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Mercedes-Benz has said it will look under “every stone” for cost cuts after it reported a halving of quarterly profits and a big fall in sales to Chinese and European consumers.
Shares in the German carmaker fell more than 3 per cent on news on Friday that profit margins in its car division had dropped to 4.7 per cent in the third quarter, compared with 12.4 per cent a year earlier.
Net profits were €1.7bn, down from €3.7bn a year earlier, with a 6.7 per cent decline in revenue to €34.5bn. Sales in China fell 17 per cent while Germany suffered a 25 per cent decline.
Mercedes-Benz has already lowered its annual profit margin guidance twice in the past three months, while most of its other big European rivals have also been struggling.
Earlier this week, Volvo Cars halved its forecast for annual sales growth, while in September, Volkswagen cut its annual guidance for the second time in three months. Renault remains the only carmaker in Europe that has maintained its full-year financial targets.
Margins have suffered at Mercedes-Benz after it was forced to offer incentives to consumers because of slowing global demand for electric vehicles and financial support to struggling dealers in China, where spending on luxury goods has been hit by an economic slowdown.
German carmakers had been among the biggest beneficiaries of China’s booming automotive market, leaving them significantly exposed to the country’s current economic malaise. Mercedes-Benz last year sold roughly a third of its cars in its biggest market of China.
Chief financial officer Harald Wilhelm told investors on Friday that the company was “working on all levers” to improve its performance and to be prepared if there was no short-term recovery in market conditions.
“We will definitely look on the cost side, and each and every element and stone, and turn it around . . . given this tighter market environment,” he said.
European carmakers have invested heavily in producing EVs ahead of a planned EU ban on sales of new combustion engine cars by 2035. But they are now struggling with falling demand: Germany and other European countries have cut subsidies that had encouraged people to buy and charging infrastructure remains patchy.
“Battery electric vehicle demand in Europe is running at far lower levels than ever expected by industry,” Wilhelm said.
Mercedes-Benz reported a 31 per cent year-on-year decline in pure electric vehicle sales in the most recent quarter, while sales of plug-in hybrids rose 10 per cent.
Tom Narayan, an analyst at RBC Capital Markets, said Mercedes-Benz’s free cash flow was higher than expected despite “a severely depressed” quarter. “This is important as it supports the dividend and capital return in 2025,” he said in a note to clients.
Wilhelm told investors that the company would seek approval for additional share buybacks at its annual shareholder meeting next year.
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