Mercedes Faces Profit Decline Amid Market Changes

Mercedes-Benz is grappling with a significant drop in profits and margins, primarily driven by a decline in luxury and electric vehicle sales. Consumers are increasingly opting for car-sharing and public transport, compounded by high new car prices that strain sales.

The company's performance in China has worsened, with a 13% downturn, as local manufacturers intensify competition. As a result, Mercedes has revised its annual forecasts downward twice, indicating that operating profit will be substantially lower than the previous year.

The financial landscape is further complicated by costly production facilities, which may not be fully utilized. Efforts to enhance efficiency and reduce costs are underway, alongside a stable free cash flow that the company plans to allocate for share buybacks.

Meanwhile, Porsche, a subsidiary of Volkswagen, is also experiencing a profit decline due to similar issues in the Chinese market, yet remains hopeful for a strong year-end to meet its revised sales targets. The automotive industry is clearly in a state of transition, with both established brands and newcomers vying for a shrinking market.