An employee performs final inspection on a Mercedes-Benz C-Class sedan at the Mercedes-Benz U.S. International Plant in Vance, Alabama.
Andrew Caballero-Reynolds | AFP | Getty Images
Benz The company’s shares fell more than 8% on Friday, becoming the latest automaker to cut its guidance this year as sluggish demand in China and trade disputes weigh on the industry.
The company said late on Thursday it now expects group earnings before interest and tax (EBIT) to be “significantly lower” than the previous year, with adjusted return on sales to be between 7.5% and 8.5%, down from its previous forecast of 10% to 11%.
The stock narrowed its losses slightly, falling 7% as of 11:20 a.m. London time.
Automobile sector dragged down 3.2% Volvo and Strantis fell 4% and 2.7% respectively.
Mercedes said in a statement on Thursday that the company’s adjustments were triggered by “a further deterioration in the macroeconomic environment”, mainly due to weak consumption in China and a long-term downturn in the country’s real estate industry.
“This has affected overall sales in China, including those in the high-end segment. Overall, the sales mix in the second half of 2024 is expected to remain unchanged from the first half and is therefore weaker than initially expected,” the company said.
German automaker peers BMW It also recorded a huge loss last week due to declining sales in China and problems with the braking system provided by Continental, which lowered profit margin expectations for 2024.
Volvo Cars also scaled back its profit margin and revenue targets earlier this month after announcing it would no longer set a target for 100% all-electric vehicle sales by 2030.
UBS analysts said Mercedes’ outlook revision was “not surprising” given current pressure from China, but noted the scale of the warning compared with the company’s peers could trigger panic among investors , and led to a further downgrade of the rating.
“MBG Facts [Mercedes-Benz Group’s] The profit warning, which is larger than BMW’s and not related to a massive recall, will confuse the market about underlying profitability and capital allocation in 2025,” they wrote in a note on Thursday.
Europe’s auto industry is facing growing pressure as it tries to deal with rising trade tensions between the European Union, the United States and China.
Germany, whose economy relies heavily on the auto industry, has been an outspoken opponent of EU tariffs on Chinese electric vehicles, saying the plans could choke off business in one of its largest markets.
“The Chancellery, led by Social Democrat Olaf Scholz, does have concerns about these tariffs,” Teneo managing director Carsten Nickel told CNBC’s “Squawk Box Europe” on Friday. Be very skeptical and let everyone in Brussels know it.
The European Commission said the EU and China agreed on Thursday to hold further talks on the measures and could revisit a minimum price deal previously rejected by Brussels.
Nicholls said the move showed China’s “carrot and stick” negotiating approach seemed to be working to some extent, and that the EU might now be more willing to consider measures such as quotas, minimum prices and maximum quotas.
