Mercedes-Benz has cut its full-year profit outlook for the second time in less than two months following continued weakness in sales in China, the world’s largest auto market. The German luxury carmaker did so citing continued weak demand for premium vehicles in China.
“The downgrade comes amid a further deterioration in the macroeconomic environment, primarily in China, where GDP growth has further lost momentum due to sluggish consumption and continued weakness in the real estate sector,” Mercedes-Benz said in a statement.
The downgrade reflects growing concerns about the Chinese economy as a whole, where slowing GDP growth, weak consumer spending and a persistent weakness in the real estate sector are hurting the luxury car market. Mercedes-Benz cut its profit margin forecast in July and was forced to revise it further.
The company’s Frankfurt-listed shares fell 3% after the announcement.
Given these challenges, the Stuttgart-based automaker revised its 2024 outlook for its automotive division and the Mercedes-Benz Group as a whole. The automaker now expects adjusted return on sales for Mercedes-Benz cars to be in the range of 7.5 percent to 8.5 percent, down from a previous forecast of 10 percent to 11 percent. This implies that it now expects return on sales to be around 6 percent in the second half of the year.
Due to the expected decline in sales, the Mercedes-Benz Group’s earnings before interest and taxes (EBIT) are expected to be significantly below last year’s level. Free cash flow for the industrial businesses is also forecast to be significantly lower than in 2023.
“Further, the second half of 2024 is expected to be subject to various valuation adjustments. Further, the dynamic pricing environment is expected to continue,” it said.
Read more in Trend Ticker Updates