New partnership
Mercedes-Benz tightens climate targets amid profitability challenges
Mercedes-Benz aims to significantly reduce its CO₂ emissions by 2039, investing billions in new vehicle technologies and lower-carbon supply chains. The carmaker has also provided further figures on the economic viability of its transformation for the first time.
Mercedes-Benz is seeking to align its sustainability strategy more closely with its operational business. At its Sustainability Dialogue in Sindelfingen, the carmaker outlined more detailed climate targets for 2039, a long-term agreement for low-carbon aluminium and a pilot project for lower-emission steel production. At the same time, the company emphasised the need to ensure that its transformation remains economically viable. In response to further questions, Mercedes-Benz provided additional figures on investments, cost reductions and the carbon footprint of its vehicle fleet.
Olaf Schick, Member of the Board of Management responsible for Sustainability, reaffirmed that sustainability remains a central part of the company's strategy despite challenging market conditions. Mercedes-Benz aims to translate its long-term climate ambitions into more concrete measures and measurable progress. However, a closer look reveals that uncertainties remain over both the commitments behind these targets and their economic implementation.
Climate targets for 2039 remain conditional
Mercedes-Benz aims to reduce CO₂ emissions from its own production operations by 90% and emissions during the vehicle use phase by 80% by 2039, compared with a 2019 baseline. Across all relevant stages of the value chain, the company is targeting an overall reduction of 70%. It then aims to achieve net-zero emissions during the following decade.
However, the targets come with an important qualification: the planned reduction in emissions during the use phase is explicitly dependent on market conditions. This makes a significant part of Mercedes-Benz's climate strategy reliant on factors largely beyond the manufacturer's control, particularly demand for electric vehicles, the expansion of charging infrastructure and energy costs.
Asked to clarify this condition, Mercedes-Benz explained that customers' purchasing decisions are influenced by several factors, including infrastructure, energy costs and government incentives. The pace of the transition therefore depends on more than the availability of electric vehicles.
The qualification consequently remains in place. At the same time, the latest targets lack clearly defined interim milestones for the individual areas of emissions reduction. Mercedes-Benz has not specified how far emissions in these categories are expected to fall by 2030 or 2035, for example.
Fleet-wide CO₂ emissions decline only slowly
Additional figures provided by Mercedes-Benz on the carbon footprint of its passenger car fleet illustrate the scale of the challenge. While the company calculates that the new electric GLC generates approximately 40% fewer lifecycle emissions than its combustion-engine predecessor, progress across the entire model portfolio has been considerably slower.
The 40% reduction is based on the current average European electricity mix. When charged using renewable electricity, Mercedes-Benz estimates that the electric GLC can reduce lifecycle emissions by approximately two-thirds.
Globally, average lifecycle CO₂ emissions per Mercedes-Benz passenger car fell from 48.9 tonnes in 2019 to 46.7 tonnes in 2025. This represents a reduction of just 4.5% over six years.
Mercedes-Benz points out that its global fleet continues to comprise battery-electric vehicles, plug-in hybrids and combustion-engine models. The company expects the introduction of new electric vehicles to translate into greater improvements in its overall emissions performance. Between 2025 and 2027, Mercedes-Benz plans to launch 14 fully electric models.
Long-term aluminium supply agreement with Hydro
Mercedes-Benz is making more tangible progress in decarbonising its supply chain. The carmaker has signed a long-term offtake agreement with Norwegian aluminium producer Hydro covering at least 10% of its primary aluminium requirements. The carbon footprint of the supplied material is expected to fall by 25% by 2030 compared with current levels.
The agreement goes beyond a statement of intent. Contractually agreed supply volumes and emissions requirements are intended to provide Hydro with greater planning certainty for investments in lower-carbon production processes. At the same time, Mercedes-Benz aims to secure a long-term supply of materials with a reduced carbon footprint.
Mercedes-Benz is also joining the aluminium sector of the First Movers Coalition, an initiative designed to accelerate the commercial adoption of low-carbon technologies by creating firm demand commitments.
From 2027, the manufacturer also plans to increase the use of recycled aluminium from Hydro in series production, a move previously announced in summer 2026.
Mercedes-Benz has also set a specific recycling target, aiming to increase the share of secondary raw materials to 40% within the next decade. However, the company has not disclosed its current share or defined any interim targets.
The manufacturer is also seeking to provide greater transparency around raw material sourcing. Through its new interactive 'Transparent GLA' format, Mercedes-Benz details the 19 raw materials used in selected components of the new GLA. The company has also published its fourth Raw Materials Report, covering the traceability and assessment of 24 critical raw materials.
Mercedes-Benz is exploring new approaches to steel production as well. In cooperation with Anglo American and HyIron, the manufacturer has tested hydrogen-based iron ore processing. The resulting material was used to produce a demonstrator component for the EQS.
According to Mercedes-Benz, the project has demonstrated the technical feasibility of the process, although it has yet to be implemented in industrial series production. Mercedes-Benz and HyIron now plan to assess how the technology could be developed further and potentially scaled up.
Mercedes-Benz reduces battery and vehicle costs
The economic viability of the transformation remains a central consideration. Asked about the financial returns on its sustainability investments, Mercedes-Benz explained that there is no single deadline by which all such investments must pay for themselves.
Instead, the company is working to continuously improve the economic conditions of the transition. Alongside direct financial returns, Mercedes-Benz also takes into account factors such as greater resilience, lower CO₂-related costs and customer confidence in the brand.
The company provided more specific details on electrification. By the end of the decade, Mercedes-Benz aims to achieve comparable margins between combustion-engine vehicles and battery-electric models, taking into account all costs associated with meeting CO₂ regulations.
Mercedes-Benz also reported progress with its new MMA and MB.EA vehicle architectures. Compared with their respective predecessor models, battery costs have fallen by approximately 30% per kilowatt-hour, while total vehicle costs have been reduced by more than 15%.
Efficiency improvements in manufacturing are also delivering financial benefits. According to Mercedes-Benz, energy efficiency measures at its plants have already generated savings in the tens of millions of euros. The company had previously reported cumulative energy savings of approximately 570 gigawatt-hours over a two-year period.
Billions invested without a dedicated sustainability budget
The transformation has already required substantial investment. According to Mercedes-Benz, the company has spent a double-digit billion-euro amount on transforming its vehicle portfolio, including the development of electric and powertrain-flexible architectures and battery technologies.
However, Mercedes-Benz does not maintain a separate investment budget for its Ambition 2039 climate strategy. Instead, the relevant expenditure is integrated into its overall investment planning.
Beyond vehicle development, these investments cover areas including renewable energy, material sourcing, logistics and the circular economy.
As an indicator of investment in environmentally sustainable activities, Mercedes-Benz points to its reporting under the EU Taxonomy. In the 2025 financial year, 29.4% of the Group's investments were taxonomy-aligned, compared with 30.1% in the previous year.
The corresponding share was 66.9% for capitalised development costs and 62.9% for investments in property, plant and equipment. These figures primarily reflect investment in the development of the company's future vehicle portfolio.
Industrial progress, but key questions remain
Mercedes-Benz can now point to concrete agreements and technological progress in its efforts to decarbonise the supply chain. The long-term aluminium agreement with Hydro provides a firmer foundation for reducing material-related emissions, while new steel production processes offer further opportunities.
The additional figures on battery and vehicle costs also demonstrate how Mercedes-Benz is increasingly managing its transformation with a focus on economic viability. Its target of achieving comparable margins between electric and combustion-engine vehicles by the end of the decade provides an important benchmark.
Nevertheless, significant uncertainties remain around the company's long-term climate targets. The explicit dependence on market conditions for reducing use-phase emissions, combined with the relatively modest reduction in the carbon footprint of its overall fleet, highlights how heavily the strategy relies on continued electrification.
Whether Mercedes-Benz can translate its industrial progress into substantially greater reductions in fleet-wide lifecycle emissions will become clearer over the coming years.
