Mercedes Cuts Expected Automotive Margin to 2%–3% After China Sales Decline
Key Facts
Mercedes-Benz cut its 2026 adjusted return on sales forecast for the Cars division to 2%–3%, from 3%–5%, in an update announced on October 27. The group said operating profit was now expected to be at the previous year’s level, after it had forecast a clear increase. It also lowered its forecast for industrial free cash flow to well below the previous year’s level, from an earlier estimate pointing to a slight decline. The company attributed the revision to a more challenging Chinese market and higher expected costs in the fourth quarter, including material costs. The announcement came a day before the full third-quarter interim results report, scheduled for October 28, according to the company’s calendar.
In the third-quarter results released, group revenue was 30.698 billion euros, down 4.5% from 32.147 billion euros in the same period a year earlier. Earnings per share were 1.64 euros, compared with 1.22 euros a year earlier, an annual increase of 34.4%. Net profit also rose 27.6% to 1.518 billion euros, from 1.190 billion euros. But the group’s adjusted operating profit fell 15% to 1.78 billion euros, compared with 2.10 billion euros in the third quarter of 2025. The results show a mixed picture, with net profit growth alongside declines in revenue and adjusted operating profit.
Preliminary figures the company announced before the full report had shown group operating profit of 1.77 billion euros, above the average forecast of 1.6 billion euros. The Cars division’s adjusted return on sales was 2.5%, compared with expectations of 2.4%. By contrast, industrial free cash flow was 172 million euros, below estimates of 422 million. The comparison between operating profit exceeding expectations and industrial free cash flow falling short highlights the different performance of the two indicators during the quarter. Financial Services recorded an adjusted return on equity of 13.8%, above expectations of 12.4%.
Mercedes car sales in China fell to 86,800 vehicles in the third quarter, down 31% year over year. Across the group, sales included 491,700 cars and vans, down 6% from the corresponding period. The company said currency fluctuations and intensifying competition in China weighed on results, alongside a more challenging market environment there. In contrast, growth in Europe and the United States, and performance in Financial Services and Trucks, supported results, according to the company. The Trucks division recorded adjusted operating profit of 397 million euros and an adjusted return on sales of 9.4% in the quarter, and 9.9% in the first nine months.
In electric vehicles, Mercedes sold 68,400 battery-electric cars in the third quarter, up 61% year over year and 29% compared with the second quarter. The company said electric versions of the GLC, CLA, GLB and GLA were sold out in Europe for the rest of 2026, and that order books extended into 2027. In the first nine months, the Cars division cut its total spending on property, plant and equipment, and research and development by 11% compared with the same period a year earlier. The spending cut followed an investment peak in the previous year linked to the product launch program. These figures show a contrast between growth in electric-car sales, pressure from Chinese sales and reduced investment by the Cars division.
The forecast revision came amid an earlier decline in group revenue, which was 32.1 billion euros in the second quarter of 2026, compared with 33.2 billion euros in the second quarter of 2025. On October 27, Mercedes shares fell 5.3% at 09:11 GMT, according to Reuters, putting them on course for their biggest intraday drop since May 2025. The “MBGYY” share closed at $11.02 that day. Investors received the forecast update before the full interim report was released, which the company had listed in its calendar for the following day. The group also set November 10 as the date for publishing its 2026 sustainability update.