Kallenius admitting China’s price war is permanent concedes what Mercedes’s own results made readily apparent. By Stewart Burnett<\/p>\n
Mercedes-Benz Chief Executive Ola K\u00e4llenius has said that the fierce pricing wars still rattling through China\u2019s car market are here to stay, telling reporters at an event near Helsinki: \u201ccompetitive intensity in China, I don\u2019t believe it\u2019s going to go away anytime soon. It\u2019s a new reality\u201d. Chinese brands, he noted, are spending \u201can enormous amount of money\u201d to break into the luxury segment German automakers like Mercedes have long dominated with models like the S-Class and G-Wagon.<\/p>\n
The pressure traces to BYD-led Chinese manufacturers\u2019 dominance in electric vehicles, which has fed rapid successive model launches and near-ruinous pricing that has already hit sales at Mercedes, Porsche, BMW and Audi, all now restructuring to become leaner. This edge in electrification has subsequently expanded into software and connectivity leadership. At the same time, China\u2019s luxury market has separately shrunk amid a protracted property crisis\u2014beginning several years ago with the collapse of Evergrande\u2014weighing on spending. K\u00e4llenius was, however, quick to emphasise that Mercedes still \u201cdominates\u201d the very top end.<\/p>\n
K\u00e4llenius made the trip to unveil the new GLA compact SUV, aimed at bolstering Mercedes\u2019s entry-level lineup with technology including 800-volt charging and an AI voice assistant, both of which were previously reserved for pricier models. The automaker is attempting a conscious break from the polarising and underperforming design of Mercedes\u2019s first EQS and EQE-generation EVs. This was a European launch, however: German orders opened on 30 July from \u20ac48,600 (US$55,700) as Mercedes targets a recovery to around two million annual global sales.<\/p>\n
Of course, it is the China numbers underpinning K\u00e4llenius\u2019 remarks that put this attempted recovery on thin ice. Mercedes has just reported a 30% Q2 2026 China sales drop, albeit roughly in line with the broader market\u2019s own decline. He pledged further cost cuts concentrated in Germany to partially address this. Full-year China sales fell 19% in 2025<\/a> to roughly 575,000 units, then dropped a further 27% in the first quarter of 2026 and 30% in the second, pulling volumes back to levels last seen in the 2010s, and far below the 774,000-unit peak reached in 2020.<\/p>\n