Mercedes-Benz is cutting authorised dealerships in China at a pace that marks a dramatic shift from its previous expansion.
A sharp reversal after years of expansion
After years of adding about 75 dealers annually, the brand is now reportedly preparing to close more than 100 outlets, with nine 4S stores losing authorisation in a single week.
The contraction reflects more than a routine channel adjustment. It shows the pressure on a traditional luxury brand that is losing share to Chinese new-energy vehicles, struggling to defend its petrol-car base and failing to build a compelling electric line-up for local buyers.
Some former Mercedes sites are reportedly shifting toward Huawei-linked Harmony Intelligent Mobility brands, a symbolic sign of how dealer confidence is moving from old premium badges toward fast-growing domestic technology-led labels.
Weak earnings make the retreat harder to ignore
Mercedes' global and China numbers have deteriorated. In 2024, global new-car sales fell 3 per cent, while China sales fell nearly 7 per cent and China revenue dropped 8.5 per cent. In the first quarter of 2025, global net profit fell 43 per cent, and China sales declined 10 per cent to 152,800 vehicles.
Second-quarter 2025 revenue fell 9.8 per cent to 33.15bn euros. Earnings before interest and tax dropped 68.56 per cent to 1.27bn euros, from 4.04bn euros a year earlier. On July 30, Mercedes-Benz shares fell 3.19 per cent in European trading, pushing market value below 50bn euros.
Large dealer networks are expensive to maintain when volume weakens. A single second-tier-city store can face annual rent above about $1.1mn, with staff costs accounting for a large share of revenue. Electric vehicles also require less routine servicing than petrol cars, reducing a traditional dealer profit pool.
In some cities, according to the article, certain dealers have struggled to sell even 30 vehicles a month, making it difficult to cover property costs. Across hundreds of outlets, the burden becomes heavy even for a brand with Mercedes' history.
The problem is structural, not only cyclical
Mercedes' 13-year channel expansion cycle in China is ending because the company's sales decline is tied to deeper market shifts. Its 2024 revenue fell 4.5 per cent to 145.6bn euros, and passenger-car revenue fell 4 per cent. China sales dropped to 683,600 vehicles, down nearly 7 per cent.
Chinese consumers have been moving toward more affordable domestic EVs with stronger digital features. Mercedes' main China EV products, including EQE and EQE SUV, have struggled in a market where Chinese rivals offer longer range, stronger assisted driving and more localised software.
The EQE SUV offers up to 609km of range, while some Chinese models such as Xiaomi YU7 exceed 700km. In intelligent driving, brands such as Aito and Voyah have moved quickly with Huawei-supported L2-plus systems. Mercedes' MB.OS software platform has been delayed and has not yet become a strong product advantage.
Sales reflect that gap. Passenger-car association data cited in the article show the EQE and EQE SUV have often remained in three-digit monthly sales. Mercedes' global battery-electric sales in 2024 were 185,100 units, down 23 per cent from 2023.
Discounts are not saving the petrol base
Mercedes still relies heavily on petrol models such as the E-Class and C-Class in China. Yet the price war has forced large discounts. Sales staff at some Mercedes stores have reportedly offered the C260L and GLC260L with discounts above about $14,000, and in some cases as high as roughly $19,000.
Those cuts can stimulate short-term sales, but they have not repaired the broader decline. Beijing Benz retail sales in February were 35,000 units, down 5.1 per cent year on year. C-Class retail sales fell more than 20 per cent, GLC retail sales dropped 5.3 per cent and E-Class monthly sales were below 10,000.
At the same time, tighter fuel-vehicle regulations make petrol development more expensive, while electrification requires product restructuring and possible model discontinuations. Mercedes appears caught between protecting legacy profits and investing fast enough to compete in China's intelligent-EV market.
Owners may bear the cost of the retreat
The most sensitive issue is what happens to customers when authorised stores close. The article cites owners who said they received little advance notice, could not reach store phone lines and were told to follow text-message notices without a clear service plan. Some said prepaid maintenance or promised dealer benefits had become uncertain after staff departures and authorisation termination.
If a channel contraction is planned carefully, after-sales obligations can be transferred smoothly. The complaints cited in the article suggest that some Mercedes customers experienced confusion and felt abandoned.
That matters because luxury branding depends on trust long after the sale. If owners believe service promises can disappear when a dealer loses authorisation, the brand's premium image weakens.
Quality concerns add to the trust problem
Mercedes has also faced repeated recalls in China. Data from China's State Administration for Market Regulation cited in the article show more than 10 Mercedes recalls in 2024, covering more than 1.2mn vehicles, including E-Class, GLA and C-Class models. On September 20, 2024, Mercedes recalled more than 280,000 locally produced GLA vehicles in one action.
In the first two months of 2025, the brand issued three more recalls involving more than 30,000 vehicles, including locally produced GLB and E-Class models. One E-Class recall involved incorrect drivetrain control-unit software that could display inaccurate torque and power values and potentially fail to meet emissions and onboard-diagnostics requirements.
For a brand built on engineering authority, repeated quality and service concerns are damaging. China's buyers are no longer willing to accept premium prices simply because a badge once carried automatic status.
Dealer cuts cannot fix a weak product strategy
Mercedes' channel reduction may lower costs and help the company survive a period of weaker demand. It will not by itself solve the brand's China problem.
The deeper issue is a mismatch between Mercedes' old model and China's new consumer logic. Buyers now compare technology, value, service, software and local relevance as much as heritage. If Mercedes cannot deliver stronger EVs, better software and more reliable customer care, a smaller dealer network may only mark the retreat rather than the recovery.
