Mercedes-Benz on Friday revised its annual profit margin forecast for its core car division, anticipating a narrower range due to heightened competition in China. The luxury automaker now expects an adjusted return on sales between 10-11% for the year, down from its earlier projection of 10-12%.
In the second quarter, Mercedes’ car division achieved a 10.2% return on sales, though its adjusted earnings fell short of analyst expectations. The company reported a 6% decline in sales for the first half of the year, with a notable 17% drop in electric vehicle sales.
Despite these challenges, Mercedes-Benz noted some positive trends. The company observed improving market sentiment in Europe and solid sales momentum in the US. However, it remains cautious about the Chinese market, where it anticipates strong competition in both entry-level and core model segments, while aiming to maintain its leadership in the high-end market.
CEO Ola Kaellenius expressed optimism for the latter half of the year, stating, “Sales and the model mix are expected to improve, supported by the market launch of new models, particularly in the Top-End segment.”
The broader automotive industry faces difficulties including subdued demand for electric vehicles, intense local competition in China, supply chain disruptions, and high interest rates. In the second quarter, Mercedes-Benz reported a 27.5% drop in adjusted earnings for its car division, slightly worse than LSEG’s forecast of a 26% decline. At the group level, earnings before interest and taxes (EBIT) fell by 19.1%, in line with LSEG’s consensus estimate.
