On the Dash:
- Mercedes’ core car sales fell 8% in Q2, with China deliveries down 30% amid intensifying competition.
- U.S. sales rose 10% and BEV sales climbed 50% to 63,000 units, offsetting some China weakness.
- European automakers are cutting prices in China as BYD pushes discounts to record levels.
Mercedes-Benz Group AG‘s core car business fell 8% year-over-year in the second quarter, as competition in China intensified, the company said Wednesday. Mercedes’ full-year operating profit dropped 57% in 2025 as the company absorbed tariff costs and intensifying competition in China, according to Reuters.
The company delivered 417,800 vehicles in the April-June period. The decline follows a first quarter in which Mercedes sales fell 6%.
Luxury vehicle demand dives in China
Deliveries of Mercedes-Benz vehicles dropped 30% in China during the second quarter, compared with the same period last year. In a statement, the company attributed the fall to “an intensifying competitive environment and the timing of the company’s current product ramp-ups.”
Adding to the pressure, Bloomberg reported that a property crisis in China is stifling demand for luxury vehicles. Declining real estate values have eroded the spending power of affluent Chinese buyers.
Notably, Mercedes performed much better outside Asia, with North American sales climbing 13% despite import tariffs in that market, according to Bloomberg. U.S. sales also rose 10% during the quarter, while European deliveries increased 4%.
Deliveries of fully electric models in the region surged as well, with strong demand in Europe also lifting overall electric sales. Battery-electric vehicle (BEV) sales, including cars and vans, climbed 50% to reach 63,000 units globally.
Price war with China
European automakers are facing a price war with local brands in China, the world’s largest auto market. Earlier this year, BMW warned its 2026 core margin could fall to as low as 1%, citing softening demand in China.
BMW cut guide prices on 31 mainstream models earlier in 2026, with some reductions topping 10%, according to Gasgoo. Mercedes and Audi followed with their own price cuts. BYD pushed its average discounts on vehicles to a record 10% in March, according to data from Automotive World.
Investors and dealers should watch second-quarter earnings, expected later this summer. Two questions will matter most. Whether China’s price war keeps pressuring top-end margins is one. Whether the U.S. and European gains reported Wednesday can offset China for the rest of the year is the other.
