"The cost structure of the electric car is above that of the combustion engine car. We are working hard on lowering this," Kaellenius, who is due to take over from Dieter Zetsche after the company's annual general meeting on May 22, said.
"We need to work on the cost of vehicle architectures. From where we are now, we need to make a significant step by 2025 in terms of cost," Kaellenius said, declining to provide specific figures.
The 49-year-old CEO designate said he would continue to rely on alliances to drive down development and procurement costs for Mercedes-Benz.
"The intensity of cooperations will increase. The alliances will be not only with other carmakers and suppliers, but also with technology companies," Kaellenius said.
Daimler has struck alliances with Renault, Nissan and BMW to share development and procurement costs of trucks, buses and passenger cars.
Daimler is also relying on increasing economies of scale for electric car batteries as a way to drive down costs. It is also working to cut the use of expensive raw materials from electric car batteries. The carmaker wants to reduce the use of cobalt in electric car batteries.
On Saturday Reuters reported that Daimler's Chinese joint venture partner BAIC was seeking to buy a stake of between 4% to 5%.
Upon being asked whether he would welcome BAIC as a shareholder, Kaellenius said: "We welcome investors who see the future of mobility in Daimler and are invested for the long run."
Daimler plans to have a passenger car fleet composed of 50% electric and hybrid cars by 2030 and wants to have carbon neutral production by 2022, the carmaker said.
Reporting by Edward Taylor.