Mercedes-Benz will step up cost cuts after earnings halved in the third quarter hit by tepid demand and fierce competition in China, it said on Friday.
The luxury carmaker cut its full-year profit margin target twice during the third quarter, joining a growing number of European rivals blaming a weakening Chinese car market for falling profits and margins.
It hopes a huge new model rollout will help revive sales next year.
Mercedes shares fell 1.4% on Friday morning, dragging down peers BMW and Volkswagen.
The company stock has lost about 8% year-to-date, underperforming Germany's benchmark DAX index but still faring better than Volkswagen, BMW and Porsche AG.
The pan-European autos index is down 10% year-to-date, the worst-performing sector in Europe this year.
Mercedes' key car division's adjusted return on sales fell to 4.7% in the third quarter from 12.4% last year, its worst profitability since the Covid-19 pandemic, while earnings in the unit more than halved, worse than expected by analysts.
“The Q3 results do not meet our ambitions,” CFO Harald Wilhelm said, adding the group will step up cost cuts.
Wilhelm declined to provide more details about the cost cuts but warned “it will be tighter and tougher”.
Europe's biggest carmaker, Volkswagen, is considering plant closures in Germany for the first time.
The July-September earnings were hit as Chinese consumers continued to cut back on luxury goods in a weakening economy, which has in particular weighed on Mercedes' lucrative high-end S-Class model sales in the country.
Model revamp costs added to the pressure, especially for new versions of the G-Class SUV, which will hit the market in the next quarter, Mercedes added.
In 2024, the company sees car sales slightly below the previous year, and fourth-quarter sales in line with the third quarter.
Nevertheless, Mercedes refuses to reduce prices and prefers to stick to its “value over volume” strategy, including in China.
Mercedes-Benz CEO Ola Kaellenius has warned that Chinese consumers are cautious about making big purchases, as long-standing economic weakness and a real estate crisis have created considerable uncertainty for consumers.
Talks between Brussels and Beijing continue over looming tariffs on imports of Chinese EVs into Europe, a major headache for Europe's China-dependent car heavyweights due to the fears of potential retaliation.
Mercedes-Benz, which counts China's Beijing Automotive Group and Geely Chair Li Shufu as its two top shareholders, has called the tariffs a “mistake”, urging the European Commission to delay their implementation to allow further talks on a deal.
Mercedes-Benz to ramp up cost cuts after earnings halve
Image: Supplied
Mercedes-Benz will step up cost cuts after earnings halved in the third quarter hit by tepid demand and fierce competition in China, it said on Friday.
The luxury carmaker cut its full-year profit margin target twice during the third quarter, joining a growing number of European rivals blaming a weakening Chinese car market for falling profits and margins.
It hopes a huge new model rollout will help revive sales next year.
Mercedes shares fell 1.4% on Friday morning, dragging down peers BMW and Volkswagen.
The company stock has lost about 8% year-to-date, underperforming Germany's benchmark DAX index but still faring better than Volkswagen, BMW and Porsche AG.
The pan-European autos index is down 10% year-to-date, the worst-performing sector in Europe this year.
Mercedes' key car division's adjusted return on sales fell to 4.7% in the third quarter from 12.4% last year, its worst profitability since the Covid-19 pandemic, while earnings in the unit more than halved, worse than expected by analysts.
“The Q3 results do not meet our ambitions,” CFO Harald Wilhelm said, adding the group will step up cost cuts.
Wilhelm declined to provide more details about the cost cuts but warned “it will be tighter and tougher”.
Europe's biggest carmaker, Volkswagen, is considering plant closures in Germany for the first time.
The July-September earnings were hit as Chinese consumers continued to cut back on luxury goods in a weakening economy, which has in particular weighed on Mercedes' lucrative high-end S-Class model sales in the country.
Model revamp costs added to the pressure, especially for new versions of the G-Class SUV, which will hit the market in the next quarter, Mercedes added.
In 2024, the company sees car sales slightly below the previous year, and fourth-quarter sales in line with the third quarter.
Nevertheless, Mercedes refuses to reduce prices and prefers to stick to its “value over volume” strategy, including in China.
Mercedes-Benz CEO Ola Kaellenius has warned that Chinese consumers are cautious about making big purchases, as long-standing economic weakness and a real estate crisis have created considerable uncertainty for consumers.
Talks between Brussels and Beijing continue over looming tariffs on imports of Chinese EVs into Europe, a major headache for Europe's China-dependent car heavyweights due to the fears of potential retaliation.
Mercedes-Benz, which counts China's Beijing Automotive Group and Geely Chair Li Shufu as its two top shareholders, has called the tariffs a “mistake”, urging the European Commission to delay their implementation to allow further talks on a deal.
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