Mercedes-Benz Faces Investor Heat Over China Recovery Strategy, Reuters Reports

Investors pressed Mercedes-Benz on its China recovery plans at the automaker's annual shareholders' meeting on Thursday, warning that an overly luxury-focused strategy could undermine the German brand's efforts to win back consumers in the world's largest car market, according to a Reuters report.

Like rivals BMW and Audi, Mercedes has lost significant ground in China, struggling to keep pace with fast-moving domestic brands such as BYD, NIO, and Li Auto, all of which offer technology-rich premium vehicles at prices that undercut European incumbents. Reuters reports that Mercedes' China sales fell 19% last year to 552,000 vehicles, with the decline accelerating sharply to 27% in the first quarter of 2026.

At the Stuttgart meeting, investors questioned whether Mercedes was doing enough to meet Chinese consumer standards on technology. Moritz Kronenberger of Union Investment, a top-20 shareholder holding approximately $276 million in stock, argued that the brand's traditional appeal is fast becoming a liability. He also criticised Mercedes for developing new products from the flagship S-Class downward, rather than adopting a more mass-market-led approach in line with Chinese rivals.

Tanja Bauer of Deka Investment, which holds around $191 million in Mercedes stock, flagged what she described as "the risk of an overly narrow focus on luxury" in her remarks to the meeting, Reuters reports.

In response, CEO Ola Källenius pointed to a sweeping product and technology overhaul for China, involving seven new models by 2027, alongside the rollout of advanced driver assistance systems co-developed with Chinese technology firm Momenta. Källenius described the initiative as the most ambitious in the company's history, backed by local development and partnerships. Finance chief Harald Wilhelm set out a medium-term volume target of 500,000 to 600,000 annual vehicle sales in China, a range that would represent a stabilisation of the brand's market position.

The pressure on Mercedes' luxury-first positioning is not confined to China. In India, the brand's dominance in the luxury segment is also showing signs of strain. BMW Group India overtook Mercedes-Benz in quarterly luxury car sales for the first time in more than a decade in Q1 2026, according to VAHAN registration data.

BMW recorded 4,944 units in the January–March period against a combined 4,862 units for Mercedes-Benz India and Mercedes-Benz AG, a narrow but symbolically significant gap. The divergence reflects contrasting strategic choices: Mercedes-Benz India has moved up the value chain, with its average selling price nearing ₹1 crore, while BMW has expanded its reach among first-time luxury buyers through a wider, more accessible portfolio including the iX1 EV.

Mercedes-Benz does retain the No. 1 position for the full financial year FY2026, with 18,160 units against BMW's 17,301, but the narrowing gap suggests that its premium-over-volume approach faces growing competitive pressure in one of the world's fastest-growing luxury car markets.