Mercedes-Benz has abandoned its forecast for profit growth in 2026, warning that earnings will remain flat at around €5.8 billion as weak demand in China, rising material costs and intensifying competition weigh on the German carmaker.
The company now expects core profit to remain at the previous level, reversing its earlier projection of growth of at least 15%. It also reduced its expected profit margin for its passenger car business to between 2% and 3%, compared with its previous forecast of 3% to 5%.
The revision makes Mercedes-Benz the third major German carmaker to lower its full-year outlook, following similar moves by Volkswagen and BMW as manufacturers face mounting pressure in a changing global automotive market.
Mercedes-Benz reported preliminary third-quarter core profit of €1.77 billion, with a margin of 2.5% in its car division. The company is scheduled to publish its full third-quarter results on Wednesday.
Investors reacted negatively to the announcement, sending Mercedes-Benz shares down more than 4%. Shares in Volkswagen and BMW also fell by around 2%.
The outlook cuts underline the challenges facing Germany’s automotive industry, which is contending with sluggish demand, higher production expenses and growing competition from Chinese manufacturers, including BYD and Xiaomi. Chinese brands have expanded their presence in the electric vehicle market, increasing pressure on established European carmakers to compete on pricing, technology and production costs.
Mercedes-Benz has been particularly affected by weakening sales in China, one of its most important markets. Vehicle deliveries in the country fell by a further 29% in the first nine months of 2026, following a decline that had already pushed sales last year to their lowest level since 2016.
The deteriorating market conditions have also intensified scrutiny of the company’s cost structure. Chief executive Ola Kallenius has urged German employees to work additional hours without additional pay as the manufacturer seeks to improve efficiency.
At the same time, Mercedes-Benz is expanding production in Hungary, where Kallenius has said operating costs are around 70% lower than in Germany.
Volkswagen is pursuing a major restructuring of its own. The group plans to cut 120,000 jobs worldwide by the end of the decade, a programme that would rank among the largest workforce reductions in automotive industry history.
The pressure on all three manufacturers reflects broader changes affecting European car production, including competition from lower-cost rivals, the transition towards electric vehicles and the need to control spending amid uncertain demand.
For Mercedes-Benz, the revised forecast signals that a recovery in profitability will be more difficult than previously expected. The company’s upcoming full results are likely to provide further detail on the financial impact of weaker Chinese sales and the measures planned to protect margins.
