Mercedes CEO warns China’s brutal price war is here to stay

Mercedes-Benz Group AG CEO Ola Källenius has declared that intense pricing pressure in China’s auto market is not a temporary blip but a permanent fixture. Speaking near Helsinki, Finland, Källenius said fierce competition from Chinese brands—especially those led by BYD—has become the “new reality” and will persist for years. Chinese manufacturers are aggressively targeting the luxury segment, directly challenging Mercedes models such as the S-Class and G-Wagon with heavy investment and rapid model launches. This has contributed to a 30% year-over-year decline in Mercedes’ second-quarter sales in China, mirroring broader industry restructuring as brands like Porsche, BMW, and Audi also reel from the downturn. The luxury-car market in China has further contracted due to a prolonged property crisis, dampening high-value purchases. Despite the challenges, Källenius noted that Mercedes still “dominates” the top-end segment, including its AMG performance models. To counter the slump, Mercedes is rolling out the redesigned GLA compact SUV, which goes on sale in Germany starting July 30. The GLA is offered with multiple powertrains, including a fully electric version with a claimed range of up to 657 kilometers (408 miles). German market pricing starts at approximately €48,600 ($55,300). The launch is a strategic move to rebuild volume without sacrificing profitability, especially as demand weakens in China and the company’s reliance on higher-priced vehicles leaves it vulnerable to a global luxury downturn. Mercedes is aiming to return to annual sales of around 2 million vehicles in the medium term, up from roughly 1.8 million last year. The company also announced further cost-cutting measures, particularly in Germany, to stabilize margins following the steep sales drop in China. While the GLA is primarily targeted at European buyers—where EV demand is rising—its lower roofline, longer wheelbase, and sportier stance give it a more aggressive, “predator-like” presence compared to its predecessor. The SUV also offers increased interior space. Mercedes insists it is managing pricing in China “as carefully and financially sound as we can,” but the structural shift in the market is undeniable.