- Mercedes-Benz Group (ETR:MBGn) has lowered its 2026 fiscal year passenger car sales and full-year revenue forecast, impacted by intensified competition and weak demand in the Chinese market, with sales expected to be slightly below last year's level.
- Thanks to the ramp-up of electrification in the second half of 2026, the company has raised its forecast for the proportion of electrified vehicle sales to 23% to 25%, and the adjusted return on equity for the financial services division is also expected to increase to 12% to 14%.
- The company's net profit for the first half of the year fell by 6% year-on-year to 2.52 billion euros, mainly due to a 752 million euro impairment loss on equity-accounted investments in China and the impact of exchange rate fluctuations, with free cash flow from industrial operations down 30% year-on-year.
Sales Forecast Revision and Pressure in the Chinese Market
Mercedes-Benz Group (ETR:MBGn) has revised its 2026 fiscal year passenger car sales and full-year revenue forecast to slightly below last year's level. Total sales in the passenger car segment fell by 7% year-on-year to 837,195 units in the first half, with sales in the Chinese market plummeting by 28% year-on-year to 210,245 units. This change reflects the combined impact of intensified end-market price wars, weak consumer demand, and the transition period for key model updates, leading to a tightening of capital allocation in the luxury car segment.
Asset Impairment Provisions and Profit Structure Divergence
The company's earnings before interest and taxes (EBIT) for the first half recorded 3.45 billion euros, with adjusted EBIT down 10% year-on-year to 4.07 billion euros. The performance decline was mainly due to a 752 million euro impairment loss on equity-accounted investments in China in the second quarter, turning related profits and losses from positive to negative. Although net profit for the second quarter alone increased by 13% year-on-year to 1.09 billion euros, the non-deductible impairment pushed the overall income tax rate up to 30.9%, posing certain challenges to overall profit quality.
Acceleration of Electrification and Resilience in Financial Business
Management has raised the forecast for the proportion of electrified vehicle sales in 2026 from the previous 21%-23% to 23%-25%, optimistic about the performance of new energy models in the second half. Meanwhile, Mercedes-Benz Financial Services has raised its adjusted return on equity forecast to 12%-14%, indicating that maintaining interest spreads and improving portfolio profitability provide significant profit buffers for the group, helping to mitigate the cyclical fluctuations of the automotive core business.
Robust Cash Flow and Commitment to Capital Returns
Free cash flow from industrial operations in the first half fell by 30% year-on-year to 2.96 billion euros, with net liquidity dropping to 30.4 billion euros. The cash reduction was mainly due to the distribution of an annual dividend of 3.50 euros per share and the advancement of the established share buyback plan. Although working capital was under pressure due to declining sales, overall liquidity remains robust, demonstrating the company's commitment to maintaining long-term capital returns to shareholders amid increasing macroeconomic uncertainties.
