Mercedes-Benz shares plunged 5% on Tuesday after the German luxury automaker lowered its 2026 profit outlook. The company pointed to worsening market conditions in China and rising costs expected during the final quarter of the year.
The Stuttgart-based manufacturer warned that China’s automotive market has become increasingly difficult. At the same time, higher expenses, particularly material costs, are putting additional pressure on profitability.
Mercedes-Benz Lowers 2026 Profit Forecast
Following these developments, Mercedes-Benz Cars reduced its adjusted return on sales forecast to 2%–3%, compared with its previous projection of 3%–5%.
The company also revised its broader financial expectations. Group earnings before interest and taxes (EBIT) are now projected to remain roughly in line with the previous year’s level. Earlier guidance had indicated significantly higher earnings.
Meanwhile, industrial free cash flow is expected to fall substantially below last year’s figure. This represents a downgrade from the company’s earlier forecast of a slight decline.
Despite these adjustments, Mercedes-Benz maintained its outlook for two other business divisions.
Mercedes-Benz Vans continues to target an adjusted return on sales of 8%–10%, while Financial Services expects a return on equity of 12%–14%.
Third-Quarter Earnings Exceed Analyst Expectations
Despite the weaker annual outlook, preliminary third-quarter results showed that several Mercedes-Benz divisions performed slightly better than analysts had anticipated.
Mercedes-Benz Cars reported an adjusted return on sales of 2.5%, exceeding the market consensus of 2.4%.
Similarly, the Vans division achieved a return on sales of 9.4%, compared with expectations of 9.1%.
Financial Services also delivered stronger-than-expected results, posting an adjusted return on equity of 13.8%, comfortably above the 12.4% consensus estimate.
At the group level, EBIT reached €1.77 billion, surpassing analysts’ forecasts of €1.6 billion.
Weak Cash Flow Adds to Investor Concerns
However, the company’s cash flow performance presented a less encouraging picture.
Industrial free cash flow totaled just €172 million during the third quarter, significantly below analysts’ expectations of €422 million.
This substantial shortfall, combined with deteriorating conditions in China and mounting cost pressures, added to concerns about Mercedes-Benz’s profitability heading into the final months of 2026.
