Mercedes-Benz Stock Reels from BMW Warning While China's EV Milestone Deepens Investor Unease

BMW's margin forecast cut triggers 4.5% drop in Mercedes shares; China's EV milestone and 27% Q1 sales plunge signal structural shift for German luxury automakers.

The premium automaker’s shares tumbled roughly 4.5% on Tuesday after BMW slashed its 2026 operating margin forecast from 4-6% to just 1-3%, dragging the entire sector lower. That single move crystallised fears that have been building for months: China, the profit engine for German luxury brands, is no longer a safe haven. Adding to the pressure, Beijing’s latest registration data showed that in April 2026, for the first time, battery-electric vehicles outsold combustion-engine cars on the mainland — roughly 580,000 EVs versus 560,000 petrol models out of 1.4 million new vehicles. For Mercedes-Benz, a company that still derives a large chunk of its margin from conventionally powered sedans and SUVs sold in China, the symbolic weight of that milestone is immense.

China’s structural shift is already visible in Mercedes’ sales numbers. In the first quarter of 2026, deliveries in the country plunged 27% year-on-year, accelerating a 19% slide in 2025 that had already pulled annual sales down to 552,000 vehicles. The group has set a medium-term target of 500,000 to 600,000 units a year in China — a goal that looks increasingly ambitious as local manufacturers sharpen pricing and the broader market has now weakened for eight consecutive months, according to Reuters. Even strong growth elsewhere — European sales climbed 7% in Q1 and the US market advanced 20% — was only enough to lift worldwide passenger-car volumes by 5% when excluding China. Including the drag, the global figure was significantly flatter.

Operationally, Mercedes-Benz Cars held its ground in the first quarter, posting an adjusted EBIT of €933 million and a return on sales of 4.1%, comfortably within its full-year guidance of 3% to 5%. The group reaffirmed that outlook on April 29, forecasting revenue at last year’s level and earnings before interest and taxes “significantly above” 2025’s figure. Yet investor scepticism is palpable. The stock closed at €44.80 on Tuesday, just a hair above its 52-week low and roughly 28% below the December peak of €62.30. The year-to-date loss stands at 27.62% and the relative strength index has sunk to 29.5, a reading that normally signals an excessively oversold condition. But technical rebounds require a fundamental catalyst, and none is in sight.

The company is counting on a wave of new metal to turn the tide. Between 2025 and 2027, Mercedes plans to launch more than 40 new models, with the battery-electric GLC L — unveiled at Auto China 2026 — the centrepiece for the mainland market. Further China-specific vehicles are due in the second half of the year. In the entry-level segment, the CLA and GLB will arrive as both electrified hybrids and pure electrics. Internally, the group describes China as an innovation and technology hub, a label that underscores how seriously it takes the market despite the mounting difficulties.

For investors, the second half of 2026 will be the proving ground. Sales and pricing power in the passenger-car division need to demonstrate whether Mercedes can hold its margin forecast — or whether BMW’s warning was merely the first domino. The new model cadence, particularly the GLC L in China, will be watched with microscopic attention. If the rollout fails to stabilise volumes and margins, the stock’s current discount to tangible book value may prove to be no bargain at all.