Mercedes-Benz Group AG shares yesterday fell the most in four years after a deepening slowdown in China prompted the world’s biggest luxury car maker to cut its outlook.
The stock slid as much as 8.4 percent in Frankfurt, the steepest intraday decline since 2020. Mercedes’ profit warning weighed across the sector, with BMW AG falling 4.4 percent.
The deepening rout in China has particularly hurt sales of Mercedes’ most expensive models like the S-Class and Maybach sedans. The manufacturer cut expectations for its main cars unit and now sees adjusted returns between 7.5 percent and 8.5 percent, compared with a prior forecast of as much as 11 percent. Earnings before interest and taxes would be “significantly below” the prior year level.
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Mercedes is planning a sales offensive in China with new products, chief executive officer Ola Kallenius said yesterday.
The profit warning is a setback for Mercedes’ push further upmarket and yet another warning sign for Germany’s marquee industry, which is struggling with a bumpy transition to electric vehicles (EVs) and headwinds in China. Volkswagen AG this month scrapped a decades-old labor pact and might close factories in Germany for the first time due to lagging demand. BMW last week cut its full-year earnings guidance, held back by the China downturn and sluggish EV sales.
The cutbacks undermine Mercedes’ strategy of selling more of its most luxurious vehicles to boost profitability. China’s macroeconomic environment has deteriorated further, driven by the persistent downturn in the real estate sector, the company said.
“China is turning into a nightmare,” Oddo BHF analysts wrote in a note, with risk of yet deeper problems as consumers in the country shift to EVs and away from high-margin S-Classes.
The company’s latest EVs have met with a tepid response from consumers in Asia’s powerhouse economy and elsewhere. Younger drivers in China are increasingly turning to homegrown brands that are perceived to have more advanced in-car digital and entertainment technology.
While business in China is sliding, sales in Europe are also under pressure. Mercedes deliveries across the region slumped 13 percent last month and were down 3 percent during the first eight months. Cratering EV sales are undermining efforts to meet EU emissions rules that would tighten next year, exposing the industry to billions of euros in fines.
German Minister for Economic Affairs and Climate Action Robert Habeck is holding an industry summit in Berlin on Monday to discuss ways out of the current crisis.
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