Mercedes-Benz is set to lower its mid-term profitability targets for its passenger car division due to ongoing market challenges and the transition to electric vehicles (EVs).
The German luxury automaker, led by CEO Ola Kaellenius, is expected to announce revised targets by February 20, coinciding with its planned capital markets day and the release of its annual financial results.
According to Reuters news, Mercedes will aim for profitability within a double-digit margin under favorable conditions, marking a downward revision from its previous goals.
In 2022, Mercedes had projected an adjusted profit margin of up to 14 per cent in favorable market conditions and no less than eight per cent in challenging times.
However, the company’s core passenger car business has faced declining profitability since achieving a record 14.6 per cent return during the COVID-19 pandemic, driven by strong demand and supply chain advantages.
The weakening performance in recent quarters, coupled with the industry-wide shift to EVs, has prompted a reevaluation of its financial outlook.
“We will use the capital markets day to provide updates on our medium-term targets,” a Mercedes spokesperson confirmed. The event will also serve as a platform for discussing the company’s strategic adjustments and plans to bolster its position in a rapidly evolving automotive landscape.
The automaker has been ramping up cost-cutting measures following a weaker-than-expected third quarter. Mercedes is also navigating heightened competition in the EV sector, where significant investments in technology and production infrastructure are impacting profit margins.
While the company’s 2022 performance exceeded expectations, the economic environment has since shifted, with reduced demand and pricing pressures affecting profitability. Analysts anticipate that the February 20 announcement will outline how Mercedes plans to adapt to these challenges while pursuing long-term growth and maintaining its status as a leading premium automaker.