Mercedes-Benz Group AG delivered a sobering assessment of the global automotive sector on Thursday evening, significantly downgrading its full-year profitability outlook. The Stuttgart-based luxury manufacturer announced that its adjusted return on sales for the core Mercedes-Benz Cars division is now expected to land between 7.5% and 8.5%, down sharply from its previous estimate of 10% to 11%.
The revision represents the German automaker's second profit warning in less than two months, underscoring how severely economic deceleration in China—the world's largest automotive market—is weighing on premier European exporters. The updated forecast implies that profitability in the second half of 2024 will sink to approximately 6%, roughly half the margins achieved during the peak post-pandemic luxury boom.
Second Margin Downgrade in Two Months
Chief Executive Ola Källenius pointed directly to weakening consumer sentiment across China's wealthy urban demographic. The protracted real estate slump, coupled with sluggish domestic economic growth, has led high-net-worth buyers to defer major luxury purchases, disproportionately impacting top-tier models like the flagship S-Class and ultra-premium Maybach lines.
Compounding macroeconomic headwinds, European legacy manufacturers face relentless price competition from Chinese domestic electric vehicle champions such as BYD, Li Auto, and Nio. Rapid technological parity in software interfaces, autonomous driving assistants, and battery architectures has eroded the historical pricing premium enjoyed by Western luxury marques.
“The macroeconomic environment in China has softened further, primarily driven by continued downturns in the real estate sector which impact high-end consumer sentiment across durable goods.”
Intense Domestic Competition and Price Deflation in Asia
Shares in Mercedes-Benz slid 7.5% in Frankfurt trading following the unscheduled announcement, touching multi-month lows and pulling down shares of fellow German industrial heavyweights BMW, Volkswagen, and Porsche Automobil Holding SE.
In response, Mercedes-Benz management announced strict operational cost containment measures and adjusted production schedules at European manufacturing hubs, while pledging to accelerate software architecture upgrades across its next-generation modular electric vehicle platforms.
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