AutoBeta(AutoBeta.net)09/25 Report--

Life is not easy for Mercedes-Benz.

Mercedes-Benz cut its financial forecast for 2024 due to weak performance in the Chinese market, according to foreign media reports. Mercedes-Benz said its adjusted profit margin forecast for its main automotive business was cut to "7.5 per cent Rue 8.5 per cent" from 11 per cent earlier, as demand in China, its largest market, cooled further. Sales of the most expensive models such as Mercedes-Benz S-Class and Maybach sedans have been hit. Meanwhile, Mercedes-Benz said earnings before interest and tax (EBIT) this year were expected to be "significantly lower" than last year's levels, a major setback to the company's strategy to boost profitability by selling more luxury models.

Ola K ä llenius, chief executive of Mercedes-Benz, said on an analyst conference call that Mercedes-Benz would "do everything in its power" to improve its performance, including launching new products in the Chinese market to launch a sales offensive.

Mercedes-Benz shares fell 7.7% after the report, the biggest intraday drop since may 2023.

Mercedes-Benz reported revenue of 72.616 billion euros in the first half of 2024, down 4 per cent from a year earlier. First-half net profit was 6.087 billion euros, down 20 per cent from a year earlier, while earnings before interest and tax (EBIT) fell 25 per cent to 7.9 billion euros in the first half. Mercedes-Benz reported a sharp decline in adjusted EBIT in a challenging environment and was affected by adverse product and market combinations, declining unit sales and negative net pricing effects.

Mercedes-Benz cut its target mainly due to the price war in the Chinese market. "the Chinese market has shrunk slightly, and the market conditions of China's high-end and luxury car markets remain weak," Mercedes-Benz said in its semi-annual report. Mercedes-Benz sold 1.1686 million vehicles worldwide in the first half, down 6 per cent from a year earlier, according to the financial report. Among them, sales in China were 341500, down 9% from the same period last year; Europe and North America declined slightly, 1% and 3% respectively; for Mercedes-Benz, the situation is very awkward. If you insist on a price war, it will lose brand value and devour profits; if you do not fight a price war, Mercedes-Benz's market share will be eroded by domestic brands, and sales will continue to decline.

In addition to Mercedes-Benz, BMW also announced a few days ago that it would adjust its guidance for fiscal year 2024, as sluggish demand in key markets such as China also had an impact on sales. BMW made the following adjustments to its guidance for fiscal year 2024: delivery will decline year-on-year, previously expected to grow, and profit margins before interest and tax in 2024 will be between 6 and 7 per cent (previously between 8 and 10 per cent). Return on capital use (RoCE) is between 11% and 13% (previously 15% to 20%)

In the first half of 2024, BMW Group delivered 1.213 million new cars worldwide (including BMW, MINI, Rolls-Royce), basically the same as in the same period. Of these, BMW brand sales totaled 1.096 million, up 2.3 per cent year-on-year, while the other two major brands declined, while Rolls-Royce fell 11.4 per cent and the mini fell 18.8 per cent.

In terms of the global market, BMW sold 460800 vehicles in Europe in the first half, up 2.6 per cent from the same period last year. The UK market was BMW's largest growth market, with 16.4 per cent year-on-year growth; in other markets, BMW also achieved growth in North America, with sales of 230100 vehicles, up 2.0 per cent year-on-year, and 188800 vehicles in the US market, up 1.4 per cent year-on-year.

As for the reasons for the decline in sales in the Chinese market, BMW and its peers are under pressure in the key market, where local carmakers are winning market share with lower-cost electric vehicles, forcing its European competitors to cut prices sharply. Under the wave of new energy, the Chinese are gradually abandoning imports and joint venture luxury cars.

Over the past few decades, China's first-tier luxury car market has long been dominated by German BBA brands, shaping the general perception of luxury cars in the Chinese people. In 2023, BBA sold more than 2.3 million vehicles in the Chinese market, with a luxury car market share of more than 75%, demonstrating its strong dominance. However, in 2024, even after the sharp price cuts by domestic brands, BBA sales did not pick up, but led to a decline in gross profit margin, which in turn affected the profitability of the group. Of course, if BBA does not cut prices, the situation may be even more serious. At present, the whole luxury car market is facing the challenges of declining sales and electric transformation, especially the brand premium of luxury brands has been difficult to transmit to electric vehicle products in the past years, and the terminal price of electric vehicle products launched by BBA has plunged sharply.

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