Mercedes To Recall Over 660,000 China Vehicles For Potential Oil Leak

Mercedes-Benz, a unit of Daimler (DDAIF), will recall over 660,000 vehicles in China due to a potential oil leak, according to a report from the Associated Press.

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A notice published by China’s State Administration for Market Regulation stated that a seal between a high-pressure fuel pump and a low-pressure fuel pipe could gradually weaken over time, causing oil leakages when the engine starts in cold weather.

Starting on December 18, Mercedes will recall 668,954 vehicles comprising of several models made between February 2013 and June 2017- including the C-class, E-class, V-class, GLK-class, CLS-class, SLC-class, GLC SUV and VS20 VITO vehicles.

Beijing Benz Automotive Co. made the majority of these vehicles in China, while Fujian Benz Automotive Co. made 12,500, and 36,000 were imported.

According to the report, dealers will replace faulty parts for free.

Last month 4,653 imported Mercedes G-class sedans manufactured between Feb. 14, 2018, and Sept. 24, 2019 were recalled for incorrect child-safety lock labels, according to China’s official Xinhua News Agency.

Shares in Daimler have plunged 24% year-to-date- and analysts have a cautious Hold consensus on the stock’s outlook. This breaks down into 6 recent buy ratings, 7 hold ratings and 3 sell ratings. (See Daimler stock analysis on TipRanks).

On the bull side, comes RBC Capital’s Tom Narayan. “We believe Daimler’s restructuring plans should unlock shareholder value in a relatively short time frame” the analyst explained, as he reiterated a buy rating on the stock. In its new divisional structure, the company will be split into 3 units – Mercedes Benz (cars & vans), Daimler Truck (trucks & buses) and Daimler Mobility (Financial & mobility services).

“A sum- of-the-parts analysis suggests Daimler could see solid upside to current levels” he wrote, adding that the company is well-positioned in China and emerging markets. “We expect China and emerging markets to represent 46% share of total unit sales by 2025, up from 39% in 2018” he told investors on July 1.