Average prices of Daimler AG's basic 2012 Mercedes-Benz C200 sedan at Chinese dealerships were 16 percent below the manufacturer's recommended price last month, compared with 14 percent in October and 3.4 percent in July, when the model became available, according to the China Auto Market.

BMW dealers sold the 2012 320i sedan 11 percent below the suggested price, more than triple the initial discount for the 2011 model.

Mercedes-Benz, BMW and Audi AG are looking to the world's biggest car market to prop up deliveries as European demand sags on concern over the region's sovereign debt crisis.

A slowdown in China's property and stock markets will probably undermine discretionary spending, according to Credit Suisse Group AG and BNP Paribas SA.

"Competition is getting fierce, especially in the entry-level luxury car segment," said John Zeng, a Shanghai-based director at researcher LMC Automotive Asia Pacific. "BMW, Mercedes and Audi are expanding their capacity in China and the majority of that capacity is used to make the entry-level models, and that's increasing the competition."

China's vehicle sales have slowed from last year's record 32 percent increase as inflation, higher interest rates and the end of a two-year stimulus plan discourage purchases. Deliveries for 2011 may rise the least in 13 years, according to the China Association of Automobile Manufacturers.

Bigger Discounts

Mercedes-Benz's 2012 entry-level C200 sedan sold at 292,800 yuan ($46,122) last month, compared with the recommended price of 348,000 yuan, according to China Auto Market, which surveys
dealerships in Beijing, Shanghai, Guangzhou, Hangzhou and
Chengdu.

"There are phases when you offer customer discounts, like in the phase-out period," Klaus Maier, CEO of Mercedes-Benz China, said on Nov. 21 at the Guangzhou auto show. "But currently I feel comfortable."

Dealers offered 6.7 percent off Volkswagen's 2011 Audi A6L last month, versus 1 percent in January at its introduction, the data show. The new version of the sedan will be available early next year.

BMW's new 5-series sedan, introduced last month in China, sold at the recommended price of 797,600 yuan, according to the data. Audi and BMW didn't respond to requests for comment.

Sales of premium vehicles are expected to rise 16 percent in 2012, down from 41 percent in the first 10 months of this year, according to LMC Automotive, a market research firm. Overall vehicle sales will probably rise 10 percent next year, according to the auto industry group.

In November, Audi posted a 69 percent jump in China deliveries to 29,861 units. BMW had a 9.8 percent increase, while Mercedes-Benz increased deliveries by 24 percent.

"Competition is very strong," said Klaus Paur, Shanghai-based managing director at Synovate Motoresearch. "In order to secure your market share, you need to be aggressive."