^{Photo: The New York Times}

Mercedes Benz has agreed to a nearly $150 million settlement with U.S. states, resolving years of legal disputes tied to allegations that the German automaker used illegal software to manipulate diesel emissions testing. The agreement marks a major step toward closing one of the final chapters of the global diesel emissions scandal in the United States.

Settlement Details and Scope

The settlement totals $149.6 million and covers claims brought by 48 U.S. states, Puerto Rico, and the District of Columbia, according to New York Attorney General Letitia James. Under the agreement, Mercedes will immediately pay $120 million to the states, while an additional $29.6 million is suspended and may be reduced depending on how many affected vehicles the company repairs, removes from service, or buys back.

The deal applies to an estimated 39,565 diesel vehicles in the United States that had not been repaired or permanently taken off the road as of August 2023.

Compensation for Vehicle Owners

As part of the settlement, Mercedes will provide $2,000 payments to eligible owners and lessees whose vehicles received approved emissions repairs. The company is also required to cover the full cost of installing compliant emissions modification software on affected vehicles.

In addition, participating consumers will receive extended warranties, offering further protection and reassurance following the emissions fixes.

Allegations of Emissions Cheating

State attorneys general alleged that Mercedes installed undisclosed and unlawful software in certain diesel vehicles to suppress emissions during regulatory testing. In real world driving conditions, the vehicles were accused of emitting pollution levels up to 30 or even 40 times higher than legal limits.

The investigation into Mercedes began in 2020, years after the diesel emissions scandal first erupted at Volkswagen in 2015. That scandal ultimately cost VW more than $20 billion globally in fines, penalties, vehicle buybacks, and settlements after it admitted to using defeat devices in nearly 11 million vehicles worldwide.

Mercedes Says Financial Impact Is Contained

Mercedes said the settlement will not affect the company’s bottom line. A spokesperson stated that sufficient provisions had already been made to cover the costs of the agreement and that the company views the settlement as a way to fully resolve its remaining diesel related legal exposure in the United States.

The settlement is still subject to final court approval, a process the company expects to complete without issue.

Previous Dieselgate Penalties

This agreement builds on earlier enforcement actions. In 2020, Mercedes Benz reached a $2.2 billion settlement with the U.S. government and private vehicle owners to resolve federal investigations and claims involving approximately 250,000 diesel vehicles.

Taken together, the combined federal and state settlements underscore the long lasting financial and reputational consequences of emissions violations across the auto industry.

Ongoing Legal Risks Abroad

While the U.S. settlements bring significant closure, Mercedes continues to face legal challenges in other jurisdictions. In England, the automaker is among several manufacturers including Ford, Nissan, and Renault named in a mass lawsuit filed in October, alleging similar diesel emissions misconduct.

These cases reflect how the dieselgate fallout continues to ripple through global courts nearly a decade after the scandal first came to light.

Industry Wide Implications

The Mercedes settlement highlights the sustained regulatory scrutiny facing automakers and reinforces the push toward transparency, compliance, and electrification. As governments tighten emissions standards and enforcement, legacy diesel technologies are increasingly viewed as legal and reputational liabilities.

For the auto industry, the agreement serves as another reminder that the cost of emissions cheating can extend for years, reshaping corporate strategies and accelerating the shift toward cleaner mobility solutions.