German luxury automaker Mercedes-Benz announced on Friday that its profits plunged by more than 50% in the third quarter, primarily due to significant weaknesses in the crucial Chinese market. The company reported a net profit of €1.72 billion ($1.86 billion), a sharp decline from €3.7 billion in the same quarter last year, while sales dipped nearly 7% to €34.5 billion.
Vehicle deliveries fell by 3%, with China experiencing a notable 13% drop, which negatively impacted the sales of the company’s most profitable luxury models, which saw a 12% decrease globally. The poor performance was attributed to a “challenging market environment and fierce competition, particularly in China,” the automaker stated.
Mercedes CFO Harald Wilhelm acknowledged that the earnings “do not meet our ambitions.” The company’s struggles are reflective of broader difficulties faced by Germany’s automotive giants in China, a vital market that is currently experiencing economic turbulence and increasing competition from local manufacturers.
Looking ahead, Mercedes anticipates that annual sales for 2024 will fall slightly below the previous year’s figures, and fourth-quarter sales are expected to remain on par with the third quarter. The automaker has already revised its annual outlook twice during the third quarter, projecting operating profits to be “significantly below the prior year level.”
European car manufacturers are grappling with high operational costs, a sluggish transition to electric vehicles, and ongoing challenges in the Chinese market, which has historically been a key driver of growth. Additionally, Brussels is poised to impose higher tariffs on electric car imports from China, which poses further challenges, particularly for German automakers with substantial investments in the region, raising concerns about potential retaliation.
