Mercedes-Benz Scours Chinese Tech Partners as 2024 Guidance Cut Further

TMTPost -- Mercedes-Benz Group is scouring Chinese partners on technology as the German auto giant tries to boost sales, particularly in China, amid macroeconomic headwinds.

Credit：Mercedes-Benz

Mercedes CEO Ola Kallenius travelled to China last week on a mission to expand local technology partnerships that could help the automaker turn around a sales decline in the market, Bloomberg reported, quoting people briefed on the plans. It was reported that the goal is to make Mercedes’ new electric vehicles (NEVs) more appealing to Chinese consumers. Specifically, tie-up with Chinese companies producing maps or in-car entertainment can make the full-electric CLA, the first model under Mercedes’ new electric architecture, more desirable to local consumers.

Kallenius’s visit came as Mercedes is under pressure to revive sales in China, its biggest market that contributed 36% of sales last year. The Stuttgart company said on September 20 that it lowered its earnings outlook for 2024 for both Mercedes-Benz Cars and the Mercedes-Benz Group, marking the second cut of its guidance since July.

Mercedes said the cut was triggered by a further deterioration in the macroeconomic environment that led to a drop in sales of its cars, especially in China. "GDP growth in China lost further momentum amid weaker consumption as well as the continued downturn in the real estate sector," Mercedes-Benz said in a statement. "This affected the overall sales volume in China including sales in the Top-End segment."

Mercedes now expects to achieve 7.5% to 8.5% adjusted return on sales after it in July had trimmed its return on sales outlook from 10% to 12% to 10% to 11%. It also expects its earnings before interest and tax (EBIT) will be "significantly lower" in the full-year 2024 compared to the year before, as a result.

"There is a tremendous amount of cautiousness, I'm trying to say this diplomatically," CEO Kaellenius told analysts in a call following the announcement, adding it was not surprising that spending for expensive capital goods was pared back in such an environment. "How long will that go on? I don't know, but I remain cautious for the foreseeable future on China," Kaellenius said.

Karellenius recently suggested he is bracing his company for a “Darwinian battle” as Europe’s auto giants reel from falling demand and the onslaught of Chinese competitors. Ending the crisis in consumer sentiment in China was the most important thing for Mercedes in the short- and medium term, Karellenius said at the Global Dialogue conference in Berlin earlier this week. The consolidation of China's EV sector was leading to "cash burn and value destruction" affecting companies at the upper end, according to the boss of Mercedes.

A make-or-break vote by the EU members to make up to 37% extra EV tariffs permanent for five years is reported to be held on Friday. Ahead of the critical vote, the German government reiterated its stance to caution consequences of elevated EV tariffs earlier this week. Three leading German automakers urged Berlin to vote against the tariffs Wednesday.

"Additional tariffs harm globally active companies in this country and could provoke a trade dispute from which no one gains," BMW CEO Oliver Zipse said at a statement Wednesday. Mercedes CEO Ola Kallenius said: "The EU should seek a negotiated solution with China instead of imposing tariffs." Volkswagen said the tariffs do not improve the competitiveness of the auto industry. "The proposed tariffs are the wrong approach," a Volkswagen spokesperson said.