Under pressure in China, Mercedes trims 2024 car profit outlook

By Nick Carey and Andrey Sychev

(Reuters) - Mercedes-Benz on Friday narrowed its annual profit margin forecast for its core car division as the German luxury automaker faces fierce competition in China, though new models should lift sales in the second half of the year.

The company said it now expected an adjusted return on sales in the range of 10-11% this year, down from its previous target range of 10-12%.

Mercedes' cars division achieved a 10.2% return on sales in the second quarter, while its adjusted earnings came in below analyst expectations.

Mercedes reported a 6% drop in sales in the first half, with electric vehicle sales falling 17%.

Mercedes said the economic outlook was marked by uncertainty, adding that it saw improving market sentiment in Europe and "solid momentum" for sales and demand in the U.S. market.

The automaker said, however, it had a "cautious view" on China, where it expected strong competition in its entry-level and core model segments, while it "seeks to successfully defend its leading position" of its top-end car models.

"Sales and the model mix are expected to improve in the second half of the year, supported by further market launches of new models particularly in the Top-End segment," CEO Ola Kaellenius said in a statement.

German automakers are struggling with lacklustre demand for electric vehicles, coupled with tough local competition in China, supply bottlenecks and persistently high interest rates.

The group reported a 27.5% fall in adjusted earnings in its car division in the second quarter, against LSEG's estimate of a 26% decline.

At group level, earnings before interest and taxes (EBIT) dropped in the quarter by 19.1% in line with LSEG's consensus.

(Reporting by Andrey Sychev, Victoria Waldersee and Nick Carey; Editing by Rachel More and Tomasz Janowski)