Mercedes-Benz lowers profit forecast

Mercedes-Benz is trimming its profit plans for the current year. In addition to an increasingly challenging environment in China, the group also expects higher costs in the fourth quarter, including for materials, as the traditional manufacturer surprisingly announced on Tuesday in Stuttgart. In an initial reaction, the shares lost four percent.

In the passenger car business, the much-noticed profit margin adjusted for special effects is now only expected to reach 2 to 3 percent in 2026 instead of the previously targeted 3 to 5 percent. The reason: In the current industry situation with increased US import tariffs and given the weakness in China, Mercedes has to grant higher discounts in order to sell vehicles. The average selling price of cars has recently fallen significantly.

The group's earnings before interest and taxes are therefore only likely to be at the previous year's level instead of significantly higher. It should actually increase significantly because Mercedes had high costs for job cuts last year. The prospects for 2026 have also clouded over the free inflow of funds.

Payouts for termination agreements also burden the free cash flow in industrial business - i.e. excluding financial services. This is likely to fall slightly again, after the key figure had already fallen significantly from 9.2 to 5.4 billion euros last year. However, CFO Harald Wilhelm is predicting an inflow of more than 4 billion euros. Mercedes also wants to invest one billion euros in share buybacks by April 2027.

China remains the defining problem at Mercedes, wrote analyst Tom Narayan from the Canadian bank RBC. The group is in danger of falling below the annual forecast range in terms of its operating passenger car margin in the third quarter. However, the market foresees this in the mood anyway. The expert therefore expects only limited additional pressure on the share price.

Analysts not surprised

Recently, the Swabians' profitable top models have also performed poorly. In the fourth quarter, however, Narayan sees momentum again thanks to new versions of the SUV GLS and the S-Class.

The experts surveyed by Bloomberg expect quarterly sales to be around 30.8 billion euros; that would be around 4 percent less than a year before. The adjusted operating profit margin (EBIT) in the passenger car business, which has received much attention from the financial market, is expected to have fallen from 4.8 to 2.7 percent.

Consolidated earnings before interest and taxes are likely to have doubled to 1.57 billion euros. A year earlier, special effects, including staff cuts, had weighed on earnings. The bottom line this time is probably a profit of 1.15 billion euros, almost at the level of the same period last year.