Driving change: inside Mercedes-Benz’s bold plan to build carbon-neutral cars

With a legacy that spans nearly a century, Mercedes-Benz continues to define what luxury means on the road, blending heritage, performance and a bold vision for the future. As one of the world’s leading premium carmakers, the firm is navigating a challenging macroeconomic environment and a global mobility transformation, while staying focussed on innovation, profitability and sustainability.

Despite near-term headwinds – from lower volumes and pricing pressure in China to shifting global regulations – Mercedes-Benz is adapting with a more modular powertrain strategy, flexible production, and continued investment in electrification and circularity. In this conversation with Hendrik Heitsch, Director Compliance Programs & ESG (Environmental, Social, and Governance) at Mercedes-Benz, we explore how the Group is positioning itself for long-term resilience, from battery recycling to supply chain redesign.

Mercedes-Benz is a brand with a deep heritage in innovation and luxury. What is the company’s raison d’être today?

Indeed, Mercedes-Benz is deeply rooted in luxury and remains committed to creating the most desirable vehicles by combining pioneering technologies, exceptional aesthetics, and integrated sustainability. At the heart of our identity today is a clear purpose: to shape the future of mobility in a way that is both innovative and responsible. This approach honours our iconic heritage while driving future innovation, ensuring that our thoughts and actions increasingly focus on sustainable luxury.

Mercedes-Benz has set a bold vision with its Ambition 2039 strategy¹, aiming to achieve carbon neutrality and a fully electric vehicle lineup. Could you share how this strategy is shaping the company’s approach to both production and innovation?

Of course. Ambition 2039 is one of the key strategic goals of the Mercedes-Benz Group – by 2039, we are aiming for our entire new vehicle fleet to be net carbon-neutral across all stages of the value chain and throughout the entire life cycle.

Electrification is our most crucial lever, and it’s already shaping how we design, produce and innovate across the business. With our latest CLA model, we’re making significant strides towards this vision. The CLA is the most efficient Mercedes-Benz car model ever built, setting new standards in charging speed – a range of up to 325 kilometers can be charged within ten minutes at a rapid charging station². It also showcases our progress in decarbonising our value chain and closing the loop. For example, its CO₂ footprint is already reduced by 40% over the entire value chain compared to its non-electrified predecessors.

By 2039, we are aiming for our entire new vehicle fleet to be net carbon-neutral across all stages of the value chain and throughout the entire life cycle

The CLA will be produced at our plant in Rastatt, Germany, where our internal combustion engine (ICE) and battery electric vehicle (BEV) models are made on the same line, allowing flexibility in production. During the integration of the new model into the existing production line, many improvements were implemented to reduce energy use, which overall led to a reduced energy consumption of 15% compared to its non-electric predecessors.

Importantly, the CLA model is just the beginning. It is a blueprint for what comes next. As we undertake the largest product launch programme in Mercedes-Benz’s history, pioneering technology remains essential to achieving our sustainability targets.

The EU is softening emissions rules.³ Do you think this willslow down EV adoption, or will Mercedes-Benz stay the course? And how do these rules impact your research and development (R&D) and production strategies?

We remain steadfast in our commitment to electric mobility and digital innovation.

Fleet regulations worldwide, and especially in Europe, must undergo continuous reality checks and realignments to become less rigid and more adaptable to market developments, while also reflecting the competitiveness of the automotive industry. Mercedes-Benz advocates for more market-based approaches to decarbonisation and a revision of the current regulatory framework. Very few forecasts anticipated the current geopolitical and macroeconomic realities. Yet, most European political goals and guidelines are based on assumptions that have not materialised. Therefore, these goals and guidelines must now be adapted to the changed reality.

The EV transition is not simply a response to regulation – it is a strategic commitment, anchored in long-term investment and a clear vision for the future of mobility

Nonetheless, the direction of travel for Mercedes-Benz remains clear: electric, digital, and customer-centred. The EV transition is not simply a response to regulation – it is a strategic commitment, anchored in long-term investment and a clear vision for the future of mobility. We have already invested billions in electrification. We are creating the essential conditions to become all-electric, with ambitious product development goals and the launch of new locally emission-free and software-driven technologies. We are accelerating the rollout of our own global high-power charging network. The pace of our transformation is influenced by market conditions, infrastructure and consumer behaviour. Therefore, we maintain flexibility in offering both all-electric vehicles and electrified high-tech combustion engines into the 2030s. This adaptive strategy ensures that our R&D and production remain both forward-thinking and resilient – ready to lead, regardless of the pace of regulatory change.

Read also: Balance of power: how EVs will help regulate tomorrow’s energy system

How does Mercedes-Benz integrate circular economy principles into its production and supply chain to enhance long-term sustainability and profitability?

At Mercedes-Benz, we are convinced that a circular economy is key to building the most desirable cars in a more sustainable way. We are committed to a holistic circular approach and the establishment of material cycles for important resources by focussing on Rethinking, Reducing, Repairing and Recycling. Essentially, we are decoupling resource consumption from volume growth by aiming to use 40% secondary raw materials – that is to say, recycled materials that can be incorporated into manufacturing processes as alternatives to or in conjunction with virgin raw materials⁴ – within the next decade, in line with Ambition 2039. This means less dependency on finite resources and a smaller environmental footprint. To achieve this goal, we aim to minimise the use of primary raw materials – i.e. virgin raw materials – and employ circular-oriented materials, emphasising the Design-for-Circularity approach in product design.

During vehicle development, we create a concept for each model in which all components and materials are analysed for their suitability as part of a circular economy. For new Mercedes-Benz vehicles, we specify a minimum proportion of recycled material for each key material – such as steel, aluminium and batteries – in its specifications. The recycling of raw materials like lithium, nickel and cobalt is integral to our analysis and is considered in the design of components. This analysis covers the entire supply chain, from mining to recycling and reuse of recycled raw materials. We also ensure that human rights and fair working conditions are respected across every stage of this cycle.

Additionally, we are working on increasing the use of renewable raw materials. One of the most exciting steps forward is our battery recycling plant in Kuppenheim, Germany – a key milestone in closing the loop on battery life. The plant uses a mechanical-hydrometallurgical process and is expected to achieve a recovery rate of over 96%, surpassing existing methods. It allows us to recover valuable and scarce raw materials such as lithium, nickel and cobalt, which can then be reused in new batteries for upcoming all-electric Mercedes-Benz models – turning yesterday’s batteries into tomorrow’s innovation.⁵

Read also: How important is nickel in the energy transition?

What steps is Mercedes-Benz taking to secure sustainable and ethical raw materials for EV batteries?

Mercedes-Benz is committed to ensuring that our products contain only raw materials sourced without violating human rights or environmental standards. We prioritise monitoring supply chains through our Human Rights Respect System (HRRS), which identifies and mitigates risks early on.

The raw materials used in batteries are among those we assess for potential human rights concerns. Our assessments involve creating transparency, identifying risk hotspots, and implementing effective risk mitigation measures. Mercedes-Benz has identified 24 raw materials with increased human rights and environmental risks. In 2024, we assessed 65% of these materials and, by the end of 2025, we aim to review 70% and publish our findings in our Raw Material Report 2025.

We require suppliers to adhere to our Responsible Sourcing Standards, ensuring transparency and compliance throughout the supply chain. This includes regular training, rigorous due diligence, and systematic monitoring – all aimed at protecting both people and the planet, and enhancing supply chain transparency.

When it comes to battery procurement, we’ve set a clear expectation – new suppliers must source cobalt, lithium, nickel, natural graphite and manganese over the long term from mines audited by the Initiative for Responsible Mining Assurance (IRMA).

Mercedes-Benz has made significant progress towards its net-zero goals, achieving carbon-neutral vehicle production at its own sites in 2022. By 2030, the company aims to cover more than 70% of its energy needs with renewables, and by 2039, all production plants worldwide should run entirely on renewable energy with zero CO₂ emissions. Could you share more about the roadmap to achieving these targets and the biggest hurdles you anticipate?

Since 2018, we have reduced our CO₂ emissions at Mercedes-Benz car production plants by 75% for scope 1 and 2 emissions – i.e. emissions from sources we own or control directly, and those we cause indirectly from the energy we purchase and use⁶. We remain committed to our goal of cutting CO₂ emissions by 80% by 2030 and achieving a 100% reduction by 2039. Thanks to 100% green electricity, the production at all our proprietary Mercedes-Benz plants worldwide has been net carbon neutral for the past three years.

We are also on track to shifting our heat supply from fossil-fuel-based energy sources to renewables, and we are expanding renewable energy generation in our plants – a strategy that not only supports our climate goals, but also helps protect us against rising CO₂ and electricity costs. In 2024, 50% of our total energy demand at Mercedes-Benz car production plants came from renewable sources. This share is set to increase to 70% by 2030 and ultimately to 100% by 2039 as we continue transforming our production footprint to support a more sustainable future.

Thanks to 100% green electricity, the production at all our proprietary Mercedes-Benz plants worldwide has been net carbon neutral for the past three years

A large proportion of the Mercedes-Benz Group’s Scope 3 emissions – i.e. those generated indirectly across its value chain⁷ – arise during the use phase of the vehicles, including both the production of fuel and electricity (well-to-tank) and driving operation (tank-to-wheel). To reduce these emissions, the Group is focussing on fully electrifying its fleet, charging with green electricity, and optimising battery technology.

Beyond external sustainability efforts, how does Mercedes-Benz foster corporate social responsibility within the company? What initiatives are in place to support employees, diversity, and workplace sustainability?

Decarbonisation is one of the most important transformation goals at Mercedes-Benz. At the heart of this transformation, however, are the people who actively shape this transition or are affected by it. For this reason, Mercedes-Benz’s Just Transition Approach is an integral part of its sustainable business strategy, with a focus on people, human rights, and policy engagement.

When it comes to our employees, at the core of our HR strategy are the 3Rs: Re-Shape, Re-Skill and Re-Charge. These pillars guide our HR efforts and the transformation in a responsible, socially acceptable, and future-oriented manner to drive a just transition.

In order to stay competitive and master the transformation, we need to be a leaner company with even more efficient structures, which is encompassed in the Re-Shape pillar. With Re-Skill, Mercedes-Benz cultivates a culture of continuous learning and future-ready development through training and qualification. As part of our “Turn2Learn” initiative, we’re planning to invest more than EUR 2 billion in training and qualifications for our global workforce through to 2030. The Re-Charge pillar focusses on nurturing an attractive and inspiring working environment that values equity, inclusion and the unique perspectives and experiences of our team. This includes the goal of reaching 30% women in senior management positions worldwide by 2030. By the end of 2024, we had already achieved 26.4% female senior managers – a sign that meaningful change is happening.

Externally, our Corporate Citizenship strategy aims to make a positive societal impact beyond our core business. We support ecological sustainability projects, community empowerment initiatives, and disaster relief efforts, emphasising that our responsibility extends beyond the factory gate. A key example is beVisioneers – the Mercedes-Benz Fellowship, which empowers young people worldwide by funding global sustainability projects and providing them with knowledge, coaching, and scholarships. By 2030, we aim to grow the community to 10,000 fellows, up from 102 at its inception in 2023⁸. Employees can also contribute directly through our Impact Mentor Training, developing their skills as mentors and contributing to sustainable change, benefitting both their personal development and the company’s transformation.

For investors looking at the EV transition, where do you see the most promising opportunities – batteries, software, or charging infrastructure?

Ultimately, the success of the automotive transformation hinges on robust framework conditions that allow for a steadily increasing and successful uptake of BEVs. The greatest leverage for improving these conditions lies with the public sector, whether at the national or European level. This applies not only to the expansion of the charging network and the reduction of energy prices, but also to the wider improvement of the conditions under which businesses operate in Europe.

In addition to necessary political support, cross-sectoral cooperation is crucial to achieving these goals. Making electric mobility attractive to customers is also essential, and it is the responsibility of governments to establish the appropriate framework. The industry has made substantial investments and will continue to drive electric mobility. Mercedes-Benz will continue to drive the transformation by offering customers the most desirable electric vehicles and advancing brand-specific innovations in charging infrastructure.