With the rollout of its battery-powered EQA: selling small electric cars without a big profit squeeze, Mercedes-Benz has taken one of the most difficult industry challenges. This spring the brand’s first fully-electric compact model will hit European showrooms. The Daimler AG unit said ahead of the EQA’s unveiling on Wednesday after strengthening the mid-size EQC sport-utility vehicle and the EQC van. The EQA is based on technology from an existing combustion-engine car unlike Volkswagen AG’s ID.3 or Tesla Inc.’s Model 3. The underpinnings of its GLA crossover have been modified by the German manufacturer to reduce investment and time compared to building an electric hatchback from scratch.

Mercedes’s lower-priced electric cars of the first generation will likely create profit for some time until the battery prices drop further and the company develops EV-specific underpinnings according to a Bloomberg Intelligence analyst, Michael Dean. The mass-market EV of the company will help to meet the emissions rule in Europe and China. The electric sibling of the full-size S-Class sedan — will be introduced later this year while the first Mercedes is based on dedicated EV technology. A separate platform that will create producing small and mid-size battery-powered models more efficiently in about four years. When it comes to bolstering its EV offerings the world’s biggest luxury-car maker has little time to waste. Daimler meets Europe’s CO2 targets in 2020 due to the Surging demand for plug-in hybrids. But right now it is unclear that for how long subsidies for vehicles relying partially on combustion engines will last. Tesla might start making a hatchback for Europe at its factory that’s under construction near Berlin according to Elon Musk.

Ola Kallenius, Chief Executive Officer of Daimler has vowed to give focus more on larger luxury cars like the S-class and GLS SUV so that he can generate enough funds for his electric car shift. Mercedes said that EQA is targeting urban, young customers will be strengthened by an all-wheel-drive version. For Mercedes, it might take up to 2024 or 2025 to make competitive mass-market EVs. A continued positive earnings momentum will likely be experienced by the manufacturer as soon as the sales of the new S-class starts.

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