Mercedes-Benz writes off over 700m euros on China woes

FRANKFURT, (Germany): Premium German carmaker Mercedes-Benz on Tuesday reported falling profit at its car business as it wrote off over 700 million euros due to fierce competition in China.

Though overall net profit for the quarter rose 13.5 percent to 1.09 billion euros (USD1.24 billion), boosted by its vans and financial services businesses, core earnings at the key cars division fell 26 percent to 909 million euros, Mercedes said, hit by competition in China.

The figure does not include a non-cash write-down of 704 million euros Mercedes booked in the value of its Chinese investments, indicating it sees lasting trouble ahead in the world’s largest car market.

Including the write-down, profit at Mercedes-Benz’s car business plummeted almost 94 percent.

“The Chinese market and customers in China remain of high strategic importance to Mercedes-Benz,” the firm said in a statement.

“Intense competition, subdued demand and the portfolio-wide model changeover continued to affect sales,” it added.

Premium German carmakers have not been spared the cutthroat Chinese competition that has also hit volume manufacturer Volkswagen.

Porsche on Monday said another 5,000 jobs would go by 2035, bringing total announced job cuts to 9,000, and BMW last month said it would prepare cost-cutting measures after slashing its core profit margin forecast for the year to as low as one percent.

Mercedes-Benz’s vehicle deliveries in China — last year already at their lowest level since 2016 — meanwhile fell a further thirty percent in the quarter, the company said.

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.