Mercedes-Benz lowered its profit forecast for 2026 on Tuesday, joining Volkswagen and BMW as German automakers adjusting to a struggling Chinese market. The company cited higher material costs and economic difficulties in China as key factors for the adjustment, which cuts the expected core profit to about €5.8 billion, roughly the same level as the previous year. Previously, Mercedes-Benz anticipated a profit increase of at least 15 percent. The manufacturer also noted that structural challenges show no sign of abating, highlighting the essential need for further cost-cutting measures alongside attractive new products to remain competitive.
Margin decline and market share
Profit margins for the core car business are now expected to fall between two and three percent for the year, down from the earlier forecast of three to five percent. This slump follows a 29 percent drop in vehicle deliveries to China during the first nine months of 2026, the lowest level since 2016. As local brands like BYD and Xiaomi gain ground, the company is facing a broader shift in the global automotive environment. This pressure forces traditional manufacturers to rethink production strategies and cost structures, often shifting focus to regions with lower operational expenses. Mercedes-Benz’s vehicle deliveries in China, already at their lowest level last year, fell further during the nine months to end-September.
Mercedes-Benz shares dropped 4.2 percent following the announcement. Volkswagen and BMW also saw declines of a little over two percent. BMW and Volkswagen have both already cut their guidance for the year as sluggish demand combined with cut-throat competition from Chinese local rivals have eaten into profits. Being partially muscled out of China has led to painful adjustments for Germany’s car industry, one of the country’s largest employers. Mercedes-Benz reported a core profit of €1.77 billion for the third quarter, with a 2.5 percent margin on its car business.
Volkswagen plans to have cut 120,000 jobs globally by the end of the decade in what is the largest restructuring in automotive history, eclipsing the 50,000 jobs lost after the bankruptcy of General Motors in 2009. Mercedes-Benz CEO Ola Kaellenius has asked German workers to take unpaid overtime while the company expands manufacturing in Hungary, where production costs are roughly 70 percent lower than in Germany. Mercedes-Benz reports full third-quarter results on Wednesday.
