Mercedes-Benz’s 6.7% Dividend Yield Masks a Deepening Structural Crisis

Mercedes-Benz shares near 52-week low as Q1 profits fall, China sales drop 27%, and dividend yield of 6.7% provides fragile support. All eyes on July 28 catalyst.

A generous payout can sometimes paper over cracks in a business model, but for Mercedes-Benz, the shine is wearing thin. The carmaker’s shares closed at €48.20, nursing a near-22% decline since the start of the year and sitting just 1.13% above their 52-week low of €47.66. The 200-day moving average at €55.45 is now a distant memory, while the relative strength index of 35.5 points to a stock that is oversold but lacks any clear reversal signal. The dividend yield of 6.70% is providing a floor for now, but should that support give way, a fresh wave of selling could follow.

First-Quarter Numbers Expose the Gap with Rivals

The group’s own first-quarter results confirm a diverging trajectory. Revenue came in at €31.6 billion, with EBIT of €1.9 billion. In the core passenger-car division, the adjusted return on sales was just 4.1% on deliveries of 419,400 vehicles. Worldwide, Mercedes-Benz handed over around 499,700 units across all divisions, nudged higher by a 7% gain in Europe and a 20% jump in the United States. Those regional bright spots, however, failed to offset the plunge in China.

A broader analysis by EY of the world’s 19 largest carmakers underscores how badly the German trio of Volkswagen, Mercedes-Benz and BMW is faring. Combined revenue for the three fell 4.3% year-on-year in the first quarter, while the whole peer group grew 1.7%. The profit picture was even starker: operating profit for the German camp collapsed 23.3%, compared with an 82.9% surge for Ford, General Motors and Tesla. Mercedes-Benz landed sixth among the most profitable carmakers with a margin of 6.0%, behind BMW at 6.5% and well ahead of Volkswagen’s 3.3%, which was below the industry average of 3.5% — the lowest since the pandemic year of 2020.

China Crisis Forces a Hard Pivot

The heart of the problem lies in the Middle Kingdom. Sales in China cratered 27% in the first quarter — the steepest slide in nearly a decade — as local premium brands and aggressive price wars eroded demand. Mercedes-Benz is responding by shifting production closer to the market. The plan is to raise local manufacturing content in China from 60% to 70% by 2027. Chief executive Ola Källenius has baked high tariffs into the company’s long-term planning, treating them as a permanent fixture rather than a temporary hurdle.

To reignite growth, the group is leaning on its high-performance arm, AMG, which will launch 27 models over the next three years with an annual target of 200,000 deliveries. The electric CLA 45 S AMG, making its global debut this summer, packs more than 544 hp and is designed to serve as the new halo car. Alongside it, the electric C-class will arrive with 489 hp and a charging capacity of up to 330 kilowatts. These launches aim to recapture some of the premium cachet that has been dented by the China slowdown.

All Eyes on the July 28 Catalyst

For now, the annual guidance sticks: revenue flat with 2025, a notable increase in operating profit, and a slight dip in free cash flow from the industrial business. The conference call on July 28, when the company releases its second-quarter interim report, will be the next major event. Investors will be watching pricing trends in core markets — particularly China — to see whether the slide is stabilising.

If the stock cannot hold above €47.66, a further leg down looks likely. The dividend yield is a comfort, but it is no substitute for a credible growth narrative. Mercedes-Benz is betting on its electric AMG blitz and a deeper local footprint in China to turn the tide. The market, however, is not yet convinced.