The car manufacturer Mercedes Benz has in the third quarter due to weak sales of luxury cars China suffered a drop in profits. The operating result (EBIT) fell by almost half to 2.5 billion euros from July to September, as the DAX group announced on Friday.
In the core passenger car business, the adjusted operating profit fell even more sharply – by 64 percent to 1.2 billion euros. As a result, the return of 4.7 percent was not even half as high as a year ago (12.4 percent). To explain this, Mercedes referred to the challenging market environment and tough competition, “particularly in China”.
CFO Harald Wilhelm (58) announced that he would increase efficiency and reduce costs even more decisively. “The financial results of the third quarter do not meet the expectations that we at Mercedes-Benz have of ourselves,” he explained. Despite the difficult times, we managed to generate solid cash. The cash flow was slightly higher at 2.4 billion euros the previous year’s level.
Brake block China
The company had a weak quarterly result in September Mercedes-Benz Cars’ profit target for this year was lowered again
. The division’s return is only estimated at 7.5 to 8.5 percent after 12.6 percent last year. The group-wide operating result is expected to shrink by more than 15 percent in 2024 after almost 20 billion euros in the previous year. The Swabians also adjusted the outlook for sales downwards: it should now fall slightly instead of reaching the previous year’s level.
In China, due to the crisis in the real estate market, wealthy customers are holding back on purchasing top models such as the S-Class and Maybach after years of boom. This means that the sales mix has deteriorated significantly compared to last year.
Car sales after nine months were only 4.3 percent lower at 1.46 million vehicles, while operating profit fell ten times as much at 44 percent. “Weaker price enforcement and a less favorable product mix” caused the drop in returns, explained Mercedes. Model changes also dampened sales.
Probably no improvement in the fourth quarter
Even in the fourth quarter, Mercedes-Benz cannot turn things around – sales in the seasonally stronger cycle should be at the level of the third quarter. This means a slight decline for the year as a whole, after the Stuttgart-based company had previously relied on a recovery in the second half of the year in order to maintain the volume from 2023.
The important and world’s largest car market, China, where the brand with the star sells one in three cars, has seen profits bubble up in recent years. Now he’s a brake block. The government in Beijing is trying to stimulate the economy with an economic stimulus package. But analysts doubt that this will have a strong enough effect to get Mercedes and the other German carmakers out of trouble.
The car market remains fundamentally weak, explained analysts at Barclays. Mercedes, BMW or Audi would have to reduce prices and would increasingly have to deal with Chinese competitors in the market segment they previously dominated. The analysts at Bernstein Research also explained that domestic manufacturers are fighting ever harder for a permanently strong market position. “We expect China to remain a challenging market.”