German luxury carmaker Mercedes-Benz’s earnings before interest and tax fell 48 percent year-on-year to 2.52 billion euros. This was mainly due to a weak performance in the important Chinese market. The carmaker said in a statement today. Third-quarter sales fell 6.7 percent to 34.5 billion euros. Net profit fell 53.8 percent to 1.72 billion euros.
Cutting costs
In response to the results, the carmaker said it would have to accelerate cost-cutting. However, it has not yet provided any further details on this. Mercedes has launched a 2020 plan that aims to cut costs by 20 percent between 2019 and 2025. According to the CFO, it has so far managed to cut costs by 15 to 16 percent.
In the core passenger car division, operating profit fell 63.8 percent to 1.2 billion euros. Sales fell 5.6 percent to 25.6 billion euros. The division’s operating profit margin fell to 4.7 percent from 12.4 percent last year. Mercedes sold a total of 503,573 vehicles in the quarter, down 1.4 percent from a year ago. In the van division, operating profit fell 13.6 percent to 618 million euros and sales fell 5.7 percent to 4.66 billion euros.
China to blame
The luxury carmaker cut its full-year profit margin guidance twice in the third quarter. It also joined a growing number of European carmakers blaming the weakening Chinese car market for the decline in profits and margins.
Third-quarter profits were hit as Chinese consumers continue to cut back on luxury purchases in a weakening economy. This had a major impact on sales of the country’s lucrative S-Class. In addition, competition from domestic manufacturers is growing in China. At the same time, the cost of upgrading models, especially the new version of the G-Class SUV, has risen, but these will hit the market in the next quarter.
Source: Czech Press office
