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 supposedly falsifies compliance with a key feature the brand is known for.
A German luxury car manufacturer founded in 1926, Mercedes-Benz Group (MBGYY) presents its slogan “The best or nothing”. The company is renowned for its state-of-the-art vehicles, ground-breaking automotive technological innovations and commitment to sustainable mobility.
However, its reputation may have just been tarnished after a recent allegation caused the company to pay a heavy price.
Mercedes-Benz USA and its parent company Daimler AG have agreed to pay a $149.6 million settlement following allegations that the automaker installed cheating devices in more than 211,000 vehicles.
According to the Delaware Department of Justice, the devices allowed the vehicles to pass emissions tests, violating state laws that prohibit unfair or deceptive trade practices. The settlement also includes more than $200 million in potential consumer relief.
The settlement applies to approximately 39,565 vehicles that have 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 well above legal limits,” Delaware Attorney General Kathy Jennings said in the filing.
“This settlement holds Mercedes accountable for defrauding consumers, circumventing emissions laws and endangering public health. We expect honesty in the marketplace and clean air in our communities. Today’s settlement provides both significant penalties and real relief for affected drivers.”
Under the agreement, 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 settlement is still subject to court approval.
Mercedes-Benz settles emissions lawsuit for $149.6 million amid falling sales. Shutterstock” loading=”eager” height=”540″ width=”960″ class=”yf-lglytj loader”/>
Mercedes-Benz settles $149.6 million emissions lawsuit amid falling sales. Shutterstock
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 and 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 oxide (NOx) emissions while appearing compliant during testing. Despite this, the vehicles were marketed as environmentally friendly and fully compliant with emissions regulations.
While the settlement will resolve the legal proceedings, Mercedes-Benz denies any wrongdoing and says the allegations are baseless. The company said 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,” Mercedes-Benz states on its website.
“We support the Paris Climate Agreement and are convinced of its goals. That is why environmental and climate issues are one of our focus areas for sustainability. Our ambition is that by 2039, our entire new vehicle fleet will be carbon neutral. throughout the entire life cycle.”
It’s 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 US government and California regulators to settle similar allegations, according to US Department of Justice records.
Mercedes-Benz is not alone in facing the legal consequences of emissions misconduct. Several rival companies have previously reached settlements with state and federal regulators over emissions cheating and the development of defeat devices.
Mercedes-Benz has reported a noticeable decline in vehicle sales over the past several quarters, and that trend extends beyond its recent legal battles.
In the third quarter of fiscal 2025, total revenue fell 7% year-over-year, while revenue from car sales also fell 7%. During the same period, total unit sales fell 12%.
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Mercedes-Benz attributes the decline to a slowdown in the global economy that occurred in the first three quarters of 2025, particularly in the US. The company noted that recent changes in trade policy and increased competition have further contributed to the drop in demand.
In response to tariff pressures, the automaker has implemented tighter inventory and inventory 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. US sales were particularly hard hit, falling 17% year over year.
Some experts are still not entirely convinced that Mercedes-Benz can successfully deliver on its long-term plans for electric vehicles and software.
“Uncertainty around the execution of long-term electrification and software strategies is seen as a valuation constraint, as investors await clearer evidence of sustainable competitive advantage in these areas,” Simply Wall Street Analysts said.
S&P Global analysts also noted: “The negative outlook reflects the risk of market share erosion in China, insufficient countermeasures on the US import tariff and the challenge of complying with the EU carbon regulation.”
However, others consider the Mercedes-Benz to be more powerful than it is given credit for.
“The premium positioning in the global auto market is seen as structurally undervalued, with investors underestimating the company’s ability to defend its margins even as competition from Chinese manufacturers intensifies,” Simply Wall St Analysts said.
Related: Amazon’s new deal with Hertz taps into $1 trillion used car market
This story was originally published by TheStreet on December 29, 2025, where it first appeared in the Auto section. Add TheStreet as a favorite source by clicking here.
