Mercedes-Benz may cut back on profit outlook as car market slows

Mercedes-Benz is expected to cut its passenger car business profit expectations for the mid-term, following the market seeing an ongoing decrease in demand, according to reports.  

The target is expected to be adjusted by mid-February, when the company’s capital markets day will take place, according to Reuters. Currently, the capital markets day is scheduled to take place on 20 February, when the company will also reveal its annual financial results. 

If so, this will be a marked turnaround from the company’s 2022 stance, when it estimated an adjusted profit margin of between 8% and 14%, depending on how the market performed at the time. 

However, even after the potential target decrease, Mercedes-Benz is still expected to try to achieve an adjusted profit margin in the double digits. 

The surge in demand for electric vehicles (EVs) seen in the past several months has also contributed significantly to the company’s passenger car business lagging. 

Earlier in November 2024, the company also revealed that it had big plans to cut billions of euros in costs annually in the next few years. However, it has not provided more details about how these costs would be cut as yet.

Euronews has contacted Mercedes-Benz for comment.

Why is Mercedes-Benz struggling?

One of the most important reasons Mercedes-Benz is currently struggling somewhat is because of intensifying competition from Chinese car makers, especially electric vehicle producers. 

Chinese EV makers such as Geely, SAIC and BYD have managed to capture a significant portion of the EV market, mainly because of their relatively low prices, modern designs and range of features. 

On the other hand, Mercedes-Benz is still seen as a premium car brand, due to which its own electric offerings have been relatively slow to establish themselves in the market. 

This is especially because of the current cost of living crisis being seen in several parts of the world, along with higher interest rates and inflation. As such, consumers are now more wary of spending on bigger-ticket purchases, instead preferring to hunt for better bargains and deals, as well as buy products which will last longer. 

Mercedes-Benz’s China sales have also suffered of late, both due to the increasing competition from domestic brands, as well as Chinese consumers holding back on luxury purchases in the last several months. 

Since Mercedes-Benz also relies significantly on its China sales, along with other major German auto brands such as BMW and Audi, this has been a heavy blow. 

The above Chinese EV brands have also managed to take European market share away from Mercedes-Benz, as well as other European car makers. This is mostly due to them being able to sell their products at steep discounts, allegedly because of subsidies provided by the Chinese government. 

Although this has now resulted in the EU imposing more tariffs on these Chinese EV makers, it has also increased the risk of retaliation by the Chinese government against Mercedes-Benz, as well as other German automakers operating in China. This could potentially mean that these companies no longer have access to benefits such as cheaper land, tax breaks and more.