What is behind the huge drop in Mercedes’ share prices?

Mercedes-Benz has just cut expectations saying the group now foresees earnings before interest and taxes to come “significantly below” the previous year. The company blamed a rapid deterioration of the business in China.

In a statement, the company said: “GDP growth in China lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector. This affected the overall sales volume in China, including sales in the top-end segment.”

Meanwhile, sales in Europe are also slowing. Mercedes deliveries in the EU fell by 12.7% in August compared to the previous year and are down by 3.1% during the first eight months. 

The carmaker said on Thursday that it now expects its adjusted return on sales to be between 7.5% and 8.5%, down from its earlier forecast of 10% and 11% (this has been cut already in July, following a previous expectation of 14% – 15%).

This is the latest blow to the German car manufacturing industry after BMW AG cut its profit expectations for this year and Volkswagen AG is looking into cutting costs by all means. 

European carmakers are facing sluggish sales in China and low EV sales. The industry has repeatedly called on policymakers to step in and provide the necessary help to regain competitiveness, among others when it comes to the EV market. 

Mercedes shares were down 7% at 10 o’clock in Europe. BMW shares also fell and were down 3% in the morning.