By Andrey Sychev (Reuters) -Mercedes-Benz will step up cost cuts after earnings halved in the third quarter hit by tepid demand and fierce competition in China, it said on Friday. The luxury carmaker cut its full-year profit margin target twice during the third quarter, joining a growing number of European rivals blaming a weakening Chinese car market for falling profits and margins. It hopes a massive new model rollout will help to revive sales next year.
Mercedes shares fell 1.3% by 1046 GMT, dragging down peers BMW and Volkswagen. The stock has lost around 8% year to date, underperforming Germany's benchmark DAX index but still faring better than Volkswagen, BMW, and Porsche AG.
The pan-European autos index is down 10% year-to-date, the worst-performing sector in Europe this year. PROFITABILITY DROPS Mercedes' car division's adjusted return on sales fell to 4.7% in the third quarter from 12.
4% last year, its worst profitability since the pandemic, while earnings in the unit more than halved, worse than expected by analysts. "The Q3 results do not meet our ambitions," CFO Harald Wilhelm said in a statement, adding that the group will step up cost cuts. Wilhelm declined to provide more details about the cost cuts, but warned that "it will be tighter and tougher for sure".
Europe's biggest automaker, Volkswagen is considering plant closures in Germany for the first time. Stifel analyst Daniel Schwarz noted substantial progress already made by Mercedes in reducing fixed costs .