Mercedes-Benz Warns of Margin Squeeze as China Sales Slump

Mercedes-Benz reported a significant 57% drop in operating profit to 5.8 billion euros, falling short of market expectations of 6.6 billion euros. The luxury automaker issued a cautious outlook for 2026, projecting an adjusted return on sales between 3% and 5%, which is below analyst forecasts of 5.4%. Profitability has been severely impacted by a 19% decline in sales within the crucial Chinese market, with further weakness anticipated throughout 2026. Additionally, the company faced approximately 1 billion euros in costs related to trade tariffs and internal restructuring efforts. These results highlight the intensifying competition and structural challenges facing European carmakers in the global transition. Consequently, the company's shares and the broader DAX index are facing downward pressure following the disappointing guidance.