Imagine finally buying your dream car after years of hard work and driving it every day with pride, only to discover that a device installed in your vehicle is allegedly faking compliance with a key feature for which the brand is known.

A German luxury automaker founded in 1926, the Mercedes-Benz Group (MBGYY) touts its “The best or nothing” slogan. The company is renowned for its high-end vehicles, groundbreaking automotive technological innovations, and commitment to sustainable mobility.

However, its reputation may have just been tainted after a recent allegation led the company to pay a hefty price.

Mercedes-Benz $149.6 million settlement

Mercedes-Benz USA and its parent company, Daimler AG, have agreed to pay a $149.6 million settlement following allegations that the automaker installed emission-cheating devices in more than 211,000 vehicles.

According to the Delaware Department of Justice, the devices allowed the vehicles to pass emissions tests while violating state laws prohibiting unfair or deceptive trade practices. The settlement also includes more than $200 million in potential consumer relief.

The agreement applies to approximately 39,565 vehicles that had not been repaired or permanently removed from the road by August 1, 2023. Owners of those vehicles may be eligible to receive $2,000 per vehicle.

“For nearly a decade, Mercedes sold vehicles that were marketed as clean and environmentally responsible while secretly polluting far beyond legal limits,” said Delaware Attorney General Kathy Jennings in the filing.

“This settlement holds Mercedes accountable for deceiving consumers, evading emissions laws, and putting public health at risk. We expect honesty in the marketplace and clean air in our communities. Today’s agreement delivers both meaningful penalties and real relief for affected drivers.”

Under the settlement, Mercedes-Benz USA will pay the state $120 million. An additional $29.7 million will be suspended and may be waived if the company completes a comprehensive consumer relief program.

The agreement is still subject to court approval.

Mercedes-Benz settles an emissions lawsuit for $149.6 million amid falling sales.

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What Mercedes-Benz is accused of

Vehicle emissions are among the largest contributors to air pollution in Delaware, making compliance with emissions control regulations critical to maintaining air quality, according to Delaware Department of Natural Resources & Environmental Control Secretary Greg Patterson.

The complaint alleges that between 2008 and 2016, Mercedes-Benz USA installed devices in more than 211,000 vehicles that allowed the cars to exceed legal limits for nitrogen oxides (NOx) emissions while appearing compliant during testing. Despite this, the vehicles were marketed as environmentally friendly and fully compliant with emissions regulations.

Mercedes-Benz’s response to the allegations

While the agreement will resolve the legal proceedings, Mercedes-Benz denies any wrongdoing and maintains that the allegations are unfounded. The company stated that it has made sufficient financial provisions to cover the cost of the settlement.

“We take a holistic approach to environmental and climate protection and want to achieve improvements at all stages of the automotive value chain,” states Mercedes-Benz on its website.

“We support the Paris Climate Agreement and are convinced of its goals. That’s why environmental and climate issues are one of our sustainability focus areas. Our ambition is that by 2039, our entire fleet of new vehicles will be net carbon-neutral
 over their entire life cycle.”

This is not the first time the automaker has faced scrutiny over its emissions practices. In 2020, Mercedes-Benz USA agreed to pay $1.5 billion to the U.S. government and California state regulators to resolve similar allegations, according to records from the U.S. Department of Justice.

Similar settlement cases involving rival automakers

Mercedes-Benz is not alone in facing legal consequences over emissions-related misconduct. Several rival companies have previously reached settlements with states and federal regulators over emissions cheating and the development of defeat devices.

  • Fiat Chrysler: Paid $72.5 million in 2019 (Source:Connecticut Attorney General)
  • Bosch: Paid $98.7 million in 2019 (Source:Attorney General of Virginia Database)
  • Volkswagen: Paid $570 million in 2016 and $2.8 billion in 2017 (Sources:Office of the Attorney General for the District of Columbia and U.S. Department of Justice)

Mercedes-Benz faces declining car sales

Mercedes-Benz has reported a noticeable downturn in vehicle sales over the last few quarters, and this trend extends beyond its recent legal struggles.

In the third quarter of fiscal 2025, total revenue declined 7% year over year, while revenue for car sales also fell 7%. During the same period, total unit sales dropped by 12%.

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Mercedes-Benz attributes the decline to a global economic slowdown that occurred throughout the first three quarters of 2025, particularly in the U.S. The company noted that recent changes in trade policy and increased competition have further contributed to weaker demand.

In response to tariff-related pressures, the automaker implemented tighter inventory and stock management strategies. While these measures helped limit broader financial exposure, they also contributed to an overall 8% decline in unit sales compared to the same period in 2024. Sales in the U.S. were particularly affected, falling 17% year over year.

Some experts aren’t entirely yet that Mercedes-Benz can successfully carry out its long-term plans for electric vehicles and software.

“Uncertainty around execution on long-term electrification and software strategies is seen as a constraint on valuation, with investors waiting for clearer evidence of sustainable competitive advantage in these areas,” said Simply Wall Street Analysts.

S&P Global analysts also noted, “The negative outlook reflects the risk of market share erosion in China, insufficient countermeasures regarding the U.S. import tariff, and the challenge to comply with the EU’s carbon dioxide emissions regulation.”

However, others view Mercedes-Benz as being stronger than it’s given credit for.

“Premium positioning in the global auto market is seen as structurally undervalued, with investors underappreciating the company’s ability to defend margins even as competition from Chinese manufacturers intensifies,” said Simply Wall St Analysts.

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