Mercedes-Benz Q3 Profit Down On Weak Volume; Continues To Expect Significantly Lower FY25 Results

Mercedes-Benz Group AG reported a significant decline in third-quarter profitability, with net profit down 30.8% to €1.19 billion and EBIT plunging 70.2% to €750 million, as revenue decreased 6.9% to €32.15 billion. This underperformance was attributed to weak unit sales volume, increased tariffs, and challenging market conditions in China. The luxury automaker reiterated its outlook, projecting Group EBIT, revenues, and unit sales for both Mercedes-Benz Cars and Vans in fiscal 2025 to remain significantly below their respective prior-year levels.

Analysis

Mercedes-Benz Group AG reported a significant decline in Q3 2023 profitability, with net profit falling 30.8% to €1.19 billion and EBIT plunging 70.2% year-over-year to €750 million. Adjusted EBIT also decreased by 17.3% to €2.10 billion, while total revenue dropped 6.9% to €32.15 billion. This underperformance was primarily driven by lower unit sales volume across its segments.

The company attributed the weakened results to increased expenses from tariffs and challenging market conditions in China, alongside a general reduction in sales volume. Mercedes-Benz Cars saw revenue decline 7.3% with a 12.3% drop in unit sales, and Mercedes-Benz Vans experienced a 13.2% revenue decrease on a 7.9% sales volume reduction. These factors highlight broader macroeconomic pressures impacting the luxury automotive sector.

Despite the weak quarter, CEO Ola Kaellenius stated results were in line with full-year guidance, emphasizing ongoing product and tech launches like the new CLA and GLC. However, the company reiterated a cautious outlook for fiscal 2025, expecting Group EBIT and revenues, as well as unit sales for both Cars and Vans, to be significantly below prior-year levels of €13.6 billion, €145.6 billion, 1,983k units, and 406k units respectively. This guidance suggests persistent headwinds.

Key Decisions for Investors

• Investors should re-evaluate their long-term growth assumptions for Mercedes-Benz given the significantly lowered fiscal 2025 guidance for EBIT, revenue, and unit sales.
• Monitor the impact of tariffs and evolving market conditions in China, as these factors were explicitly cited as significant headwinds impacting profitability.
• Assess the efficacy of new product launches, such as the CLA and GLC, in counteracting declining sales volumes and improving segment performance in future quarters.