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Shares in Mercedes-Benz fell by more than 7 per cent on Friday after the German carmaker lowered its full-year profit outlook due to a “further deterioration” of Chinese demand.
The Stuttgart-based group said late on Thursday that it now expected its return on sales to be in the range of 7.5 per cent to 8.5 per cent, down from previous guidance of between 10 per cent and 11 per cent.
Chief executive Ola Källenius told analysts on Friday that the company’s issues stemmed “mainly [from] China” but added that in other markets, such as Europe, Mercedes-Benz was also still feeling “the [impact] of higher interest rates”.
The company’s stock fell more than 7 per cent in early trading, giving it a market capitalisation of about €59bn.
Mercedes-Benz is the latest German carmaker to raise concerns about weak demand in China, the world’s largest car market, which all of the country’s auto groups are heavily reliant on for sales and profits.
The company on Thursday said sales in its “top-end segment” had been particularly affected, delivering a blow to its strategy of so-called premiumisation. Mercedes-Benz has been attempting to develop and sell more expensive, high-margin cars that it believed would be less vulnerable to macroeconomic fluctuations.
The company added that it did not expect Chinese demand for higher-priced cars to recover in the latter half of the year.
Its comments follow warnings about the Chinese market from other groups, including rival BMW, which cut its full-year earnings forecast earlier in September and warned that weak Chinese demand would hit deliveries.
In July, luxury-car maker Porsche also issued a profit warning, reporting that sales in China in the six months to June were down a third from the previous year.
Mercedes-Benz on Thursday said GDP growth in China had “lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector”.
The group’s full-year earnings before interest and tax are now expected to be “significantly below” the €19.7bn that the group reported last year, compared with previous guidance of “slightly below”.