CashNews.co
Mercedes-Benz revised down its full-year profit outlook for the second time in under two months, following a continued slump in sales volumes in China, the world’s largest car market. The German luxury carmaker cited ongoing weakness in Chinese demand for premium vehicles for the adjustment.
“The downgrade comes amid further deterioration of the macroeconomic environment, mainly in China. GDP growth in China lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector,” Mercedes-Benz said in a statement.
The latest downgrade reflects deepening concerns about the broader Chinese economy, where slowing GDP growth, weaker consumer spending, and a persistent downturn in the property sector have taken a toll on the luxury car market. Mercedes-Benz had previously cut its profit margin forecast in July but has now been forced to further revise its projections.
Shares of the company, which are listed in Frankfurt, dropped 3% following the announcement.
In light of these challenges, the Stuttgart-based company has adjusted its 2024 outlook for both its cars division and the broader Mercedes-Benz Group. The automaker now anticipates an adjusted return on sales for Mercedes-Benz cars in the range of 7.5% to 8.5%, down from its prior estimate of 10% to 11%. This signals an expected return on sales of around 6% for the second half of the year.
As a consequence of the reduced sales expectations, Mercedes-Benz Group’s earnings before interest and taxes (EBIT) are projected to fall significantly below last year’s level. Free cash flow for the industrial business is also forecasted to be considerably lower than in 2023.
“Additionally, the second half of 2024 is expected to be impacted by various valuation adjustments. Furthermore, the dynamic pricing environment is expected to continue,” the company said.
READ MORE in our trending ticker update