AFP – German auto manufacturer Mercedes-Benz fell sharply on the Frankfurt Stock Exchange yesterday after the group lowered its outlook on the back of weak sales in its key Chinese market.
Mercedes shares had lost almost seven per cent around 10am shortly after markets opened.
The Stuttgart-based group said late on Thursday it now expected its operating profit to be “significantly below the prior year level”.
Previously, the carmaker had indicated a result “slightly below” the previous year.
Mercedes likewise cut profit margin predictions for its car business to between 7.5-8.5 per cent from 10-11 per cent.
The downward revision was the second time Mercedes has cut its guidance in the space of two months, following weak earnings in the second quarter.
The new cut “was triggered by a further deterioration of the macroeconomic environment, mainly in China”, Mercedes said.
China’s economy had “lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector”, the German group said, impacting Mercedes’ sales, including for its high-margin top-end segment. German auto manufacturers have been hit hard by weak demand and a difficult transition from combustion engines to electric vehicles.
Like Mercedes, BMW was forced to lower its guidance at the beginning of the month due in part to muted demand in China.
Volkswagen meanwhile has said it will need significant restructuring to remain competitive, raising the possibility of closing factories in Germany.
The unprecedented step, which has riled unions, was in part a response to lower demand for Volkswagen cars since the coronavirus pandemic.
For analysts at Stifel investment, the cut to guidance at Mercedes “does not come as a major surprise” in itself but the magnitude of the revision was a “negative surprise”.
