Mercedes-Benz catches a cold in China

China’s appetite for luxury German vehicles has helped to drive growth at Mercedes-Benz for the past two decades. Now the economic crisis gripping Beijing has caught up with even its wealthiest car enthusiasts.
Shares in the Stuttgart-based automaker shed as much as 8 per cent on Friday after it cut its full-year profit outlook due to a deterioration in demand in the world’s largest car market.
It expects a return on sales of between 7.5 per cent and 8.5 per cent, against a previously guided range of at least 10 per cent. Earnings before interest and taxes are now expected to be significantly below 2023’s €19.7 billion.
The company said: “GDP growth in China lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector. This affected the overall sales volume in China, including in the top-end segment.”
The investor update wiped about €4 billion from Mercedes’ market value, extending a downward trend that has reduced its valuation by more than a fifth this year, to below €60 billion.
Over the past two decades, China has become a key export market for Germany’s powerhouse car industry, with wealthy customers embracing high-end models like the Mercedes-Maybach and G-Class SUV.
The company responded to the demand by building ever-more expensive models, personalised with quilted Nappa leather seats, Burmester entertainment systems and refrigerated rear compartments with folding tables and silver-plated champagne goblets.
The premium sector has become squeezed in recent months as China’s economy struggles with a prolonged downturn in the property sector: Mercedes does not expect demand to recover this year.
Porsche also issued a profit warning last month, with annual sales in China down by a third, while BMW recorded steep losses last week after cutting its profit margin guidance.
Mercedes was also slower to move into manufacturing electric vehicles than many rivals, and in May pushed back a 2030 deadline to become an all-electric brand following disappointing orders for the EQS and EQE electric saloons.
Earlier this week the company sold off its remaining 10 per cent stake in Denza, a luxury EV brand established in partnership with BYD, after struggling to gain traction in the segment which is slowing globally.
• VW considers closing German factories for first time
Its German peer Volkswagen, in particular, has suffered, with management now locked in a battle with powerful unions over plans to cut thousands of jobs and close factories in the country for the first time in its 87-year history.
Visiting a VW factory in Emden in northwestern Germany on Friday, Robert Habeck, the economy minister, stopped short of mentioning state aid but said the country would look to send the right “market signals” to support the carmaking industry and prevent factory closures.
Meanwhile, in the US, General Motors has been hit by technical problems, recalling nearly 450,000 pickup trucks and SUVs due to a defect in the brake system.
The US National Highway Traffic Safety Administration announced that the recall affects models such as 2023 Chevrolet Silverado 1500s and Cadillac Escalades, among other models, after an issue was detected with the electronic brake control module software. GM has promised an over-the-air update to resolve the problem.