Mercedes-Benz Cuts 2026 Profit Outlook on China Weakness and Higher Costs

Mercedes-Benz Group AG has revised downward its full-year 2026 outlook for its core cars division, citing an increasingly challenging market environment in China and higher fourth-quarter costs, including material expenses. The company now expects an adjusted return on sales of 2% to 3% for Mercedes-Benz Cars, down from its prior forecast of 3% to 5%. Group earnings before interest and tax (EBIT) are projected to be broadly flat year-on-year, rather than significantly higher.

The announcement, made on October 27, 2026, triggered a sharp sell-off in Mercedes shares, which fell as much as 5.5% in early European trading—the steepest intraday drop in over a month. The broader European autos sector also came under pressure.

This marks Mercedes as the latest major German automaker to issue warnings about softening demand and intense competition in China, the world's largest auto market. Rivals BMW and Volkswagen had previously cut their outlooks for similar reasons. Mercedes reported an 8% year-on-year drop in core car sales in Q3 2026, with deliveries in China falling 29% in the first nine months of the year after already reaching their lowest level since 2016 in 2025.

Preliminary Q3 results showed group EBIT of €1.77 billion and a cars division adjusted return on sales of 2.5%. The company left guidance unchanged for its vans and financial services segments.

Analysts and reports attribute the pressures to slowing Chinese demand combined with aggressive pricing and EV advancements from domestic competitors like BYD and Xiaomi, eroding margins for premium European brands.