Mercedes-Benz’s chief executive, Ola Kaellenius, has tempered expectations for the company’s performance in China, acknowledging that the German automaker is under no illusions about the intensifying challenges ahead in the world’s largest vehicle market. Speaking in a video interview at the Automobilwoche industry conference in Berlin on 20 November, Kaellenius outlined a pragmatic stance, emphasising that while market consolidation among the more than 100 competing carmakers is inevitable, it will unfold gradually over the coming years, sustaining elevated rivalry in the interim.
The executive’s comments come against a backdrop of stark underperformance for Mercedes in China, where third-quarter sales plunged 27 per cent year-on-year to levels not seen in nearly a decade, according to Bloomberg. This downturn, which dragged global car and van deliveries down 12 per cent to 525,300 units for the period, contrasts sharply with rival BMW’s flat sales in the same market and underscores broader pressures on European luxury brands. Local powerhouses like BYD and Geely have capitalised on aggressive pricing, rapid innovation in electric vehicles, and consumer preferences for tech-forward features, eroding foreign incumbents’ share from over 50 per cent a decade ago to below 30 per cent in 2025.
Kaellenius highlighted the structural shifts reshaping China’s automotive landscape, where domestic firms now dominate nearly 70 per cent of new-energy vehicle sales through vertical integration and state-backed supply chains. As reported by Reuters, Mercedes is responding by localising production costs, accelerating software updates for models like the EQS and GLC, and avoiding deep price cuts that could dilute brand prestige – a strategy echoed across the sector as Volkswagen and Audi grapple with similar 20-25 per cent sales drops. The company’s joint venture with Beijing Automotive Industry Group remains pivotal, churning out over 600,000 units annually from facilities in Beijing and Fujian, but adapting to Beijing’s “Made in China 2025” push for indigenous tech is paramount.
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Looking ahead, Kaellenius anticipates a “multi-year task” to regain footing, with Mercedes investing €10 billion in electrification by 2030 to roll out 25 new battery-electric models tailored for Asian tastes, including enhanced autonomy and infotainment. Yet, the path is fraught: China’s EV penetration hit 45 per cent in the first nine months of 2025, up from 25 per cent in 2023, while export tariffs in key markets like the US and Europe – now at 100 per cent on Chinese EVs – indirectly squeeze domestic overcapacity, flooding local shelves with affordable hybrids and pure electrics.
For Mercedes, which derives about 16 per cent of its €153 billion in 2024 revenue from China, the stakes are existential. The slump contributed to a 31 per cent drop in third-quarter operating profit to €2.7 billion, prompting €876 million in restructuring charges for job cuts and efficiency drives targeting €5 billion in annual savings by 2027. Despite these headwinds, Kaellenius remains bullish on long-term opportunities, citing China’s role as a testing ground for software-defined vehicles and partnerships with firms like Nvidia for AI integration.
The broader industry echoes this caution. BMW’s chief warned of “Darwinian” pressures, while Porsche slashed China forecasts by 20 per cent. Analysts at AlixPartners project that of China’s 129 active EV brands, over 100 could vanish by 2030 through mergers, potentially easing the fray but not before inflicting pain on outsiders. As global trade tensions simmer – with the EU probing subsidies and the US mulling further barriers – Mercedes’ resilience will hinge on blending Teutonic engineering with agile localisation, ensuring the three-pointed star endures in the dragon’s lair.