Shares of German luxury carmaker Mercedes-Benz rose on Tuesday after the company reported a stronger second-quarter operating profit and maintained its core profit margin forecast for the year, even as weak demand in China continued to weigh on its core car business.
The premium automaker, alongside German rivals Volkswagen and BMW, is grappling with rising tariff costs and intensifying competition from Chinese electric vehicle manufacturers. In response, Mercedes also announced plans to accelerate cost-cutting measures, with particular emphasis on improving productivity at its German plants.
Mercedes reported a 22% increase in second-quarter operating profit to €1.5 billion ($1.7 billion), driven by lower administrative expenses and reduced research and development spending. However, the result fell short of analysts’ expectations of €1.6 billion, according to a Visible Alpha consensus.
Despite the improved earnings, the company withdrew its earlier forecast for stable group revenue and passenger car sales, saying it now expects both to decline slightly compared with the previous year.
Mercedes nevertheless reaffirmed its full-year core margin guidance of between 3% and 5%. Chief Financial Officer Harald Wilhelm said the company now expects its passenger car business to deliver results at the lower end of that range.
The group’s overall performance was supported by strong contributions from its financial services and vans divisions. Earnings also received a boost from a €131 million gain linked to the planned sale of its leasing subsidiary, Athlon.
Chief Executive Officer Ola Kaellenius said the company had remained on course despite challenging market conditions.
“Despite a demanding market environment, we remained on track in the second quarter while continuing to advance our product launch programme,” Kaellenius said, adding that Mercedes would pursue further cost-cutting measures in the second half of the year.
The company’s passenger car business continued to face significant pressure in China, where second-quarter sales fell 30%. The world’s largest automotive market has become increasingly competitive as domestic manufacturers expand their range of lower-cost, technology-focused electric vehicles, eroding the long-standing dominance of foreign brands.
Building on a 25% reduction in fixed costs since 2019, Mercedes said it began stepping up global productivity initiatives in June, with its German operations remaining a key focus of the restructuring efforts.
Boluwatife Enome
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