Daimler Chief Executive Dieter Zetsche said electric cars have so far failed to gain widespread acceptance.
"They are an exciting concept but have a rather slow market adoption rate," Zetsche said on the eve of the Paris auto show. "A plug-in hybrid is the easy-entry version for those who are still a little uncomfortable with electric cars."
The new Mercedes-Benz S500 plug-in hybrid combines a conventional combustion engine with an electric motor, a concept that may prove more popular with customers.
The car is able to travel 33 kilometers using just electric motors, Zetsche said.
(Reporting by Edward Taylor, editing by David Evans)