German automotive giant Mercedes-Benz has agreed to pay a substantial $149.6 million to settle allegations it used illegal software to cheat emissions tests in the United States. A coalition of state attorneys general announced the settlement on Monday, 22 December 2025, resolving claims that the company secretly installed so-called 'defeat devices' in hundreds of thousands of its diesel vehicles.
The Core of the Allegations
The authorities alleged that between 2008 and 2016, Mercedes-Benz equipped more than 211,000 diesel passenger cars and vans with sophisticated software. This software was designed to detect when a vehicle was undergoing official emissions testing. During these tests, it would activate full emission controls to ensure the car passed. However, during normal, real-world driving conditions, these controls were significantly reduced.
This manipulation allowed the vehicles to emit levels of nitrogen oxides far exceeding legal limits. Nitrogen oxides are harmful pollutants linked to serious respiratory illnesses and are a major contributor to smog formation. The states argued that Mercedes resorted to this deception because it was struggling to meet its own design and performance goals, such as fuel efficiency, while still complying with strict emissions standards.
Marketing Claims and Previous Penalties
Critically, the company is accused of actively concealing the existence of these devices from both regulators and the public. During this period, Mercedes-Benz marketed the affected vehicles as "environmentally friendly" and fully compliant with all emissions laws. A spokesperson for the automaker did not provide an immediate comment following the announcement of this latest settlement.
This is not the first financial penalty Mercedes-Benz has faced over this issue. In 2020, its parent company Daimler AG agreed to a $1.5 billion settlement with the U.S. federal government and California state regulators to resolve similar emissions cheating allegations. The latest $149.6 million settlement involves a coalition of 50 attorneys general, including those from the District of Columbia and Puerto Rico. Notably, California was not part of this specific multi-state group.
Terms of the Settlement and Consumer Relief
The settlement mandates that Mercedes-Benz pay $120 million directly to the participating states. A further $29 million payment is suspended and may be waived, contingent on the successful completion of a consumer relief programme.
This programme is targeted at the approximately 40,000 vehicles fitted with the defeat devices that had not been repaired or permanently taken off the road by 1 August 2023. Owners of these eligible vehicles can receive $2,000 per vehicle if they install approved emissions modification software and an extended warranty.
Beyond the financial penalties, the settlement requires Mercedes-Benz to adhere to strict reporting requirements. The company is also prohibited from any further unfair or deceptive marketing or sales practices concerning its diesel vehicles.
The Mercedes-Benz case echoes the larger Volkswagen 'Dieselgate' scandal, which saw Volkswagen pay $2.8 billion to settle a criminal case related to its own widespread emissions cheating. These cases have profoundly shaken the automotive industry and led to intensified scrutiny of vehicle emissions and testing protocols worldwide.
