In recent years, the global auto industry has aggressively pursued electric vehicle (EV) production, driven by carbon reduction goals and government policies. However, major car manufacturers are now refocusing on internal combustion engines (ICEs) as EV sales slow and consumer demand remains mixed.

Leading brands like Mercedes-Benz, BMW, Porsche, and General Motors are adjusting their strategies, balancing EV development with continued investment in gasoline and hybrid engines. This shift reflects economic, technical, and market challenges in the transition to full electrification.

Mercedes-Benz and BMW rethink their approach

At the end of February, Mercedes-Benz reported a nearly 25% drop in EV sales for 2024, with revenue falling by 5% and net profit down by 28%. Despite the company's commitment to electrification, gasoline and diesel models remain its best-selling vehicles.

From now until 2027, Mercedes-Benz plans to launch 19 new ICE models, compared to 17 EVs, signaling a strategic pivot from previous electrification goals. The company has also postponed its full transition to electric vans, opting to develop a new ICE-powered VAN platform instead.

Similarly, BMW has reaffirmed its commitment to ICE technology. Board member Jochen Goller told The Financial Times that the EV transition will take longer than expected. BMW will continue offering multiple powertrain options, including gasoline, diesel, hybrid, and EV models across the same vehicle lines, such as the X1 and 5 Series.

Porsche and GM adjust their strategies

Luxury automaker Porsche is also revising its EV strategy. Sales of its electric models in China—the world's largest EV market—fell by 28% in 2024, as domestic brands like BYD, Xiaomi, and XPeng increased competition.

To counter this, Porsche will introduce new gasoline and hybrid models, including an ICE version of the Macan SUV, which was originally planned to be fully electric by 2026. However, this shift is expected to reduce the company's profit margins in 2025 to 10-12%, down from its original 20% target.

Meanwhile, General Motors (GM) is doubling down on ICE production, investing over $500 million in its Arlington Assembly plant in Texas and $1 billion in two Michigan factories. These investments signal GM's confidence in the longevity of gasoline-powered large SUVs, even as it continues developing EVs.

Ford and Japanese automakers maintain ICE investments

Ford has also scaled back its electrification plans, discontinuing the F-150 Lightning electric truck and canceling a large electric SUV project. The company cited slowing EV demand and infrastructure challenges as reasons for maintaining ICE production in key markets where EV adoption remains low.

In Japan, Toyota, Mazda, and Subaru have all reaffirmed their commitment to internal combustion engines, while also developing carbon-neutral fuels. This dual approach allows them to comply with stringent emissions regulations while offering consumers a variety of powertrain options.

Consumer demand drives the shift

A 2024 McKinsey survey found that 46% of U.S. EV owners are considering switching back to ICE vehicles, with a global average of 29%. The top reasons include charging infrastructure issues, higher ownership costs, and range limitations.

By 2025, the decline in EV demand in the U.S. may accelerate, partly due to anticipated policy changes under President Donald Trump.

As a result, automakers are balancing their investments, ensuring that ICE vehicles remain available in markets where EV infrastructure is underdeveloped or consumer preferences favor traditional powertrains.

While EV technology continues to advance, internal combustion engines are far from obsolete. The world's leading car brands are adapting their strategies, prioritizing flexibility and profitability as they navigate the evolving automotive landscape.

The Vinh