Mercedes admits EVs are "a very big bet"

Mercedes-Benz is making a big play for a slice of the electric vehicle (EV) pie, but concedes it's a risky strategy.

The German luxury car company is sinking big bucks into a new EV platform, which will underpin its 'EQ' EV sub-brand and it's betting big on battery production too.

"We’re investing one billion euros in our global battery production," Mercedes-Benz CEO Dieter Zetsche said at the launch of its EV strategy in Paris last month.

"We have big plans that will require a lot of batteries. That's why we’re bundling all our electrification initiatives under one umbrella. We’re launching a new brand… we're convinced now is the time to flip the switch," he said.

Despite the hype surrounding EVs, they presently account for a miniscule slice of the global new car pie and widespread public take-up could be slow. The most ambitious forecasts by luxury brands like Mercedes and Audi predict that between 15 and 25 per cent of their sales will be EVs by 2025.

EV sales have been glacier-like in Australia, where the vast majority of electricity is produced from coal, negating their CO2 benefits.

Despite this and other disincentives, such as the lack of charging infrastructure, range anxiety, relatively low fuel prices, relatively high EV prices and lack of model availability, Mercedes-Benz says its new EQ sub-brand will eventually come to Australia.

Volkswagen has also indicated it will bring at least part of its new EV family to Australia, as part of its plan to become the global EV leader by selling a million EVs a year worldwide by 2025.

Renault, Nissan, Mitsubishi, BMW and Audi are also investing heavily in EVs, despite agreement that petrol and diesel engines have many years ahead of them.

Asked whether the unprecedented investment in EV technology was a gamble before the mass market has moved to embrace EVs, Mercedes-Benz's global chief of marketing and sales, Ola Källenius, said the time was right.

"We believe that the market is gradually going towards more and more zero-emission and battery-electric formats. So yes, it's a very big bet for us, but a bet we think is going to pay out.

"We focus on developing the Mercedes brand and in this case the sub-brand EQ to a leading brand for battery-electric vehicles," said Källenius.

Like Audi, Mercedes' first EV will be an SUV, but the company's global sales and marketing chief says he's not concerned by the competition.

"Of course there will be competitors both from the established names that you know and also some new players. We're ready for any of those rivals.

"And with this first vehicle we're hitting a sweet spot of the market with SUVs, with an attractive vehicle with up to 500km range," he said.

Previewed by the Generation EQ concept, which pumps out 300kW and 700Nm from its high-density (70kWh) Lithium-ion battery pack, it's expected to arrive in Australia in 2019 for less than $100,000, which would likely undercut the Tesla Model X, the first battery-electric SUV available in Australia.

Källenius, a Swedish-born executive widely tipped to replace Dr Thomas Weber as Mercedes' head of research and development, said one of the most important elements in EVs becoming popular and profitable is battery supply.

"We already have the biggest battery plant in Germany and we're investing another 500 million euro into that operation over the next few years. So to have that know-how in-house and having that production capability is very important to us."

With more and more car companies shifting R&D spending away from internal combustion engines and towards electrification, expect a wide variety of electric vehicle types to hit the market as car-makers attempt to anticipate trends and get a leg-up on their competitors.

But until a car company develops an affordable EV with a long driving range and short charging time, EVs will remain a gamble for both car makers and buyers.