Mercedes-Benz lowers profit outlook due to slowdown in Chinese market

Mercedes-Benz Group AG has revised its year-end profit outlook due to a decline in sales in the Chinese market and rising material costs. The company announced that it has lowered its adjusted return on sales forecast for its automotive division from the previously projected 5 percent to a range between 2 and 3 percent.

Following Volkswagen and BMW, Mercedes-Benz, which lowered its profit expectations, stated that challenging market conditions in China and rising costs in the fourth quarter were influential in this decision. The company expects its group earnings before interest and taxes to remain flat compared to last year.

Following the news, Mercedes-Benz shares fell by 5.4 percent, marking their sharpest decline in the last month. For the year as a whole, the decline in shares has exceeded one-third. This situation indicates that China has become a strategic risk for German automotive manufacturers.

Assessment: This cut in profit expectations may lead to questioning CEO Ola Källenius's strategy of focusing on high-priced cars. The company is trying to maintain its position in the Chinese market while simultaneously financing product launches and transforming its Germany-based cost structure.