Mercedes-Benz Bets on AI and ICE to Halt a 26% Stock Slide

Mercedes struggles with weak China sales, rising Asian competition, and a 26% stock drop. It boosts AI usage to cut costs while extending combustion engine production.

Mercedes-Benz is leaning on artificial intelligence to boost productivity and on old-fashioned combustion engines to satisfy customer demand, as its shares tumble near a 52-week low. The Stuttgart-based carmaker is fighting a multi-front battle: a sluggish Chinese market, rising competition from Chinese EV rivals in Europe, and a stock that has lost more than a quarter of its value since the start of the year.

AI Becomes the Cost-Cutting Tool of Choice

Personal board member Britta Seeger has been preparing employees for tough times. The company is conducting a thorough review of its cost structure in Germany, squeezed by new US tariffs and intensifying global competition. A longstanding agreement prohibits compulsory redundancies until 2034, forcing management to find alternative ways to improve productivity.

The answer is artificial intelligence. The workforce has doubled its use of AI in just 18 months to 60%, and Mercedes-Benz aims to push that to 70% by the end of the year. The goal is leaner processes and a more stable operating margin — a vital target given that the car division reported an adjusted return on sales of just 4.1% in the first quarter, with management citing an extremely difficult market environment.

European Registrations Expose Market Share Bleeding

Data from the European Automobile Manufacturers’ Association (ACEA) for the first five months of the year paint a clear picture. New passenger car registrations in the EU rose 4% overall, driven almost entirely by electrified powertrains. Battery-electric vehicles and hybrids together now command nearly 58% of the market, while petrol and diesel models are rapidly losing ground.

Mercedes-Benz is growing more slowly than the broader market. From January to May, its EU registrations inched up just 3.2%, and in May the increase was a meager 0.7%. That means the premium manufacturer is ceding market share — and the gap is being filled by Asian rivals. BYD’s European registrations surged 136% in May, while Chery Automobile posted a staggering 244% increase. Although Mercedes-Benz remains far larger in absolute terms, the growth differential is alarming investors.

The shift in demand has also prompted a strategic U-turn. The company dropped its “Electric Only” mantra in favor of “Electric First” and now plans to build modern combustion-engine models well into the 2030s. Analysts have praised the pragmatic approach but warn that the biggest risk remains the weak Chinese market.

Technical Damage Deepens

The stock’s slide reflects the mounting uncertainty. The shares have changed hands at €45.33 and more recently at €45.10, leaving the 52-week low of €43.99 dangerously close. On a year-to-date basis, the loss stands at 26.47% by one measure and 26.84% by another, underlining the relentless selling pressure.

The medium-term indicators remain firmly negative. The stock trades more than 18% below its 200-day moving average. The relative strength index has fallen deep into oversold territory, reading 34.7 in one assessment and 33.9 in another — a sign that the selling has been intense, though not a guarantee of a quick rebound.

All eyes are now on the second-quarter earnings release on July 28, when management will present the real impact of its strategy adjustments on margins. In the meantime, Mercedes-Benz is betting on a massive product offensive: between 2025 and 2027, it plans to launch more than 40 new models, hoping to win back lost ground in the electric-vehicle segment and halt the stock’s brutal descent.