Name: Mercedes in Crisis? Why the Three-Pointed Star Is Losing Its Shine
Uploaded: 2026-03-15T23:05:33.000Z
Duration: 13 min 7 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Is the sheen of the three pointed star fading?

Has stiff competition from software forward?

Chinese brands dealt Mercedes a knockout blow.

All foreign automakers who have been operating in China were hit hard by this price.

And has the German heavyweight's own strategy of luxury first simply not paid off?

Mercedes have pushed far too high up market.

We have a rock solid balance sheet to take on the next phase of transformation.

Rev delves in 2025 was a turbulent year for Mercedes Benz.

A 57% plunge in operating profits, a 9% dip in global car sales and a 19% drop in sales in China, its most important market.

Tariffs imposed by the US totaled roughly $1.2 billion.

High energy prices in Europe, a fallout of Russia's invasion of Ukraine pushed up production costs consistently.

That meant earnings generated abroad translated into fewer euros on the balance sheets.

While all these factors go some way towards explaining the reasons behind the dramatic decline, they don't indicate when this downturn might end.

Indeed, Mercedes own projections suggest that profit margins will remain compressed in 2026.

Is this a temporary blip or is it something deeper shifting within the company?

To answer this, we need to look beyond the numbers and examine the strategy that shaped Mercedes in recent years.

They made some strategic moves or strategic decisions that turned out to be not like the best.

And they corrected some structures strategic mistakes of the past.

In particular we saw like four strategic U turns within the last 18 months.

The first was Mercedes focus on the luxury segment.

Something CEO Ola Kalanius had been sure was the right move for the brand.

The company's goal was to sell more luxury cars.

It proved to be a tightrope walk that didn't pay off.

The trouble is that luxury is more than just about the sophistication of the car, the price of the car and so on.

You cannot have mass volume presence with luxury because you erode that exclusivity.

And so this is a very difficult line to tread for a company like Mercedes, which has, you know, quite a lot of high fixed cost.

That strategy has been largely reversed now with attention being refocused on volume oriented offerings like the A class.

Despite initial hiccups, the A class was a success.

The first generation sold around 1.1 million units between 1997 and 2004, proving it was a volumes product.

But since the car didn't align with the brand's luxury only strategy.

Now not only does the A class remain in production, a successor is in the works.

Mercedes had also positioned itself as a leader in assisted driving.

It was the first manufacturer to receive international approval for Level 3 Autonomous driving technology with its drive pilot system.

But with limited demand and regulatory frameworks proving to be slow, the resources devoted to expensive driverless tech have now been reduced and reallocated.

Perhaps Mercedes biggest u turn relates to its EV strategy.

The brand initially focused on large premium electric models with significant battery capacity and even more significant price tags.

But these only appealed to a very small demographic.

They've tried to sell large SUV style or very expensive sports car style electric vehicles for which there is a limited demand at the best of times.

Instead of integrating electric vehicles seamlessly into Mercedes core design language, the company created a separate identity with distinct styling and branding.

The intention was to signal a bold electric future.

But it diluted one of Mercedes strongest assets, its instantly recognizable design and heritage.

The fallout was dramatic, particularly in China, its most crucial market.

Right now we have like more than 100 EV brands arising within China and compete against each other.

And in this kind of situation, Mercedes decided to not use their biggest asset like their iconic design, their brand, and

just like introduce a new brand and be just one of many.

Mercedes is now reintegrating its EVs into its core brand identity, ditching the EQ sub brand.

It hopes this will revive sales, especially in China.

As it seems here, Mercedes mistakes were amplified the most.

Reduction in sales is mainly down to managing the fierce competition in China.

So that is where you will find the major part of that reduction, where we don't go for market share at all cost.

For all German car makers, China is a vital market and one that's embraced the transition to EVs.

In 2025, new energy vehicles comprised over 50% of all car sales in China.

And its car market is saturated with sleek, futuristic EVs from domestic manufacturers, often priced more competitively than any EVs Mercedes has on offer.

All foreign automakers who have been operating in China were hit hard by this price war.

A lot of the value you pay when you buy a Mercedes is connected to the brand.

If you see a Mercedes with a discount of 30 to 40%, then kind of consumer perception is shifting.

Is this really the luxury brand, which I always learned it was?

And while traditional German carmakers, including Mercedes, suffered growing pains trying to go electric, some Chinese carmakers started with a clean slate.

Now they're building tech packed machines that appeal to the average Chinese car buyer, who at around 30 is 20 years younger than the average German one.

In China, cars are often thought of as connected devices, valued for software interfaces and updates, not just engineering and heritage alone.

In China, German car brands and especially Mercedes are bought for their combustion cars.

But when consumers want to buy a software defined ev, a German brand is not what comes to their mind.

You see some of the sophistication of that coming out of China at the moment is quite astonishing.

The cleverness in the design, inside the sophistication, the flexibility just outpaces anything that you see in Europe.

And so I think there has to be a lot more work on developing things which the industry has traditionally called surprise and delight features.

There's not enough of that inspirational aha moment coming out of German industry and German design at the moment.

In 2024, Mercedes sold around 680,000 cars in China, down south 7% from the year before.

The further drop in sales in 2025 doesn't just have to do with the vehicles on offer.

It's also a product of China's current economic climate, where a property sector crash and deflation mean people simply aren't buying as many cars as they used to.

Though even taking that decline into account, China remains the industry's most important battleground.

China is kind of the ground zero right now of the automotive industry.

Meanwhile, Chinese brands are expanding globally, exporting their EV expertise and proving to be stiff competition for legacy carmakers.

For decades, German manufacturers relied on their engineering know how, believing a well built machine would be successful anywhere in the world.

But there is no one size fits all product strategy that works across multiple markets.

Although for many years the car industry has tried to create a more homogenous global market for cars in the interest of economies of scale in manufacturing, that basically hasn't worked, that we still see strong, at least regional differences in markets.

Which is precisely why, although it's cost intensive, a brand like Mercedes cannot afford to abandon any powertrain.

Under the Trump administration, combustion engines remain crucial in the United States and in emerging markets.

Hybrids offer a transitional bridge where infrastructure or consumer readiness is still evolving.

And electric vehicles are essential in China as well as for Europe's Climate goals.

Adoption towards electrification in the 150 plus markets that we serve around the world.

And it is clear to us that for the foreseeable future, minimum, the next 10 years, probably a little bit longer, it will be.