Luxury cars as slow sellers: Mercedes in crisis

German car manufacturers are feeling the full impact of the downturn in the car market. Volkswagen Now comes bad news from Mercedes-BenzThe luxury car manufacturer had to lower its forecast for the full year for the second time in two months and now expects a significantly lower profit than a year ago.

The main reason is weaker demand for luxury cars in China. Car manufacturers are suffering particularly from the simmering real estate crisis in the People’s Republic: falling real estate prices are particularly affecting wealthy Chinese – the typical customers of German premium manufacturers.

“You can say that our customers are very cautious at the moment,” said Mercedes boss Ola Källenius before analysts. It is unclear how long the reluctance to buy will last. “I will remain cautious for the foreseeable future,” added Källenius. Mercedes recently tried to counteract the crisis with new models, but tried not to fight the crisis with price cuts.

Margin is leaner

The Stuttgart-based company is now expecting a margin of between 7.5 and 8.5 percent for the full year, having previously assumed 10 to 11 percent. This implies an adjusted return on sales of around 6 percent in the second half of the year, it said. Negative valuation effects also played a role.

Mercedes shares collapse

The lowered forecast was not well received on the stock market: Mercedes shares fell by 8.4 percent on Friday to a two-year low. Although some investors had expected a profit warning, it came as a surprise and was larger than expected, wrote the RBC analysts.

The other auto stocks in the German stock market index DAX also went downhill on Friday. Investment strategist Jürgen Molnar from the broker RoboMarkets stated: “The problem is always the same.” Cars are difficult to sell these days, mainly in China, but also in all other parts of the world.

BMW is also in crisis

The Munich-based carmaker BMW is also feeling the effects of weaker demand in China and has recently lowered its outlook for this reason, among other reasons. The weakness is also affecting dealers in China, some of whom have run into difficulties, said Mercedes’ finance chief. Harald Wilhelm. Mercedes will support dealers to ensure that they survive despite the difficult situation. Porsche had also admitted at the half-year mark that no rapid recovery was to be expected in the People’s Republic.

Car summit with Habeck on Monday

Next Monday, Economics Minister Robert Habeck will host an automotive summit to discuss the crisis in the industry. TIn addition to the automotive industry association, VDA and the IG Metall union also representatives of the largest German automobile manufacturers and suppliers.

The focus will certainly be on the switch to e-mobility. On Friday, Habeck (Greens) announced new funding measures for electric cars. “I feel obliged to see that the market is now picking up again,” said the Green politician during a visit to the VW plant in Emden. But Habeck also called on VW to refrain from closing plants. “The locations should be retained.”