Mercedes revises profit targets

Mercedes-Benz has lowered its expected operating profit for 2026, now predicting a level similar to 2025, around 5.8 billion euros. Previously, the company aimed for at least a 15% increase. This revision reflects challenges in global markets, particularly in China.

Chinese market decline hits Mercedes

Deliveries of Mercedes cars in China have dropped significantly, with a 29% decline since January and a 31% drop in the third quarter alone. This follows a difficult year for the brand in the region, with the lowest sales since 2016. Chinese competitors like BYD and Xiaomi are gaining market share.

Rising costs add pressure

Mercedes faces additional financial strain from rising production costs, particularly for materials. These increased expenses are expected to impact the fourth quarter, compounding the effects of lower sales in China. The company is now struggling on two fronts: reduced sales and higher production costs.

European sales show improvement

In contrast to the challenges in China, Mercedes reported a 5% increase in sales in Europe during the third quarter, selling 168,700 vehicles. Germany saw a 13% rise in sales, driven in part by the growing popularity of electric vehicles. The brand sold 68,400 fully electric cars in the quarter, a new record.

Electric models lead the charge

Electric vehicles are playing a key role in Mercedes’ European success. The electric GLC model saw sales more than triple compared to the previous quarter, and nearly one in three Mercedes sold in Europe is now fully electric. Models like the electric GLC and CLA are available in European dealerships and are attracting buyers.

Global strategy shifts to cost-cutting

To offset losses in China, Mercedes is focusing on cost reduction. CEO Ola Källenius has asked German employees to work more without additional pay. The company is also expanding production in Hungary, where manufacturing costs are about 70% lower than in Germany. These moves aim to improve profitability amid global challenges.

New models and cautious optimism

Mercedes has launched a long-wheelbase GLE model in China, produced locally to appeal to local customers. This move is seen as a test of the company’s ability to recover in the region. While North American sales also rose by 4% in the third quarter, the situation in China remains the most concerning for the company’s future.