Mercedes-Benz Bets on Electric Momentum and Cost Cuts to Offset China's Deepening Slump

Mercedes' China deliveries fell 31% in Q3 while its European electric CLA, GLA, GLB and GLC lines are sold out for the rest of the production year.

Mercedes-Benz is navigating a sharply divided landscape. On one side sits a European order book for battery-electric models that is effectively sold out for the remainder of the year; on the other, a Chinese luxury market in retreat that is eroding the very profits that fund the company's transformation.

That tension was on full display this week. Citi trimmed its price target for the Stuttgart automaker while keeping a "Neutral" rating, pointing to mounting earnings pressure facing European carmakers in the second half of 2026. Shares closed yesterday at EUR 39.90, hovering just above the 52-week low of EUR 38.91 touched in pre-market trading at EUR 39.70.

China's 31% Collapse Hits the Profit Engine

The root of the strain lies in Asia. Industry data released yesterday showed Mercedes' passenger-car deliveries in China tumbling 31% in the third quarter to 86,800 units. Across the first nine months of the year, the decline in the world's largest auto market reached 29% versus the prior-year period.

What makes the drop especially painful is where it is concentrated. Shipments of the company's most expensive model lines — the traditional profit engine that underwrites research budgets — fell 21% worldwide to 53,900 vehicles. Gains in the United States were not enough to offset that shortfall.

The damage extends to the top line. Group-wide deliveries of passenger cars and vans slipped 6% in the third quarter to 491,700 units, dragged down by the Chinese reversal.

Electric Orders Stretch Deep Into Next Year

Against that grim backdrop, the picture in Europe tells a strikingly different story. Global sales of fully battery-electric passenger cars climbed 61% in the quarter to 68,400 units, accounting for 16.8% of total passenger-car volume. In Europe, nearly one in three customer vehicles delivered during the period was fully electric.

Demand has run past available capacity. The all-electric variants of the CLA, GLA, GLB and GLC are sold out for the rest of the European production year, with order books for some model lines extending well into the coming year — a signal that the latest generation of vehicles has landed with buyers.

A separate tally put worldwide BEV sales at 78,100 units, up 52%, underscoring the momentum even as the combustion-engine flagship business loses ground.

Buybacks and Buyouts as Earnings Pressure Builds

Management is responding on two fronts. Between September 28 and October 2, the company repurchased 875,000 of its own shares on the open market. Since the program began on September 1, the cumulative buyback through October 2 reached 3,851,805 shares — a move designed to shrink the free float and lend support to the stock as investor skepticism over profitability mounts.

On the cost side, roughly 5,500 employees in Germany have already left the company under a severance program. Through its savings initiative, the automaker is targeting annual savings of about EUR 5 billion by 2027. The challenge is acute: expensive battery components and shrinking volumes of combustion-engine flagships are weighing on operating results just as the high-volume electric lineup ramps up.

Smaller Markets and Partnerships Offer Partial Relief

Not every region is contracting. In India, Mercedes reported a 6% increase in third-quarter deliveries to 5,422 vehicles. The company is also pushing ahead with strategic alliances — on October 1, FUCHS SE and Mercedes-Benz extended their partnership.

The verdict for shareholders now hinges on a single question: whether the margins from a booming electric lineup can close the earnings gap left by China quickly enough to defend the group's medium-term return targets.