Pressure is mounting on carmakers to flood the market with low emission vehicles to avert heavy pollution fines as customers gravitate towards buying larger and heavier sports utility vehicles.
"We need to act in an economically rational way. It is very important to achieve adequate prices on these cars and not to destroy the pricing levels," Kaellenius said about the new electric cars Mercedes is getting ready to launch this year.
The European Union penalties are being imposed on carmakers who fail to lower levels of carbon dioxide pollution from 2020 and 2021 onwards.
Speaking at the company's annual results news conference in Stuttgart, Germany, Kaellenius said Daimler, which owns the Mercedes-Benz brand, would have a hard time meeting the new emissions limits.
"In the medium term I am confident. 2020 and 2021 will be a challenge," Kaellenius said.
(Reporting by Edward Taylor; Editing by Michelle Martin)
