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Mercedes-Benz Group AG has revised its financial forecast for the year, citing declining sales in China as a significant factor. The luxury carmaker now expects its adjusted return on sales to fall between 7.5% and 8.5%, down from the previous projection of up to 11%.
Mercedes-Benz cuts Annual Forecast Amid Slowing Chinese Sales | Image Credit: Pexels
Key Highlights
- Mercedes-Benz slashes sales forecast, with adjusted returns expected to dip to 7.5%-8.5%.
- Slower GDP growth and lower consumption in China hit luxury car sales, including the top-end segment.
- Mercedes faces growing competition from domestic Chinese brands offering advanced in-car technology.
New Delhi: Mercedes-Benz Group AG has downgraded its financial forecast for 2023, citing weakening sales in China as a major factor. The luxury carmaker now expects its adjusted return on sales to range between 7.5% and 8.5%, a reduction from the earlier forecast of up to 11%. This revision follows a deterioration in China’s macroeconomic conditions, which have led to a significant drop in consumer demand, particularly in the premium vehicle segment.
The company has also warned that its earnings before interest and taxes (EBIT) are now projected to be “significantly below” last year’s figures. This decline is attributed to China’s slowing GDP growth and a broader economic downturn, which has seen a decrease in consumer spending and a continued slump in the real estate sector. These factors have particularly affected Mercedes-Benz’s high-end vehicle sales, a core part of its luxury strategy aimed at funding the company’s transition to electric vehicles.
The slowdown in China is a major concern for Mercedes-Benz, as the country has traditionally been one of its most profitable markets, particularly for its luxury models. However, Mercedes is facing increasing competition from local Chinese automakers, who are gaining popularity among younger buyers. These homegrown brands are perceived to offer more advanced in-car digital and entertainment technologies than the traditional German manufacturers, making them more appealing to tech-savvy consumers.
This situation reflects broader challenges in the German automotive industry which is struggling with slow demand and rising pressure from international competitors. Mercedes’ rivals, Volkswagen and BMW, have also revised their forecasts recently. Volkswagen is even considering closing some of its factories in Germany due to low demand, while BMW has adjusted its full-year earnings guidance, partly due to slower electric vehicle (EV) sales.
For Mercedes-Benz, the weakening sales in China represent a significant setback, as the company has heavily relied on the market for both its luxury strategy and the rollout of its electric vehicle range.
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