Mercedes’ Car Margin Fell to 2.5% in Q3 Even as Its Electric Sales Hit a Record

Mercedes-Benz Group reported third-quarter revenue of 30.7 billion euros, down 4.5 percent year over year, with group EBIT of 1.77 billion euros and net profit of 1.52 billion euros, the company said October 28. The reported profit rose mainly because the prior-year quarter carried heavy restructuring and legal charges — on an adjusted basis, group EBIT fell 15 percent to 1.78 billion euros.

The pressure is concentrated in the car division. Mercedes-Benz Cars sold 407,232 vehicles, down 8 percent, with adjusted EBIT falling by more than half to 560 million euros and the adjusted return on sales dropping to 2.5 percent from 4.8 percent a year earlier. China was the main drag, and management cut the full-year adjusted margin guidance for the car division to 2 to 3 percent, from 3 to 5 percent. Industrial free cash flow collapsed to 172 million euros from 1,367 million a year earlier.

The bright spot is electric: Mercedes-Benz Cars achieved its highest-ever quarterly battery-electric sales, up 61 percent year over year to 68,428 units, with growth in Europe and the United States. Vans stayed highly profitable at a 9.4 percent adjusted margin, and Financial Services delivered a 42 percent jump in adjusted EBIT to 445 million euros. The group’s earnings, in other words, are increasingly coming from everywhere except selling cars.

The response is strategic, not just financial. Reuters reported October 28 that Mercedes is working on a repositioning aimed at reducing its dependence on the Chinese market, and the company is selling its European fast-charging network to Electra. For a brand that built its identity on engineering margins, a 2.5 percent car margin is the number that frames everything else.