German luxury cars are in a quality crisis, with sales dropping by another 10% in the first quarter. How can they regain the Chinese market?

On June 13th, the Defective Product Recall Technical Center of the State Administration for Market Regulation issued three recall notices regarding Mercedes-Benz, involving imported A-Class, CLA-Class, GLA-Class, domestic EQC, domestic C-Class, and GLC SUV vehicles, totaling 16,100 units. The reasons for the recalls include potential safety hazards and emission risks.

In May, Mercedes-Benz recalled 33,400 vehicles due to safety concerns, including imported G-Class and domestic E-Class vehicles.

Before this large-scale recall, Mercedes-Benz also experienced widespread in-vehicle system failures. According to media reports, on June 12th, Mercedes-Benz owners in many parts of the country encountered widespread in-vehicle system failures, rendering the in-vehicle navigation, CarPlay, etc. inoperable. Some owners even reported that the voice control function was also affected.

Frequent recalls and widespread in-vehicle system failures have made Mercedes-Benz's situation in China even more difficult. In 2024, Mercedes-Benz sold 683,600 vehicles in China, a year-on-year decrease of 7.3%. In the first quarter of 2025, Mercedes-Benz sold 152,800 vehicles in China, a year-on-year decline of 10%.

To boost sales, Mercedes-Benz has been continuously reducing prices in China, but the situation it faces cannot be solved simply by price cuts. Previously, Mercedes-Benz stated that it would continue to increase investment. From 2025 to 2027, it will launch a number of exclusive products in the Chinese market, covering all market segments and drive forms. Can Mercedes-Benz reverse its current decline by increasing investment in China?

Price Cuts Fail to Reverse Sales Decline

The C-Class, GLC, and E-Class are the three major sales pillars of Mercedes-Benz in the Chinese market, and their prices have also been continuously reduced in recent years. For the 2025 facelifted C200L Sport Edition with a guide price of 334,800 yuan, dealers are offering it at 234,800 yuan; for the 2025 facelifted C260L with a guide price of 356,800 yuan, dealers are offering it at 256,800 yuan.

Overall, the dealer prices of the C-Class are about 100,000 yuan lower than the guide prices.

According to media reports, for the Mercedes-Benz GLC with a guide price ranging from 427,800 to 531,300 yuan, the maximum discount at the terminal is 120,000 yuan; for the Mercedes-Benz E-Class with a guide price ranging from 451,800 to 599,800 yuan, the discount at the terminal also exceeds 100,000 yuan.

Behind the price cuts is Mercedes-Benz's attempt to reverse its sales in the Chinese market - In 2024, Mercedes-Benz sold 683,600 vehicles in China, a year-on-year decrease of 7.3%. In the first quarter of 2025, Mercedes-Benz sold 152,800 vehicles in China, a year-on-year decline of 10%.

The decline in sales in the Chinese market has also affected the company's performance. In 2005, Beijing Automobile and Mercedes-Benz jointly established Beijing Benz, with the two parties holding 51% and 49% equity respectively. According to Beijing Automobile's financial report, Beijing Benz's operating income in 2024 was 21.747 billion euros, a year-on-year decrease of 3.36%; the profit after tax was 2.443 billion euros, a year-on-year decrease of 18.5%.

With the rise of Chinese domestic brands, Mercedes-Benz is facing considerable pressure. According to data from the Passenger Car Association, from January to May, the retail market share of domestic brands was 64%, an increase of 7.9 percentage points compared to the same period last year. Among joint-venture brands, the retail share of German brands in May was 15.3%, a year-on-year decrease of 3.3 percentage points; the retail share of Japanese brands was 12.6%, a year-on-year decrease of 2.2 percentage points; the retail share of American brands was 5.2%, a year-on-year decrease of 1.5 percentage points.

The rise of domestic brands is due to their advantages in new energy vehicles. In May, the retail penetration rate of new energy vehicles in the overall domestic passenger car market was 52.9%. Among them, the penetration rate of new energy vehicles among domestic brands was 74.6%; the penetration rate of new energy vehicles among luxury cars was 25.0%; while the penetration rate of new energy vehicles among mainstream joint-venture brands was only 6.4%.

However, Mercedes-Benz's layout in the electric vehicle market is significantly behind. In 2024, Mercedes-Benz's global sales of pure electric vehicles were only 185,000 units, a year-on-year decrease of 23%. In the first quarter of 2025, the sales of pure electric vehicles were 45,500 units, a year-on-year decrease of 10%.

According to the electric vehicle sales data compiled by Chezhuzhijia, in 2024, the sales of the Mercedes-Benz EQE SUV were 7,321 units, the sales of the Mercedes-Benz EQB were 3,645 units, the sales of the Mercedes-Benz EQE were 3,141 units, and the sales of the Mercedes-Benz EQA were 2,721 units. In the first five months of 2025, the sales of the Mercedes-Benz EQB were 1,395 units, the sales of the Mercedes-Benz EQE SUV were 1,341 units, the sales of the Mercedes-Benz EQA were 861 units, and the sales of the Mercedes-Benz EQE were 635 units.

Such sales performance of electric models has made Mercedes-Benz's electric vehicles less noticeable in the Chinese market.

Most of the vehicles recalled by Mercedes-Benz this time are also electric models. Beijing Benz will recall some domestic EQC vehicles produced between November 30, 2018, and September 17, 2022, starting from September 27, 2025, totaling 13,447 units. Due to the design of the battery management system software in some vehicles within the recall scope, the high-voltage battery may experience thermal runaway in extreme cases, which may lead to vehicle fires and pose safety hazards.

Mercedes-Benz (China) and Beijing Benz will recall some domestic C-Class and GLC SUV vehicles produced between April 25, 2023, and August 17, 2023, totaling 252 units; and some imported S-Class and EQE vehicles produced between February 8, 2023, and October 10, 2023, totaling 257 units. Some vehicles within the recall scope used incorrect fuse boxes during previous recall repairs, which may cause malfunctions in the associated systems. The vehicle may lose power, and the restraint system, instrument display, etc. may be affected. In addition, the risk of fire cannot be excluded, posing safety hazards.

Meanwhile, Mercedes-Benz (China) will recall some imported A-Class, CLA-Class, and GLA-Class vehicles produced between December 2, 2020, and December 12, 2022, totaling 2,151 units. Due to manufacturing issues, the shape of the nozzles on the turbocharger turbine housing of some vehicles within the recall scope may not meet the specifications. Under specific driving conditions, they may not meet the emission requirements, posing potential emission risks.

The continuous decline in sales and the quality issues reflected by the large-scale recalls have also put Mercedes-Benz under more severe market tests.

Trailing in Electrification Layout Compared to Other Automakers

In February 2024, Mercedes-Benz stated that it would no longer adhere to its original goal of fully transitioning to electric vehicle sales in major markets by 2030. Instead, it will develop both fuel-powered and electric vehicles. The current plan is to launch a new lineup of internal combustion engine models by 2027, enabling internal combustion engines to continue into the 2030s.

At the 2024 earnings conference, Mercedes-Benz stated, "From 2025 to 2027, Mercedes-Benz will launch the largest new car offensive in its history."

Mercedes-Benz revealed that it has formulated a powerful product update plan with as many as 36 new products. Among them, there will be 4 new products in 2025 (3 fuel-powered vehicles and 1 electric vehicle), 18 new cars will be launched in 2026 (8 fuel-powered vehicles and 10 electric vehicles), and 14 new cars will be launched in 2027 (7 fuel-powered vehicles and 7 electric vehicles). Among them, in the high-end luxury segment, 10 new fuel-powered and 10 new electric vehicles will be launched; in the core luxury product group, 4 fuel-powered and 3 electric vehicles will be launched. In the young luxury segment, a total of 3 fuel-powered and 4 electric vehicles will be launched.

Meanwhile, Mercedes-Benz stated that it will continue to increase investment. From 2025 to 2027, it will launch a number of exclusive products in the Chinese market, covering all market segments and drive forms.

Data shows that since 2019, Mercedes-Benz has invested up to 10.5 billion yuan in R & D in China, mainly in the fields of electrification and intelligence, and has established the largest and most powerful R & D network outside Germany.

In addition, in 2017, Daimler (the Mercedes-Benz brand) participated in the Series B financing of the autonomous driving startup Momenta. In 2024, Mercedes-Benz planned to increase its investment in Momenta and will adopt its autonomous driving software in at least four models launched in China from 2025 to 2027.

However, compared to other multinational automakers, Mercedes-Benz's localization of electrification seems to be progressing more slowly.

In April 2024, Shenyang City and BMW Group held a signing ceremony for deepening strategic cooperation. BMW Group announced that it would continue to deepen its layout in China and invest an additional 20 billion yuan in the large-scale upgrade and technological innovation of Brilliance BMW's Dadong Plant, laying a solid foundation for the local production of BMW's "New Generation" models starting in 2026. This is a larger investment compared to Mercedes-Benz's 10.5 billion yuan.

In May 2024, Audi signed a cooperation agreement with SAIC Group and SAIC Volkswagen to further strengthen local cooperation. Audi will jointly develop a new platform dedicated to the Chinese market - the "Advanced Digitized Platform" - with SAIC Group and will build a new generation of high-end intelligent connected vehicles based on this platform. In November of the same year, Audi officially launched a new brand "AUDI" dedicated to the pure electric market in mainland China, which is jointly developed by Audi and SAIC.

In May 2025, the pre-sale of the FAW-Audi Q6L e-tron began. It is equipped with Huawei's Qiankun Intelligent Driving system and a dual-lidar and visual fusion perception solution.

As other automakers are also increasing their cooperation with Chinese companies, Mercedes-Benz needs to find its own rhythm as soon as possible to maintain its position in the Chinese market. However, with increasingly fierce competition, time may be running out for Mercedes-Benz.

This article is from the WeChat official account "Visibility in the Auto Circle", author: Du Ge. Republished by 36Kr with permission.