Mercedes-Benz cuts profit targets due to Chinese market and rising costs

The company reduced its adjusted operating profit margin target for the passenger vehicle segment from 3 to 5 percent, to 2 to 3 percent. Annual profit is expected to remain flat at 5.8 billion euros in 2025.

The Chinese market is turning into a strategic problem

China has turned into a crisis for German manufacturers due to declining domestic demand, the end of electric vehicle subsidies and competition from local brands. Mercedes' core passenger vehicle sales, whose Chinese deliveries decreased by 29 percent in the nine-month period, also decreased by 8 percent on a global basis in the third quarter.

Analysts state that Mercedes and BMW's dependence on China and the shrinking internal combustion engine sector increases fragility. While Porsche increased its profits by reducing its dependence on China, the fact that Mercedes, after BMW and Volkswagen, also lowered its targets proves that the pressure on the German automotive sector is widespread.

Middle East conflicts and electric vehicle conversion weigh on the bottom line. While a significant portion of higher material costs in the fourth quarter were due to conflicts in the Middle East, the company confirmed it would implement a new redundancy program covering non-production staff in December.

Another factor that strained the balance sheet was the high production costs and low profit margins of electric and hybrid vehicles, whose share reached 25 percent in the third quarter. Management predicts that margin parity will only be achieved in 2030.

Following the announcement, Mercedes-Benz shares lost more than 4 percent in value on the Frankfurt Stock Exchange, experiencing the steepest decline in the last month.