German premium automaker Mercedes-Benz (MBGn.DE), opens new tab on Friday said third-quarter earnings in the core car division plunged by 64%, massively missing analysts’ estimates, as Chinese consumers continued to cut back on luxury goods in a weakening economy.
“The Q3 results do not meet our ambitions,” CFO Harald Wilhelm said in a statement, adding that the group will step up cost cuts.
The July-September earnings, according to Reuters, were hit by model revamp costs as well as a tough market, especially for new versions of the G-Class SUV, which will roll out in the next quarter, Mercedes added.
It sees annual car sales slightly below the previous year, and fourth-quarter sales in line with the third quarter.
A rare bright spot in the results was the continued cash flow generation from the industrial business, which reached 2.39 billion euros ($2.59 billion) in the quarter, up 2% year-on-year.
Adjusted earnings before interest and taxes (EBIT) in the car unit dropped to 1.2 billion euros versus LSEG’s mean estimate of a 3.6% drop to 3.19 billion euros
China Woes
Mercedes-Benz CEO Ola Kaellenius has warned that Chinese consumers are extremely cautious about making big purchases, as long-standing economic weakness and by a local real estate crisis have created considerable uncertainty for consumers.
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.
ALSO READ:Dollar Droops with US yields, Stocks Mixed Amid Rates, Election Risks
The results come as talks between Brussels and Beijing continue over looming tariffs on imports of Chinese EVs into Europe, a major headache for Europe’s China-dependent car heavyweights due to the fears of potential retaliation.
Mercedes-Benz, which counts China’s Beijing Automotive Group Co Ltd (1958.HK), opens new tab and Geely (GEELY.UL) Chair Li Shufu as its two top shareholders, has called the tariffs a “mistake”, urging the European Commission to delay their implementation to allow further talks on a deal.
