📉 Mercedes-Benz to focus on cost cutting after profit falls by half!
Mercedes-Benz $MBG.DE has reported a significant drop in profits for the third quarter of 2024, more than halving from the same period last year. This drop was mainly due to lower demand for luxury cars in the key Chinese market and fierce competition on the global stage 🚗
CFO Harald Wilhelm acknowledged that the results "do not match the company's ambitions", and announced that Mercedes would take further tough cost-cutting measures. He added that these will be tougher steps than before, with the details of these measures remaining non-public for now 💼.
📊 Q3 2024 financial results
Return on sales (RoS) for the Mercedes-Benz Passenger Car Division fell to 4,7 %, while last year it was 12,4 %. This drop is the biggest since the pandemic and shows the serious effects of changing global demand and competition.
Adjusted earnings before interest and tax (EBIT) Passenger Car Division reached EUR 1.2 billion (versus €3.4 billion in the same period in 2023). In addition to the challenging market environment, the transition to new models, which will not be available until the fourth quarter, contributed to this decline .
The Mercedes-Benz Vansdivision recorded an adjusted return on sales (RoS) 13,5 %, which is lower than 15 % from last year, mainly due to lower sales volumes. Despite this decline, a stable sales mix supported healthy profitability in this category 🚐📈.
The Mercedes-Benz Mobility division faced a decline in profit due to lower interest margins, which were under pressure from the competitive environment and interest rate developments. Adjusted EBIT here amounted to EUR 285 million (versus EUR 363 million in 2023), while the adjusted return on equity (RoE) was 8,9 %.
🔍 Stock development and macroeconomic view
Mercedesshares have fallen by more than 8 %, which is less than its main competitors (BMW, Volkswagen, Porsche) and than the decline in the pan-European automotive index. However, unlike some of its competitors , Mercedes has stuck to its philosophy of "value over volume" - a strategy that sees it reject price wars with competitors and bet on long-term brand value 🏷️🚙.
💡 2024 outlook and key challenges
Mercedes expects full-year 2024 sales to be slightly below last year's level. In Q4 , it plans to increase the range of high-end models such as the new G-Class and AMG sports models, which should boost sales momentum. In addition, the company hopes to further expand the share of electric vehicles (BEVs and plug-in hybrids) in total production, aiming for a share among 18 % a 19 %.
Total adjusted return on sales (RoS) is expected to be between 7,5 % to 8,5 % for passenger cars, while the outlook for the Vans division remains at 14 % to 15 %. Adjusted return on equity (RoE) for the Mobility division is expected to be in the range of 8,5 % to 9,5 %.
Mercedes-Benz is thus entering a critical period where new models and adaptation to global market conditions will be crucial. 🔍
What is your opinion of Mercedes-Benz? Do you think the company is still playing the quality of workmanship as before? 🚘
European car companies currently suck. For me, it's either the US or China.
Mercedes is not ideal for me. Better for me is $P911.DE or $RACE.
As Kryštof writes, it is not easy for all European car companies now. I have $P911.DE shares, so I'll see how it goes.
I think all European car companies in general have to concentrate a lot now :) They missed the train and now they are paying the price, literally.