Mercedes-Benz Group AG Q1 Profit Falls as China Weakness Weighs on Performance
Mercedes-Benz Group AG reported a 17.2% decline in first-quarter net profit, which fell to €1.43 billion from €1.73 billion a year earlier. The drop was primarily driven by a sharp slowdown in China, which offset stronger demand in the United States and growth in electric vehicle sales.
Revenue and Earnings Decline Across Key Metrics
For the quarter ending March 31, 2026, revenue declined 5% to €31.60 billion. Earnings before interest and taxes (EBIT) fell 17% to €1.90 billion, while adjusted EBIT dropped more sharply by 30% to €1.77 billion, reflecting pressure on margins.
China Sales Slump Drives Overall Weakness
The biggest drag came from Asia, where total vehicle sales dropped 24% to 152,662 units. In China, Mercedes-Benz’s largest single market, sales plunged 27% to 111,621 units.
The company cited several factors behind the decline, including model transition cycles, macroeconomic uncertainty, and intensifying competition in the region.
Segment Performance Shows Mixed Results
The Mercedes-Benz Cars division saw EBIT fall 54% to €809 million, with return on sales dropping to 3.5% from 7.3% a year earlier.
In contrast, the Vans division delivered strong results, with EBIT rising 71% to €392 million, despite a slight 3% decline in unit sales.
U.S. Growth and EV Sales Provide Support
Sales in the United States helped offset some of the weakness, with car deliveries increasing over 20% to 81,060 units.
The company’s electric vehicle push also showed progress, as battery electric vehicle (BEV) sales rose 9% to 44,258 units. However, plug-in hybrid (PHEV) sales declined 20% to 37,079 units, indicating mixed momentum within electrification efforts.
Cash Flow and Investment Trends Improve
Mercedes-Benz reported an 18% increase in adjusted free cash flow, reaching €2.84 billion. Net liquidity in its industrial business rose 5% to €33.81 billion compared to the end of 2025.
Research and development spending was slightly reduced by 3% to €2.25 billion, while capitalized development costs increased 21%. Investment in property, plant, and equipment rose 9% to €749 million, reflecting continued long-term strategic investment.
Full-Year Outlook Remains Intact
Despite the weaker quarterly performance, Mercedes-Benz maintained its 2026 guidance, expecting revenue to remain broadly in line with last year and EBIT to come in significantly higher than 2025 levels.
Basic earnings per share declined to €1.49, compared to €1.74 in the same period last year.
Strategic Changes and Corporate Developments
The quarter also included structural adjustments, such as the planned sale of Athlon Group to BNP Paribas Group, with completion expected in the second half of 2026.
Additionally, the company continued its “Own Retail” transformation in Germany, signing agreements to divest six more operations during the quarter.
