Mercedes-Benz has cut its full-year profit margin for the second time in less than two months, citing a decline in overall sales volume in China. The luxury carmaker’s decision to trim its outlook follows a similar adjustment made just recently in July, underscoring the ongoing challenges faced by the company in the Chinese market.
The Stuttgart-based automaker’s shares listed on the Frankfurt exchange fell 3.4% following the announcement. Mercedes-Benz Cars now expects an adjusted return on sales of between 7.5% and 8.5%, down from the previously forecasted range of 10% to 11%. This implies an expected adjusted return on sales of around 6% for the second half of the year.
As a result, Mercedes-Benz Group’s earnings before interest and taxes (EBIT) are expected to be significantly lower than last year’s level. Additionally, free cash flow for the group’s industrial business is anticipated to be substantially less than the previous year’s level.
China’s slowing GDP growth, weaker consumption, and the continued downturn in the real estate sector have contributed to the luxury car market’s weakness. Mercedes-Benz is not alone in facing difficulties in the world’s second-biggest economy and largest auto market. Last week, BMW also flagged muted demand in China, affecting sales in the country.
Mercedes-Benz’s revised outlook reflects the increasingly challenging environment for luxury carmakers in China. The company’s struggles in the region are likely to continue, with no immediate signs of recovery in sight.
