Mercedes Cuts 2026 Profit Margin Outlook Citing China Struggles

STUTTGART, Oct 27 (Bernama-dpa) -- German carmaker Mercedes-Benz has lowered its outlook for the current year, citing difficult conditions in China and higher cost expectations in the fourth quarter, the company said on Tuesday, reported German news agency (dpa).

Markets swiftly responded to the surprise announcement, with Mercedes shares dropping by some 4 per cent on Tuesday morning.

Mercedes now expects an adjusted car profit margin of 2 per cent to 3 per cent in 2026, compared to the 3 per cent to 5 per cent in the previous guidance.

Earnings before interest and tax are likely to be on a par with last year’s figure, even though they should rise significantly, as Mercedes incurred high costs relating to job cuts last year.

Like many German carmakers, Mercedes has been struggling with weak sales in China, a core market where German companies are facing sluggish demand and increased competition from local manufacturers.

Mercedes also released third-quarter figures earlier than planned, which showed that the company generated just €172 million (US$191 million) in free cash flow from its vehicle business, down on the €422 million forecast by financial market experts.

Before interest and tax, Mercedes posted an operating profit of €1.77 billion - more than double the €750 million recorded a year earlier, according to the preliminary figures.

However, the firm had recorded significant one-off expenses at that time, primarily relating to job cuts and legal disputes.

Adjusted for one-off items, the operating profit margin in the passenger car business stood at 2.5 per cent, down on the 4.8 per cent recorded a year earlier.

The Mercedes van business continued to perform better, generating around €9.40 of operating profit for every €100 of turnover in day-to-day operations.

Mercedes intends to present detailed figures on Wednesday.

--BERNAMA-dpa