Mercedes-Benz Q1 profit drops 43% on lower sales, pricing, China slowdown

Mercedes-Benz experienced a sharp 43% decline in first-quarter profit, as the premium automaker grappled with lower sales volumes, pricing challenges, and a persistent slowdown in the critical Chinese market.

Financial Performance Under Pressure

The Stuttgart-based automotive giant reported that its group earnings before interest and tax (EBIT) fell to 3.03 billion euros ($3.24 billion) from 5.34 billion euros in the same period last year, slightly below analyst expectations of 3.05 billion euros.

The company’s first-quarter revenue also decreased by 4.4% to 35.9 billion euros as vehicle deliveries dropped by 8% to 568,400 units. The decline was particularly pronounced in the high-margin top-end luxury segment, which saw deliveries fall by 21%.

These results underscore the challenging market conditions facing even the most established luxury brands in the automotive sector, as economic uncertainties and changing consumer preferences reshape the industry landscape.

Chinese Market Struggles Continue

The performance in China, a crucial market for premium vehicles, remained particularly concerning. Despite efforts to strengthen its position, Mercedes-Benz faced persistent challenges in the region.

“The situation in China continues to worsen. It’s a major issue,” said CEO Ola Kaellenius, addressing the significance of the market’s slowdown for the company’s overall performance.

The Chinese automotive market has become increasingly competitive, with domestic manufacturers gaining market share and pricing pressures intensifying across all segments. This competitive environment has made it difficult for traditional premium brands to maintain their historical profit margins in the region.

Outlook and Strategic Response

Despite the disappointing quarterly results, Mercedes-Benz maintained its full-year guidance, forecasting group returns at the same level as 2023. The company expects a slight decrease in car sales compared to the previous year.

To address the current challenges, the luxury automaker has indicated it will focus on cost discipline while continuing to invest in electric vehicle technology and digital innovations.

“We are maintaining our course and focus on cost discipline in a challenging environment,” Kaellenius emphasized, signaling the company’s determination to navigate through the current market difficulties.

Industry analysts will be watching closely to see how Mercedes-Benz adapts its strategy in the coming quarters, particularly regarding its approach to the evolving Chinese market and its ongoing transition toward electrification.