Mercedes-Benz has announced a temporary halt to production of its EQE and EQS electric vehicle models in the U.S., a move that underscores growing challenges for the EV sector as federal incentives are poised to vanish. This decision arrives just ahead of the September 30 expiration of tax credits under the Biden administration, potentially signaling broader industry retreats.

Details of the Production Pause

The suspension affects all variants of the EQE and EQS, including sedans and SUVs, starting September 1, reports Gizmodo. Mercedes-Benz has already closed order banks for these models and informed U.S. dealers of the change.

“Vehicles scheduled for production prior to September 1 will continue to be produced,” a spokesperson told InsideEVs. “This announcement applies only [to] U.S. vehicle orders of these models.”

Production of the EQS SUV and EQE SUV occurs in Tuscaloosa, Alabama, where operations began in 2022. In contrast, the sedan versions are manufactured in Germany and shipped to the U.S. These sedans have not qualified for the $7,500 federal EV tax credit unless leased, due to sourcing rules in the Inflation Reduction Act. Pricing for these models spans $78,000 to $135,000, with the 2025 EQS 450 SUV starting at $105,250.

This raises questions about the immediate triggers. The company did not respond to requests for further comment, leaving room for speculation on factors like demand shifts or supply chain adjustments.

Mercedes-Benz Suspends Eqe And Eqs Production As U.s. Ev Tax Credits Near End

Broader Implications for EV Demand

The timing aligns with the recent signing of a comprehensive bill by President Trump on July 4, which eliminates the $7,500 credit for new EVs and the $4,000 incentive for used ones. Experts view Mercedes-Benz’s action as a potential precursor to similar decisions across the industry. As one observer noted, this story is likely to repeat itself, with only the names at the top changing.

EV sales in the U.S. already declined 6.3% in the second quarter compared to the same period in 2024. Analysts anticipate a short-term surge in the third quarter as buyers accelerate purchases before the September 30 deadline. Building on that, the post-deadline landscape appears uncertain, with warnings that demand for high-end models could weaken significantly without subsidies.

Social media reactions from EV supporters highlight concerns. “Major pause signals deeper EV headwinds,” one user commented on X. Another added, “Benz electric cars are already uncompetitive and losing money, and a $7500 tax credit would make it even worse, so I think that’s why they made that decision.” A third user stated, “Another sign of where EVs are headed in the US thanks to the current administration. It’s unfortunately going to be downhill from here for American EV enthusiasts.”

Industry Outlook and Strategic Shifts

Closing order books and pausing production points to a strategic recalibration amid shrinking incentives. EVs remain pricier than gasoline counterparts, and the loss of federal support could exacerbate this gap, particularly for luxury segments. If other automakers follow suit, the sector might face a slowdown rather than sustained growth.

This development serves as a cautionary indicator. Without new policy interventions, the EV market could stall, affecting adoption rates and innovation. Mercedes-Benz’s retreat reflects fears that subsidies have masked underlying economic realities, prompting a reevaluation of U.S. market commitments.

While the pause is temporary, it highlights vulnerabilities in the EV ecosystem. Stakeholders will watch closely for announcements from competitors, as the incentive cliff approaches.

Photos courtesy of Mercedes-Benz.