that is one of the main buying criteria are the EV's going to.

Nelai Patel

Stay more different design wise. Now it comes, I'm not going to reveal everything, but if you're in that C Class segment, one of the cars that we are showing the people here today, by the way, in a not too distant future. Stay tuned. And let's put it like this. I guarantee you that you will love the styling.

Ola Schlanius

If that's not the case, money back for you. I'm putting that bet out there. So once you see that car, we're going to do another Verge podcast in 2026 when it's out, and then we'll see if I overpromised. All right, I got to see if Nick Saban is going to leak me this car, first of all. Second of all, that's really interesting, right?

Nelai Patel

The idea that you're going to converge the standard design and the EV design, or that you will guarantee that people love it. The classic Mercedes design, people just love it. The EQ design has been more polarizing. So that guarantee feels like you're going to head in more of a direction. I don't know.

Let's say BMW is in where the I four is basically a four series with an EV drivetrain. The I seven is basically a seven series with an EV drivetrain. Is that what the market is telling you? Or is that strategically, we should make more of the same car with different drivetrains? We're heading a direction which will be 100% Mercedes, 100% recognizable as a Mercedes, immediately pick up on styling cues that are uniquely Mercedes, and can only be Mercedes and will be beautiful.

Ola Schlanius

So I stand by my promise. All right, we'll have you back. Every time you have a new car out, we'll have you back, and we'll just up the conversation. But can I say one thing on the g, by the way? Because I think this is important.

So the styling is the same. Don't mess with the styling. Rule number one with the g. But you mentioned the Mercedes engineers. You know, they have ants in their pants.

They never stand still. They always push forward. Always. They look for what's next on technology. We have made a whole host of subtle changes that only the train eye will see.

But that makes a world of difference. I'm going to take one example, and as we are now launching this electric g, we are also updating the complete combustion offering of the GE as well. So the whole G lineup is being freshened here alongside with the electric g. If you take the a pillar on the a pillar, the way you put two pieces of metal together, back in 1979, the flange was kind of on the outside of the body, not on the inside. And you cover it up with a nice looking cover.

You know, this black strip that every G driver immediately recognizes, but that creates drag on a combustion based product, maybe not that big of a deal. Yeah, but on an electric car, you are chasing every single arrow point. I mean, it's like you're in Formula one. They're looking for downforce. And here the guys in the wind tunnel are looking for drag reduction while keeping it beautiful.

So we turned that inside. We still put a nice looking cover on top of it, so you don't really see it, but it significantly reduced the drag. Just that simple thing changing to the body construction while we were at it. We do that for the ice based cars as well. What's the benefit?

So you get them better range. That's the thing of course, you chase range, you want to keep the battery. It's a precious every kilowatt hour, every watt is precious in an electric car. So every user of wattage you optimize and pushing an object through air eats up energy, obviously. Remember your physics class in school?

But for what's the benefit? On the combustion side, of course, that reduces the consumption on that one as well, but it's not as crucial. But it reduces the wind noise. Now, you don't live in Germany, but if you would, we still have free speeds on the autobahn. Maybe an AMG GT is the right car to open it up and see what it can do.

And the g is a little bit less so. But if you would be driving a g, let's say, at 160 or 170 km an hour, the wind noise, in spite of the boxy shape, is so much less. Now for one of those subtle changes that you can easily have a conversation on the phone, hands free or with the person sitting next to you, what have you. So we have made dozens and dozens of dozens of small changes to the g that makes the product overall better. And we have completely updated the infotainment to the latest and greatest, maybe not the number one buying criteria for the g, but, you know, a lot of people buy the car as a lifestyle choice.

You live in downtown LA, you go back and forth to work with it, and you just love it because you love it. And you want to have the latest navigation, you want to have the best entertainment, you want to have all of those things and all the convenience. So all of that comes with the electric g, but also with the combustion based G's. Yeah. I feel like in downtown LA, most g wagons are off roading by going over the curb at Starbucks.

Nelai Patel

That might be it. We have to take another quick break. We'll be right back.

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Nelai Patel

Were back with Mercedes Benz CEO Oleish Lanius and its time to talk about the thing modern cars do that isnt just being a car, they are computers with screens. Let me ask about the infotainment. This is a big deal in the industry. It feels like a central tension of the entire industry. You have the hyperscreen for people who don't know what the hyperscreen is.

Pause the podcast, go look at a picture of the Mercedes hyperscreen. It is very compelling. It's a huge screen across the front dash of the car. Your models that don't have hyperscreen, you have big screens everywhere. You have mBux, which is your infotainment platform.

You just added chat GPT to it, which is fascinating. You are all in on AI. You've mentioned that several times now. There's another view of the world which says, just give all of this to Apple. Right?

Apple CarPlay is what people want to buy. GM drops Carplay. There's a huge outcry. We'll see how that plays out for them. Apple is very confident that people are going to buy cars with Apple Carplay.

You still have CarPlay in there 2022, Apple announced, here's a version of CarPlay that can take over. Something like the hyperscreen can take over the instrument cluster in front of the driver. I asked you then, would you ever do that? You said, I got to talk to them. It's been a couple of years.

Have you talked to them? Would you ever let them take over all of the infotainment of the car in that way? So the short answer is no. But you need to look at it from a bigger perspective. Everything that's going on in this digital window into your car and to the world is not just infotainment.

Ola Schlanius

It's not just the music that you listen to or the phone call that you make. Where there is another revolution going on is assisted and automated driving. So our so called Mercedes Benz operating system, which is really the central nervous system in the brain of the whole car, of which the infotainment is one of four domains. The whole operating system, infotainment, automated driving, every single function of the body, exterior and interior of the car, the whole drive system, the battery management, all of that. The telecommunications module, speaking to the cloud, where we have the personal nilay file for you with your settings and everything, it's all one holistic software architecture.

So if you want to create a superior customer experience, you need to think about that as a whole. And only the manufacturer, only the manufacturer can tie all of it together. There's nobody out there, none of the tech companies that is even aspiring to do that whole thing. If you want that to be perfect, integrated, seamless, you don't want to jump between different worlds. Oh, I'm now in the infotainment.

Well, let's jump back to Mercedes and so on and so forth. So our quest is a different one. We want to create the best digital experience in the world for you. That includes fantastic and intuitive UI. And you will also see when we launch MBOS 1.0 next year in the CLA, that we're taking the next step.

But the precursor to that, like MBOS 0.5, we actually already just launched in the new e class, where we have programmed the complete infotainment domain ourselves, it's probably the biggest digital in house product that we have ever made. We work with the best. Yes. We're integrating Google Maps. In fact, we are developing with Google the next generation of what a map in a car married to the driving assistance system should look like.

Fascinating product, where the best of the Google engineers, we're the best of the Mercedes engineers, can throw their expertise together and take that to the next level. So I fundamentally believe that holistic customer experience is best done by us and we will serve you then. There are, of course, other aspects to that. If you get a Mercedes product, I assume you have a Mercedes me id, you have the app, you have everything. You can take that id with you to several cars.

My wife and I, we actually have our profiles in both our cars. So when I step into my wife's car, the car recognizes me and it puts the seat in the right position. It turns down the air conditioning a little bit. She likes it a little bit warmer, I like it a little bit colder. It puts on my favorite music station, whatever it is and everything.

So my tailormade suit, my digital tailor made suit, and also physical suit adapts to me. All of it is integrated. Your personal profile with your privacy. You choose your privacy. It's another very important thing for Mercedes, is in the cloud and is available.

You don't want to rip one limb of that body out and give it to somebody else. I fundamentally don't think that's the right thing to do. And of course, we want to keep the customer interface with you. So there are so many reasons why we're doing what we're doing, but we're not a fundamentalist to say for some reason, we're not going to allow a customer to use Apple CarPlay, if that's what they choose to do. So we have Apple Carplay, we have Android Auto.

If for some of the functions, you feel more comfortable with that and you will switch back and forth, be my guest. You can get that, too. But to give up the whole cockpit head unit, in our case, the passenger screen and everything, to somebody else, the answer is no. You're stepping into your Mercedes cocoon, your Mercedes rolling living room and the furniture and the digital stuff is from Mercedes. Welcome to Mercedes.

That's it. There's a lot of concepts in there. This should have been the first question because I got a whole hour of questions. Just to follow up on all that, let's start with mapping, which to me feels like once mapping plus autonomy come together, a lot of the car market will change around it. So you get in the car, you tell Google Maps, I want to go here.

Nelai Patel

The car, to some extent drives itself there on whatever timeline that could be five years from now. I don't think it's tomorrow, but on some timeline, this is where the industry is headed at that point, the user interface in front of you, the screens, the infotainment becomes what you're doing. You're in competition with the phone because people will just pull out their phones and play on their phones or the card goes wherever it goes to make this happen, to even get to the place where you're in competition with a phone like that, you need a mapping system. You need people to use the inbuilt mapping system of the car. And right now people use Carplay for messages, podcasts and music and mapping.

So you've got to compete with the mapping. Is that why you're working with Google, to get people out of using Carplay for mapping? I think in terms of customer experience and use cases, obviously, if you're in a car, you're probably going somewhere, right? Oh, no. By the way, I'll add for Ev's, you need to map your charging and precondition the car for charging.

Ola Schlanius

That's a given. I mean, we have that today. I mean, most of the things that I'm talking about we have today, but we're taking it to the next level. So if you're in a car, you're probably going somewhere, even though that's maybe another chapter of the podcast. A lot of customers in China and in Asia actually spend time in the car just to spend time in the car.

And I'm going to get back to that in a second. Me time in the car is kind of the new thing here. So we are going to create downright the best from a to b digital experience that you can think of. And it's obvious you said it yourself, if you integrate that with other functions in the car, driving assistant can't reveal too much here. Now it's almost like I'm having my presentation of the next generation vehicle here.

It's a little bit too soon, but we do speak about this. So yeah, stay tuned. It's great. Now it's about to get even better. But here's another thing.

I love my smartphone. You mentioned Apple. I have Apple. I have MacBook and everything. Tim Cook and Steve Jobs before him have done a fantastic job over the last many decades.

So I'm an Apple fan through and through. I watch movies on my iPhone. If I'm, I don't know, on a train or whatever, in some situation, maybe I'm waiting at an airport or whatever I'm doing. But when I get home and I want to watch a movie, I watch it on my fantastic tv, much bigger screen, laying on my cell phone. Now look at your car, especially when you're in autonomous mode.

You know, we have now the first level three baby steps in the market already. And the next step is to raise the speed of level three. And I test drove a prototype of our here in Germany to raise the speed from 60 km an hour to 95 km an hour. I mean, wow. Then starts getting interesting, right?

It's like you can put yourself in the right lane and be in a train. If I then want to watch a movie, what do I pick? My fantastic, blow your mind, very big hyper screen in the car, like in my living room at home? Or do you pick up my phone and watch that small screen? I mean, for me, that decision is an absolute no brainer.

If I want to have a video conference, maybe I don't want to watch a movie. I want to have a video conference. I want to be able to see the PowerPoint presentation and see the person that I'm talking to. I mean, I could go on and on and on and on and on. There are so many reasons why would you would do this.

If you look carefully at the concept car of that ClA that we showed in Munich, I mean, look at what the passenger is going to get. We were the first ones with the new e class that I mentioned before that now got certification in Europe that the passenger can watch a movie while you're driving. You know, you're not allowed to have distraction, driver distraction and all that. But if the driver directs its view to the screen and starts watching the movie, it turns black. So you have eye tracking for stuff like that.

There is an explosion of use cases going on here. And the real estate in the car is that. I'm exaggerating now, your 55 inch tv, it's not quite that, but it's going to be in Mercedes, a very attractive offering to take care of a lot of those use cases. So the bet here, and I've heard this from a lot of car manufacturers, I've heard this from you the last time we spoke, is that people will be drawn to the biggest screen they can get and that the computing environment of the big screen in the car will be so good that it's competitive with the phone and you've already begun some of that stuff. There's zoom in a Mercedes right now.

Nelai Patel

I believe you have these applications, you have these abilities in the car right now. But it's not only that. If I go back to that. You talked about marrying the map to the assistant system. Well, you have to have the car domain to be able to do that.

That's true. That is not a trivial thing, by the way. I believe you. I have no reason not to. But I look at your specific example of watching television, and I look around and I see most people have stopped watching.

They were watching their phones. Even in their own homes. They turn on Netflix and they look at their phones at the same time. You see that behavior is incredibly hard to crack. And then on top of it, part of the bet and all that investment is that you will be able to monetize the experiences in the car.

The way that the phone platforms have been able to monetize, the way that Apple and Google have been able to monetize. Is that playing out? Do you see people using your App Store, using your e commerce abilities, using the platform in a way that suggests you can get to the mobile market style monetization? Because I listen to Marybara and that's the bet that they are making. Then I talked to Jim Rowan at Volvo, and he says, that's crazy.

We're never going to have the skill to do that. Just Carplay it is. There's a pretty big extreme in this industry right now. So some things you can monetize, some things you can't. If you go back to.

Ola Schlanius

We had a tech day on Mercedes Benz operating system MBOs in California at our Sunnyvale tech hub two years ago, and you can watch that presentation, I'm sure it's out there somewhere. We talked about that monetization. What can you monetize and what can't you monetize? We take, I would say, a sober view on how much revenue and profit pool you can drive with that. And I don't think it would be realistic to say, oh, this is going to be tens of billions of revenue and so on and so forth.

And that's not what we said, but everything that gets more and more close to what is the original know how and ip of the carmaker. Where you can monetize will be things like different types of assisted driving, autonomous driving, not go crazy, but in the project that we're working with Nvidia to develop the next generation autonomous drive for our cars, you will have a lot of different functions. And yes, of course you can monetize that. I mean, we have been monetizing driving assistance systems. We are the inventors of driving assistance system.

We have been monetizing it now for almost 30 years. So in the AdAs domain, there is more. In the infotainment domain, much of it will be kind of just part of the car. It's just part of the car. But there are things that you can throw in there as well.

You can turn your car into monitoring your driveway and be almost like a burglar alarm and stuff like that. So once you have all the sensing and so on, so there are pockets here and there. But also we talked about the insane hyperscreen. I mean, it's a digital sculpture, really. It's not a screen.

It's a beautiful object. It's a piece of art. We also sell the hardware in the car as well. So it's a combo of that. So all in all, we are monetizing.

But I think also you need to be realistic. We're not turning ourselves into a mobile phone company. That's not who we are. We're not in primary competition with Apple or Google or whoever around the world. In fact, we have great partnerships with these companies and work very well with them.

If you look at what we did with Apple Music and Dolby Atmos on the music experience, I mean, if you're into music, that is concert hall quality. It's just concert hall quality. I've never heard music in a car at better quality. If you close your eyes, you think you are, I don't know, at the Elbe Philharmonie in Hamburg, which is supposed to be the best acoustic building in the world or something like that, it is great. So that's not the issue.

And we don't think in those terms. Take care of the customer. Create the best digital customer experience. Partner with companies like Google and Apple where it makes sense for them and for us. But be the architecture of your digital environment in the car.

And as I said before, it's no less than the brain and the central nervous system of your vehicle. You can't outsource that. Let's wrap up and talk about AI. We've been talking about monetization and costs and what you can monetize and what you can't. There is chat GBT in the Mercedes operating system right now in Mbux.

Nelai Patel

It feels like it's just there to be cool. It's a cool thing to add to an operating system like that. There's no business model that really works for chat GPT for any of the big LLM style AI's next to that. You have autonomy, which you could, at some level people are going to start charging subscription services for. That seems to make sense because the ongoing mapping and improvements you need.

Do you see a path forward for the chat GPT style AI in the car? Because the whole industry is confused about that. No, definitely. The next level is this, and we actually showed it at the CES in Vegas in January. You got to now start training that AI to be more specific to your environment.

Ola Schlanius

You take the world, the knowledge of the world. Of course, you don't say no to that. The knowledge of the world is. I think I used the analogy last time we talked about this. This is your Jarvis, your Ironman, and Jarvis knows everything.

It's like your digital brain that is helping you negotiate any situation. But you need to now train your Jarvis for the Mercedes world to make it more relevant for everything that is going on in the car. And we are working on what we call the Mercedes virtual assistant, which means common knowledge plus specific knowledge to give you ultimately a Jarvis in the car. That's where it's going. That's a great vision.

Nelai Patel

But right now, chat chibt hallucinates. It is frequently wrong. I don't trust it to do a lot of things in a general case. Llms have, they've hit a ceiling and we'll see if that ceiling gets higher over time. In very specific cases, you can see how they're useful.

You can see how people are tailoring them and focusing them. Jarvis is a very general case. How do you go from we have it in the car today, we need to tailor it to the car all the way to Jarvis. And by the way, pay the fees necessary. I don't want to pay another $20 to use the mercedes assistant in my car.

Step by chat, shippity costs today. Step, step by step, step by step. It's back to the customer experience. Maybe you want to have very specific answers on the destination you're going to or the type of restaurant, what they have on the menu, on the type of restaurant, you navigate automatically to that. All of those things.

Ola Schlanius

Specific questions that don't yet work today, but which would add a layer of convenience. That's the direction. That is absolutely the direction. Once you have that layer of convenience as it works, of course, our chat GPT integration in the cars right now, it's a beta, but if you don't start learning, I mean, you got to jump and start. And we tell our customers that right now, that is beta.

I use chat GPT, also for a lot of search cases, but I'm also careful if I feel that the answer is a little bit of gobbledygook. You need to be a semi intelligent interpreter of the answer as well, of course. So we are going to start training a Mercedes Benz virtual assistant and gradually add use cases for you. Do you think this is something where you're going to look at different model providers over time? You're going to build your own model, you're going to stick with OpenAI?

Nelai Patel

How does that look like for you? Because that's a pretty key dependency here for that kind of product. I know that. But competition is rising in that space now. There's always a company that's going to be the first one out.

Ola Schlanius

I don't know how many billions and billions and billions is going into this by many, many players. So I can see how competition is starting to rise here now. We do what we always do. We assess the options and pick the partner that we think is the best partner. That's great.

Nelai Patel

Well, ola, you've announced at least two cars here today, one a real car, one that you've promised to come back when it's real. You revealed some of your roadmap, and you've told us you're building Jarvis. I think this is a pretty good episode of Decoder. Thank you so much for coming on the show. Thank you for having me.

Ola Schlanius

And I'm looking forward to that 2026 podcast. We're going to have to do it before then. These are always great. Thank you so much, man. Thank you.

Nelai Patel

I'd like to thank Ola Schlanius for taking the time to join Decoder once again. That was a lot of fun. I'd also like to thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or anything else, what you'd like us to.

Cover, hit us up. You can email us@decoderverge.com we read all those emails. You can also hit me up on threads. I'm at reckless 1280 and we have a TikTok for as long as that lasts. It's at Decoderpod.

It's a lot of fun. If you like Decoder, please share it with your friends. Subscribe wherever you get your podcast. And if you really like the show, leave us a review. We'd love them.

Decoder is a production of the Verge. And part of the Vox Media podcast network. Today's episode was produced by Kate Cox and Nick Statt, who was edited by Kelly Wright our supervising producer is Liam James. The decoder of music is by Brakemaster Cylinder. We'll see you next time.

We'll see you next time.

Mercedes-Benz CEO Ola Källenius explains why EVs are still the future - but Apple's next-gen CarPlay isn't

Primary Topic

Episode Summary

Main Takeaways

Episode Chapters

1. Introduction to Electric Vehicles

2. Challenges in EV Adoption

3. Digital Transformation in Mercedes-Benz

4. Future of Automotive Technology

Actionable Advice

About This Episode

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Transcript