Mercedes-Benz cuts 2026 outlook on China slump, costs

Mercedes-Benz lowered its full-year 2026 guidance on Tuesday, October 27. The German luxury carmaker pointed to an "increasingly challenging market environment in China" and higher costs expected in the fourth quarter, including material costs, according to its ad hoc disclosure. The cut makes Mercedes the third major German automaker to lower its forecast this year, after Volkswagen and BMW Bayerische Motoren Werke AG, as sales in China decline.reuters.com+1

Lower targets for margins and cash

Mercedes-Benz Cars, the core division, now expects an adjusted return on sales of 2% to 3%, down from 3% to 5%. The company now expects group EBIT to be roughly the same as last year. It had previously guided for EBIT well above the prior-year level. It also expects industrial free cash flow to come in significantly below last year, a step down from its earlier "slightly below" forecast. Targets for the Vans unit (8% to 10%) and Financial Services (12% to 14% return on equity) stayed the same.live.deutsche-boerse.com+1

Preliminary third-quarter figures were mostly ahead of analyst forecasts. Group EBIT was €1.77 billion, compared with the €1.6 billion consensus. The cars division posted a 2.5% adjusted margin against an expected 2.4%. Industrial free cash flow was €172 million, well short of the €422 million analysts had expected. Core car sales fell 8% from a year earlier in the quarter, mainly because of weak demand in China.reuters.com+1

Shares slide

Shares dropped about 5% in morning trading in Frankfurt. Reuters said the stock was heading for its largest intraday fall since May 2025. Mercedes is listed on the DAX, and the stock had already lost about a third of its value since the start of the year.marketscreener.com+1

A sector-wide squeeze

BMW cut its forecast on June 16. It lowered its automotive EBIT margin target to 1% to 3% from 4% to 6%, blaming a faster downturn in China and the effects of the Iran war. In September, Volkswagen cut its 2026 operating margin forecast to at most 1%, down from 4% to 5.5%. It cited roughly €10 billion in one-off charges, much of it tied to Porsche, along with a weak Chinese market.reuters.com+1

German carmakers keep reporting falling sales in China. At the same time, Chinese competitors are gaining ground in Europe with lower prices and advanced electric-vehicle technology, in a market Western brands have long dominated.reuters.com