Mercedes cuts 2026 profit guidance as China woes weigh on German automakers

By Amir Orusov

Oct 27 (Reuters) - Mercedes-Benz cut its 2026 profit margin outlook on Tuesday, citing weaker conditions in China and higher fourth-quarter costs, in the latest sign of mounting pressure on German carmakers in their key market.

Its shares fell as much as 5.5%, and were down around 4% as of 0955 GMT.

The German premium automaker now expects an adjusted return on sales of 2%-3% in 2026, down from its previous guidance of 3% to 5%.

The company also cut its 2026 group operating profit guidance, now expecting earnings to be broadly flat year-on-year rather than significantly higher.

The warning comes as German carmakers continue to struggle in China, the world's largest auto market, where slowing demand and intense competition from local manufacturers are eroding sales and pricing power.

Mercedes' core car sales fell 8% year-on-year in the third quarter, hit by weak demand in China.

Rivals BMW and Volkswagen also cut their outlooks earlier this year, blaming, in part, the worsening situation in China.

Metzler analyst Daniel Schwarz said China was the main reason for the weak performance of German carmakers.

Mercedes, like BMW, remains heavily exposed in China. By contrast, Porsche, which reported a profit rebound on Tuesday, has reduced its dependence on China and is pushing the brand further into the luxury segment, making it less vulnerable to competition from Chinese manufacturers expanding into Europe and other markets, Schwarz said.

(Reporting by Amir Orusov, additional reporting by Anastasiia Kozlova, editing by Anna Pruchnicka)