Sharply falling sales in China and burdens from the US import tariff, along with special effects, caused Mercedes-Benz’s profits to collapse in the third quarter. From July to September, the adjusted operating profit shrank by 17 percent to 2.1 billion euros, as the car manufacturer announced on Wednesday.
Mercedes cited low sales volume and higher expenses due to tariffs and exchange rate effects as reasons. Including special factors – such as the costs of the workforce reductions that have been ongoing since spring – operating profit fell by 70 percent to 750 million euros. “The quarterly results are in line with our forecast for the year as a whole,” explained CEO Ola Källenius (56) and confirmed the group forecast of a significant decline in sales, sales and pre-tax profit.
Shares are rising
On the stock market, Mercedes-Benz shares rose by 2.4 percent. The carmaker exceeded expectations, wrote RBC analysts. However, the merely confirmed annual outlook raises the question of whether market expectations for the final quarter will have to fall or whether management is simply planning conservatively.
At 4.8 percent (previous year: 4.7 percent), the return in the main passenger car business area was at the lower end of the forecast range of 4 to 6 percent. The DAX group wants to shake off the crisis with savings and a model offensive that began with the CLA and GLC electric models. The company offered around 40,000 employees outside of production Germany a voluntary departure in return for severance pay.
Thousands of people use it. In the third quarter, the Swabians recorded 876 million euros in restructuring costs after more than 400 million euros in the second quarter. In total, the special effects, including legal costs, amounted to 1.35 billion euros. The bottom line was that profits fell by 30 percent to 1.2 billion euros, with sales shrinking by 7 percent to 32.1 billion euros.
Tough competition in China
Not just Mercedes, all German car manufacturers are in crisis: In their most important market, China, they are faced with the rapid change of car buyers left behind by domestic competitors on electric cars.
This particularly affects the premium and luxury segment, which includes the Stuttgart manufacturers Mercedes-Benz and Porsche serve. “The market situation in the premium and luxury segment in China remained tense, with foreign manufacturers in particular recording significant declines in sales,” explained Mercedes.
In the USA the import tariff reduces profit margins. As of August it was set at 15 percent. From April to July, US customs authorities demanded 27.5 percent instead of the previous 2.5 percent because US President Donald Trump Exports become more expensive and thus want to strengthen the domestic economy. By the end of September, the brand with the three-pointed star sold 6 percent more cars in the US as many vehicles were delivered to dealers before the tariff increase.