Car industry Mercedes expects significantly lower profits
The bad news from German car manufacturers is piling up. Now the brand with the three-pointed star is also getting in the way of the sometimes dire economic situation.
20.09.2024, 12:57
SDA
The car manufacturer Mercedes-Benz is cutting its profit forecast due to the stuttering business in China. After Volkswagen and BMW, the Stuttgart-based company is now also having to pay tribute to the weakening economy after a long period of buoyant business. "I don't know how long the situation in China will remain like this," admitted CEO Ola Källenius during a video conference with analysts. Mercedes shares fell sharply on Friday, dragging down other stocks in the sector with them.
In the People's Republic, things have not been going well for the car manufacturer with the three-pointed star for some time now, because wealthy customers are digging less deep into their pockets to buy a car in view of the real estate crisis in the country. However, China is the most important market for Mercedes.
The clientele there is currently "very cautious, to put it diplomatically", said Källenius. High inflation and sharply rising interest rates over the past two years had recently made it difficult for companies and consumers to buy cars. The Group remains cautious about the economic situation, particularly in China.
Management expects a significant drop in profits
This is also reflected in the trimmed expectations: Mercedes management now expects earnings before interest and taxes (EBIT) this year to be down significantly on last year's figure of 19.7 billion euros, as the company announced late on Thursday evening. A slight decline had previously been expected.
In terms of the financial indicator most followed on the stock market, the operating margin adjusted for special effects in the passenger car business, the management is now only expecting a return on sales of 7.5 to 8.5 percent. Just a few weeks ago, the Management Board had lowered the target range to 10 to 11 percent, but was still hoping for a stronger second half of the year. Last year, the margin had already shrunk by two percentage points to 12.6%. The figure essentially shows how much money Mercedes is keeping from sales.
Lower sales expected in the top segment
The car manufacturer with luxury ambitions will also have to cut back more and more on sales prices: The particularly expensive and therefore profitable cars are no longer selling as well as expected.
According to CFO Harald Wilhelm, sales of the top-end models are likely to remain noticeably below 300,000 cars worldwide this year. Last year, the Group sold 328,200 units of models such as the S-Class, the luxury sub-brand Maybach and the tuning brand AMG.
Expert: China will be the biggest test of strength
Industry expert Ferdinand Dudenhöffer stated that China is increasingly becoming the biggest test of the last 50 years for all German car manufacturers. In the People's Republic, nothing would work without electric cars known as NEVs (New Energy Vehicles). This is precisely where Germany and Europe have missed the boat.
In China, more than half of the cars sold are now electric cars. "The only way forward for German car manufacturers is therefore to make even greater direct investments in China to establish and expand development centers and production facilities for electric cars in China."
