Mercedes-Benz expects a stronger second half of the year on the back of new models and strong orders, after earnings were hit by weaker demand in China.
The German automaker pointed to improving performance in the coming months after its carmaking margin fell to 4.1% in the first quarter from 7.3% a year earlier.
The decline was less severe than some analysts had forecast, with returns around the midpoint of its annual target.
Demand for new products and “healthy order books” are setting up the maker of the S-Class for improving momentum, Chief Financial Officer Harald Wilhelm said in a statement.
He pledged to keep a tight grip on costs to underpin profits.
The shares rose as much as 3% in early Frankfurt trading. Volvo and Aston Martin, reporting first-quarter earnings on Wednesday, also gained.
A wave of launches underpins Mercedes’ rebound, pairing refreshed combustion-engine cars with a new generation of electric vehicles to broaden its lineup and lift margins.
Highlights include the electric version of its best-selling GLC and an updated flagship S-Class.
The push comes as Mercedes trims global production capacity by more than 10% to about 2.2 million units to cut costs.
It also warned that the Middle East conflict could sap consumer confidence. Car demand is vulnerable to higher fuel prices, rising interest rates and falling asset values.
Mercedes chimed with General Motors, which on Tuesday said increasing inflation pressures are holding back its business as the conflict continues.
Raw material prices are set to rise during the second half of the year, the Mercedes CFO said on a call with analysts, though the carmaker has accounted for this in its outlook projection, he said.
Investors and analysts are watching for signs Mercedes can regain traction in China, long a key profit engine and still its biggest market.
Sales there slumped 27% in the first quarter, prompting the carmaker to lean more heavily on local development and partnerships to better tailor models to Chinese consumers.
Even so, Mercedes is bracing for a prolonged downturn amid persistent economic weakness, management said at the Beijing auto show last week.
During the first quarter, average selling prices per model declined some 7.7% to €66,700 (around R1.3 million), according to an investor presentation.
The facelifted S-Class sedan, a major contributor to Mercedes’ bottom line, is set to debut in the second half.
On the cost side, the manufacturer is pushing to streamline operations but faces limits at home.
Labour agreements in Germany — which accounts for nearly half its output — protect factory jobs until 2035.
As a result, Mercedes is relying on attrition and focusing most capacity reductions outside its domestic base.
The automaker is also grappling with the impact of US tariffs, adding another layer of pressure on earnings.
Mercedes has said the levies are weighing on profitability and complicating pricing decisions in a key market. The company took a $1.2 billion (about R20 billion) hit from tariffs last year.
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