Mercedes-Benz Q3 Profit Rises 28%, Forecast Lowered

Mercedes-Benz reported a 28% increase in third-quarter profit, reaching approximately €1.52 billion, though this figure is contrasted with a prior-year period negatively impacted by substantial restructuring costs. The gains, however, are overshadowed by a lowered full-year profit forecast, reflecting significant headwinds particularly in the Chinese market.

Despite the profit increase, Mercedes-Benz is contending with a rapidly declining market position in China, where sales fell by nearly one-third (31%) during the third quarter. This downturn, combined with anticipated higher material costs in the fourth quarter, prompted the company to revise its 2026 earnings expectations. Mercedes-Benz now projects the group EBIT will remain at the prior year's level, rather than surpassing it as previously anticipated. The projected margin for the passenger car division has also been reduced to 2-3%, down from the earlier target of 3-5%.

Overall group revenue declined by 4.5% in the third quarter, totaling €30.7 billion. While the company experienced growth in sales outside of China – with a 1% increase – it was insufficient to offset the substantial losses in the Chinese market. Despite the overall sales decline to 407,200 passenger cars (an 8% year-over-year decrease), sales of battery-electric vehicles increased by 61% compared to the same period last year. Mercedes-Benz is also initiating a new round of voluntary severance packages in Germany, mirroring a similar program from the previous year, in an effort to reduce costs.

The downturn in China and rising costs are forcing Mercedes-Benz to reassess its strategy, with CEO Ola Källenius aiming to reduce the company’s dependence on the challenging Chinese market. Detailed plans for this shift will be presented in February with the release of the full-year forecast. The company’s stock currently trades at its lowest level since the 2020 COVID-19 market crash, at around €40, reflecting investor skepticism as indicated by a recent analyst note from Jefferies.