Mercedes Enters New Era With Flagship Sedan Going Electric

(Bloomberg) --

Mercedes-Benz has long billed the S-Class as the pinnacle of luxury and performance for the combustion age. It's now intent to do the same with an all-electric sibling.

The EQS sedan the German manufacturer unveiled Thursday boasts market-leading driving range and a luxurious interior rarely found in battery-powered cars. It's meant to usher in a new era for Daimler AG's main brand, which spent decades designing high-powered combustion rides chauffeuring around captains of industry and heads of state.

Read more: The Best Thing About the New Electric Mercedes Is Not Under the Hood

Attempts by BMW's 7 Series and Audi's A8 to win over more of those deep-pocketed customers yielded only modest results over the years. But Tesla Inc.'s Model S outselling the S-Class in markets including the U.S. proved that the electric shift wouldn't spare the upper echelons of the automotive world.

“Mercedes claims that the S-Class is the best car in the world, hence the EQS should be the best electric car in the world, and it will most likely be scrutinized with that expectation in mind,” said Roman Mathyssek, a consultant at Arthur D. Little GmbH. The bar for the Mercedes EQS is “very high in every respect.”

Criticized for taking too long to embrace EVs, Stuttgart-based Daimler is under pressure to prove it can retain its engineering prowess in the electric age, where expertise in battery technology and software is key.

Tesla is amping up the Model S with a fresh high-performance version, and new rivals like Lucid Motors Inc. are plotting inroads into a lucrative segment still largely dominated by Mercedes, BMW, Audi and Toyota Motor Corp.'s Lexus.

The EQS, which features an optional digital panel stretching across the entire dashboard, will be the first Mercedes built on a dedicated platform for battery-powered cars. It does away with the engineering compromises that earned the brand's first EV, the EQC SUV, criticism from Tesla aficionados and Mercedes loyalists alike.

Initial feedback from analysts who drove a camouflaged prototype of the EQS was positive:

• “Mercedes has succeeded in distilling the essence of its brand DNA into a completely new from-the-ground up platform,” Societe Generale analyst Stephen Reitman said in a note. “The EQS sets new benchmarks in comfort, handling, technology, material quality and we believe desirability for sedans in the EV space.”

• “This is the ultimate ‘where luxury meets EV' limousine,” Sanford C. Bernstein analyst Arndt Ellinghorst wrote. “Very impressive performance and amazing interior.”

• The EQS will likely “set the benchmark” in terms of technical features, design and quality, according to Deutsche Bank analyst Tim Rokossa. The vehicle could “improve the perception of the entire brand.”

While the praise should come as a boon to Mercedes, it remains to be seen how well the EQS will sell and -- more importantly -- if it can win over more Tesla customers than it lures away from the highly profitable S-Class.

Volumes of the EQS “will depend heavily on the price point versus competition,” UBS Group AG analysts led by Patrick Hummel said in a note, adding that they expect the electric model to cost more than a comparable S-Class. “While the vehicle is unlikely to challenge the performance of Tesla Model S, it will likely deliver a better luxury experience.”

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