(Bloomberg) — Mercedes-Benz Group AG plans to step up cost improvement measures after fierce competition and weaker demand in China hit the luxury-car maker’s profits. The key gauge of profitability slid to 4.7% in the third quarter, undershooting the company’s minimum target of 8% and well below the 12.
4% level a year ago. The decline comes after sales of the automaker’s most expensive cars fell during the period, dealing a blow to a luxury-first strategy meant to deliver higher profits. “The Q3 results do not meet our ambitions,” Chief Financial Officer Harald Wilhelm said Friday.
“We are taking a prudent view about market evolution going forward and we will step up all efforts on further efficiency increases and cost improvements across the business.” Mercedes’ results contrasted sharply with Tesla Inc., which saw its shares surge the most in more than three years this week after the company posted surprisingly strong earnings and rising profit margins.
The US manufacturer projected orders would grow in the final quarter, while Mercedes said its sales would remain at a similar level. China’s economic slowdown, worsened by a prolonged real estate slump, has hit the German automaker hard, especially in orders of high-end S-Class and Maybach models. Meanwhile, its vast industrial footprint means the company faces structurally higher costs than firms like Tesla.
The downturn in China had already forced the company to cut its 2024 sales outlook and lower adj.