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Mercedes-Benz and Porsche pledged to increase cost cuts after the German automaker reported a sharp drop in quarterly profits due to falling Chinese demand.
Shares of Mercedes-Benz fell more than 3% following news Friday that the auto division’s operating margin fell to 4.7% in the third quarter, compared with 12.4% a year earlier. .
Net profit more than halved to 1.7 billion euros from a year earlier as revenue fell 6.7% to 34.5 billion euros. Sales in China fell 17% while in Germany they fell 25%.
Mercedes-Benz already has it lowered annual margin guidance twice in the past three months, while most other major European rivals are also struggling.
Porsche’s operating profit also fell 41% to 974 million euros in the July-September quarter as the German sports car maker warned of a “structural change in demand” in China. Revenue fell to 9.1 billion euros from 9.7 billion euros as the company maintained full-year guidance that was cut in July.
“We are looking at our product line and ecosystem as well as our budget and cost position,” Chief Financial Officer Lutz Meschke said Friday.
Earlier this week, Volvo Cars halved its forecast for annual sales growth and Volkswagen in September cut its annual forecast. second time for three months. Renault remains the only carmaker in Europe to maintain its full-year financial targets.
Profits have been affected Mercedes-Benz after it was forced to offer incentives to consumers due to slowing global demand for electric vehicles and financial support for struggling dealers in China, where spending on luxury goods has been affected by economic recession.
German automakers have been among the biggest beneficiaries of China’s booming auto market, leaving them exposed to the country’s current economic malaise. Mercedes-Benz last year sold about a third of its vehicles in China’s largest market.
Chief Financial Officer Harald Wilhelm told investors on Friday that the company is “working on all levers” to improve its operating efficiency and be prepared if market conditions fail. short-term recovery.
“We will definitely look at the cost aspect as well as each element and stone and turn things around. . . with this tighter market environment,” he said.
European automakers invest heavily in production tram ahead of the EU’s planned 2035 ban on the sale of new combustion-engined cars. But they are now struggling with falling demand: Germany and other European countries have cut subsidies that encourage people to buy and charging infrastructure remains patchy.
“Demand for battery electric vehicles in Europe is much lower than industry forecasts,” Wilhelm said.
Mercedes-Benz reported pure electric vehicle sales fell 31% year-on-year in the most recent quarter, while demand for plug-in hybrids increased 10%.
Mercedes-Benz’s free cash flow was higher than expected despite a “severely weak” quarter, said Tom Narayan, an analyst at RBC Capital Markets. “This is important as it supports dividends and capital gains in 2025,” he said in a note to clients.
Wilhelm told investors that the company will seek approval for additional share buybacks at its annual shareholder meeting next year.
