Mercedes-Benz Faces Major Profit Decline Amidst China Struggles

Mercedes-Benz, the renowned German automaker, is grappling with a significant downturn in profits and margins during the third quarter. The company's net profit plummeted by nearly 54%, reaching just 1.72 billion euros, while the revenue margin in the passenger car segment fell sharply from 12.4% to 4.7%. This decline is prominently attributed to weakened sales in China, Mercedes-Benz's most crucial market.

The overall revenue decreased by 6.7% to 34.5 billion euros, and the number of vehicles delivered dropped by 3%. The sales of luxury vehicles, which are vital for the company's profitability, also saw a considerable decline, particularly in the electric vehicle segment, where sales plunged by 31%. This situation has raised alarms within the company, with Financial Chief Harald Wilhelm acknowledging the failure to meet their internal expectations.

China's market, pivotal for Mercedes-Benz, poses a substantial challenge, especially with the rise of local competitors like BYD. Despite China's governmental economic stimulus efforts, the automotive sector remains under pressure. The company now plans to enhance efficiency and implement cost-cutting measures to navigate these difficulties.

Industry expert Ferdinand Dudenhöffer highlights Mercedes-Benz's significant "China problem" concerning its electric vehicles. The company's current margin reflects a level similar to Volkswagen's restructuring phase. Looking forward, Mercedes-Benz anticipates a continued sales decline into the fourth quarter, with an expected operating profit reduction by more than 15% in 2024. Amid these challenges, the company remains focused on stabilizing its finances while contending with intense competition in the Chinese market.