Mercedes profits driven down as Chinese demand slows

The German automaker is pledging to cut costs through ‘efficiency increases’ after weak Chinese demand hits profits.

Profits at Mercedes-Benz fell by around 54% year-on-year in the third quarter of this year, according to the firm’s earnings report released on Friday.

From July to September, net profit fell to €1.7bn from €3.7bn a year earlier.

Revenue was recorded at €34.5bn, down around 7%.

At Mercedes’ core car division, meanwhile, adjusted earnings before interest and taxes (EBIT) dropped 64% year-on year, coming in at €1.2bn.

“The Q3 results do not meet our ambitions,” said Harald Wilhelm, Chief Financial Officer of Mercedes-Benz Group AG.

“We are taking a prudent view about market evolution going forward and we will step up all efforts on further efficiency increases and cost improvements across the business,” he added.

Mercedes cited a number of factors behind the disappointing results, notably “weaker macroeconomic conditions and fierce competition, mainly in Asia”.

China’s post-pandemic economic slowdown, aggravated by its property woes, has dented demand – dealing a blow to the carmaker.

Mercedes similarly blamed lower sales on product transitions, where existing models are being replaced by new versions.

For instance, Mercedes’ new G-Class SUV models will be available in the next quarter.

The firm added that sales of its top-end, luxury vehicles should see “positive momentum” in the next quarter, “supported by availability of the G-Class, the Mercedes-AMG E-Class, Mercedes-AMG GT and the SL”.

Looking ahead, the manufacturer forecast that full-year sales for its car division will come in “slightly below” the total seen in 2023.

“The guidance for the adjusted return on sales is seen at 7.5% to 8.5%,” it added.

Mercedes’ share price was down around 1.17% in daily trading as of around 11h15 CEST, at €57.68.