Mercedes-Benz cuts guidance on slump in China's economy

By Louis Goss

Mercedes-Benz Group shares fell 8% on Friday after the German carmaker made another cut to its full-year guidance, citing a slowdown in car sales caused by a slump in China's economy.

The Stuttgart company said the cut to its outlook, which marks the second lowering of its guidance since July, was triggered by a "further deterioration in the macroeconomic environment" that led to a drop in sales of its cars, particularly in China.

Shares in Mercedes-Benz Group (XE:MBG) , listed on the Frankfurt Stock Exchange, fell 8% on Friday morning having lost 19% of their value over the previous 12 months.

"GDP growth in China lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector," Mercedes-Benz said in a statement. "This affected the overall sales volume in China including sales in the Top-End segment."

Mercedes-Benz said it now expects to achieve 7.5% to 8.5% adjusted return on sales, compared to its previous already-lowered outlook that it would achieve return on sales of 10% to 11%.

In July, the luxury car manufacturer had previously cut its return on sales outlook from 10% to 12% to a new range of 10% to 11%, before lowering its outlook even further on Thursday evening.

Mercedes-Benz makes around one-third of its sales in China, where it has made significant efforts to capture a share of the fast-growing market for high-end luxury vehicles in the country.

Mercedes-Benz also said it expects its earnings before interest and tax (EBIT) will be "significantly lower" in the full-year 2024 compared to the year before, as a result.

Earlier this week, Mercedes-Benz also sold off a remaining 10% stake in Denza, the luxury electric vehicle (EV) joint venture it formed with China's BYD in 2010, having struggled to make inroads into the Chinese electric car market.

Mercedes-Benz's cut to its guidance comes as German carmakers are struggling in the face of higher energy prices in Europe and mounting competition from Chinese rivals.

Volkswagen (XE:VOW), the world's largest car manufacturer, earlier this month told workers it is considering closing one of its German factories in what would mark the first shuttering of one of its own factories in its home country in the entirety of its 87-year history.

-Louis Goss

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09-20-24 0420ET

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