[BERLIN/FRANKFURT] German carmaker Mercedes-Benz on Wednesday (Oct 29) reported stronger than expected margins at its core autos business as improved sales of premium models helped to offset one-off charges related to ongoing job cuts.
Like rivals including Porsche and BMW, Mercedes faces particular challenges in the Chinese premium and luxury market, where a price war driven by local carmakers is hitting demand, while US import tariffs also weigh.
“The animal that is able to adapt is the one that survives and thrives in evolution,” said chief executive Ola Kaellenius. “The hyper-competition in China is not going away any time soon. This is certainly a multi-year task.”
In the third quarter, Mercedes-Benz’s return on sales at its car division was 4.8 per cent, up from 4.7 per cent in the same period last year and beating the 3.9 per cent average estimate in a Visible Alpha poll.
This was supported by a 10 per cent increase in top-end models, including the high-margin Maybach and AMG brands, while free cash flow was about 1.4 billion euros (S$2.1 billion), prompting the company to resume its share buyback programme.
Operating profit, meanwhile, fell 70 per cent owing to charges related to layoffs as the company implements restructuring measures to save five billion euros globally by 2027.
This “should be good enough” for a positive market reaction, said one Frankfurt-based trader.
Shares in the company were up 6 per cent at the top of Germany’s blue-chip index. Mercedes’ challenges are spread across its most important markets: tariffs in the US, falling sales in the highly competitive Chinese market and European emissions targets that have prompted an uneasy shift towards margin-squeezing electric vehicles (EVs). REUTERS
