On October 25, German luxury carmaker Mercedes-Benz reported that its revenue for the third quarter was €34.5 billion (around $37.4 billion), marking a year-on-year decline of about 7%. Earnings before interest and taxes (EBIT) dropped to €2.52 billion, a 48% decrease compared to the same period last year. The profit margin fell to 4.7%, below its minimum target of 8% and the lowest level since the company spun off its truck division at the end of 2021.
The downturn in Mercedes-Benz's third-quarter performance is mainly attributed to a decline in sales of its most expensive models, a setback to its "luxury-first" strategy aimed at boosting profitability.
In the Chinese market, Mercedes-Benz previously achieved a relatively high proportion of sales with its luxury models, positioning China as a benchmark to replicate in other regions. However, with demand slowing in the Chinese auto market this year, orders for Mercedes-Benz's high-end S-Class and Maybach models have been significantly affected. This has forced the company to lower its 2024 sales forecast and reduce its adjusted profit margin for the automotive segment.
At the same time, due to its large industrial scale, Mercedes-Benz faces higher structural costs than automakers like Tesla. As a result, the company announced plans to intensify cost-cutting efforts.
Mercedes-Benz Chief Financial Officer Harald Wilhelm said, "Our third-quarter performance fell short of expectations. We remain cautious about future market developments and will increase efforts to improve efficiency and optimize costs across the board."
Although Mercedes-Benz has committed to improving its cost structure, it has not specified areas where cuts will be made. Currently, the company operates several factories in Germany, where labor and energy costs are relatively high. Additionally, Mercedes-Benz has been heavily investing in the development of electric vehicles within its extensive factory network, producing both electric and fuel-powered cars.
Following the earnings report, Mercedes-Benz's stock price fell by as much as 3.9% in early trading. Year-to-date, the stock has declined by around 9%.
The third-quarter results of Mercedes-Benz contrast sharply with Tesla's performance, as Tesla recently posted unexpectedly strong revenue and profit margins, resulting in its stock experiencing its largest single-day gain in 11 years. Tesla anticipates increased deliveries in the fourth quarter, while Mercedes-Benz expects its fourth-quarter sales to remain flat.
