Mercedes-Benz reported a sharp drop in vehicle sales for the second quarter, driven largely by a continuing collapse in its Chinese business, even as the German carmaker insisted it remains on a stable long-term path. Group net income actually rose during the quarter, propped up by strong performances in its van and financial services divisions, while the core car business faced mounting pressure from weak demand and fierce competition in China.
Vehicle deliveries in China fell by 30 percent during the quarter, extending a downward trend that had already pushed the market to its lowest level since 2016 the previous year. The scale of the challenge became clear in the numbers: operating profit in the car division dropped 26 percent to 909 million euros, a decline compounded by a 704 million euro non-cash write-down linked to the value of Mercedes' Chinese investments. When that write-down is factored in, profit at the car division collapsed by almost 94 percent.
Finance chief Harald Wilhelm told investors the adjustment reflected current market conditions rather than any shift in overall strategy, noting that the company now expects a smaller profit contribution from its Chinese operations than it had previously assumed. Despite the setback, Mercedes maintained that China continues to hold major strategic importance for the brand and its customers.
Group-wide, total car segment sales slipped by nearly seven percent to 417,865 vehicles for the quarter, with revenue in the segment reaching roughly 23 billion euros out of a total group revenue of about 32 billion euros2
Outside China, the picture looked considerably brighter. Mercedes sold more vehicles in both Europe and the United States during the quarter, helping offset some of the weakness from Asia. Electric vehicle sales stood out in particular, with 52,852 units delivered, a 51 percent jump compared with the same period last year. That growth was driven above all by a surge in Europe, where EV sales climbed 87 percent.
On the strength of this momentum, Mercedes raised its full-year forecast for the share of electric vehicles in total sales, lifting the target from 23 to 25 percent.
Chief executive Ola Kaellenius used the results presentation to renew pressure on Germany's industrial sector, arguing that the country needs a broad productivity push to keep pace with international rivals, particularly from China. He said competitiveness in Europe, and Germany specifically, must improve, framing the challenge as one the company itself is already addressing through efficiency gains visible in its second-quarter figures.
Kaellenius pointed to a cost gap of around 70 percent between Mercedes' operations in Germany and in Hungary as evidence of how much ground needs to be closed. He stressed that the goal was not to turn Germany into an equivalent of Eastern Europe, since that would be unrealistic, but rather to raise competitiveness relative to the company's current position. Achieving that, he argued, would make industrial activity in Germany more attractive overall.
The comments come as Mercedes pursues a target set last year to cut ten percent of its overhead costs by 2027, a plan that has already triggered friction with the workforce. Employees staged protests earlier this month against proposals to increase working hours without additional pay.
Other German manufacturers are following a similar path: Volkswagen is reportedly considering cutting up to 100,000 jobs across its ten brands, while BMW has said it is preparing its own cost-cutting measures after Chinese market weakness forced it to lower its profit outlook.
While the car division struggled, other parts of the business performed strongly. The van segment posted a slight increase in sales to around 94,000 vehicles, with revenue up just over five percent and operating profit rising nearly three percent. The financial services division delivered an even bigger boost, with operating profit surging 70 percent, helping the group post an overall net income increase of 13.5 percent to 1.09 billion euros for the quarter.
Shares in Mercedes-Benz responded positively, opening 1.2 percent higher in Frankfurt before extending gains to nearly four percent later in the session.
Looking ahead, Mercedes lowered its expectations for the remainder of the year. The company now anticipates total vehicle sales slightly below last year's level, alongside group revenue that is also expected to fall short of the previous year's figures. Citing weakness in China, the carmaker said it now expected sales for the year to shrink up to 7.5 percent on the 2025 level of 132.2 billion euros, down from a previous forecast of roughly unchanged sales growth.
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