Mercedes-Benz Puts C-Class on Sale as Software Chief Departs and China Woes Deepen

Mercedes-Benz offers 12% discount on C-Class, loses software chief Östberg, and faces recall, as pricing pressure spreads to Europe.

Mercedes-Benz is offering a flat 12 percent discount across nearly all petrol and diesel versions of its C-Class saloon equipped with 48-volt mild-hybrid technology — one of the steepest markdowns the Stuttgart-based carmaker currently applies to an entire model line. The move signals a clear determination to defend volumes even at the expense of margin, and it underscores that pricing pressure is no longer confined to China, the market widely blamed for the group's recent guidance cut.

The discount arrives roughly three weeks after Mercedes-Benz lowered its full-year outlook, now expecting sales and revenue to come in slightly below last year's levels. While China has been the primary drag, the C-Class promotion suggests the competitive squeeze has spread to the company's home turf in Europe.

A Leadership Vacancy in a Critical Division

Compounding the operational strain, Chief Software Officer Magnus Östberg is leaving the company after nearly five years. Östberg, who joined in September 2021 and built up the organisation behind the in-house MB.OS operating system, is departing for personal reasons. No successor has been named, and his next professional move remains undisclosed.

The exit lands at an awkward moment. Mercedes-Benz has positioned software and automated driving as its key competitive answer to Chinese rivals, and the company recently announced that its "point-to-point" partially automated navigation system for urban traffic would launch across Germany in early 2027 — a project closely tied to the division Östberg oversaw.

The DZ Bank acknowledged the strategic importance of that roadmap on Thursday, reaffirming its "Buy" rating with a fair value of €55. Analyst Michael Punzet framed the autonomous-driving announcement as evidence of progress in software capability — the very area now losing its top executive.

Recall Wave Adds to Quality Concerns

The same week brought another headache: Mercedes-Benz initiated a recall covering the all-electric CLA and the GLB model line. The move extends a pattern of similar actions over recent months, keeping questions about quality control in the electric-vehicle division firmly in the spotlight.

On the product front, the company did receive some positive news. On Wednesday, it granted sales approval for the new CLA 45 4MATIC+, with pricing starting at €79,039.80. The high-margin performance segment continues to serve as a counterweight to the discounts applied in the volume business.

The Numbers Behind the Pressure

The second-quarter results illustrate the scale of the challenge. Group revenue fell to €32.06 billion, down 3.3 percent year on year. Mercedes-Benz Cars delivered roughly 419,400 vehicles, an 8 percent decline, with China sales plunging 30 percent. The US and Europe fared better, posting gains of 13 percent and 4 percent respectively.

The passenger car division's adjusted margin slipped to 4.0 percent from 5.1 percent a year earlier, though it remains within the company's 3 to 5 percent target band. An impairment charge of €704 million on a Chinese joint venture added further pressure to the bottom line.

There are bright spots. Battery-electric vehicle sales jumped 51 percent in the second quarter, and European order intake for electric models more than doubled. The company has consequently raised its xEV mix target to between 23 and 25 percent. Mercedes-Benz Financial Services also outperformed, lifting earnings by 70 percent to €492 million.

A Stock Waiting on the Sector

The share price has been moving with the broader market rather than on company-specific news. On Friday, the stock rose 2.6 percent to €46.76, part of a sector-wide recovery led by BMW. The previous day, it had gained 2.2 percent to €45.59, a move analysts could not attribute to any particular catalyst.

The stock remains down roughly 22 to 24 percent since the start of the year, depending on the trading day referenced, and sits about 27 percent below its 52-week high of €62.30. The C-Class discount campaign does little to reassure investors that the structural problems in the core business are being resolved.

Adding to the uncertainty is a legislative push in the US Senate that could ban the sale of vehicles under Chinese control. The proposed law would affect Mercedes-Benz given that Geely chairman Li Shufu holds 9.7 percent of the company's shares and Beijing Automotive Group owns another 5.0 percent.

Investors will get their next opportunity to assess the company's trajectory when third-quarter results are presented on October 28. Until then, the focus is likely to remain on China's recovery — and on who will step into Östberg's shoes to steer the software strategy forward.