Mercedes-Benz lowers 2026 sales forecast as China demand slumps

German carmaker Mercedes-Benz Group AG on Tuesday cut its 2026 unit sales outlook for its Cars division.

The company said sales are now expected to be slightly below the previous year's level.

Mercedes-Benz attributed the revised outlook in particular to the negative development of the Chinese market.

The company also adjusted its full-year revenue forecast.

Revenue is now expected to be slightly below the previous year's level.

The revision reflects the expected development of unit sales at Mercedes-Benz Cars.

At the same time, Mercedes-Benz raised its forecast for the share of electrified vehicle sales in 2026.

The company now expects electrified vehicles to account for 23%-25% of sales, that is up from its previous forecast range of 21%-23%.

The company cited positive momentum expected from the further ramp-up of electrified vehicles in the second half of 2026.

Mercedes-Benz financial services raises return forecast

Mercedes-Benz Financial Services also increased its outlook for adjusted return on equity.

The company now expects adjusted return on equity of 12% to 14%.

The company said the upgrade was primarily due to a higher portfolio margin.

The revised forecast came as Mercedes-Benz reported mixed financial results for the first half of the year.

The company faced pressure from exchange rates, net pricing effects and weaker vehicle sales in China.

First-half net profit falls 6%

Mercedes-Benz reported a 6% decline in first-half net profit to €2.52 billion.

Revenue fell 4% to €63.66 billion.

The company attributed the revenue decline to the negative development of exchange rates and negative net pricing effects.

Earnings before interest and taxes, or EBIT, for the first six months came to €3.45 billion.

Despite the weaker first-half performance, Mercedes-Benz reported stronger results in the second quarter.

Second-quarter EBIT rose 22% to €1.55 billion from €1.27 billion a year earlier.

Net profit for the quarter increased 13% to €1.09 billion from €957 million.

The company said second-quarter results included €752 million in impairments on Chinese equity-method investments.

The results also included a €92 million risk provision related to a financing commitment to smart.

Chinese investments weigh on results

Mercedes-Benz said gains and losses on equity-method investments swung to a loss of €263 million in the first half.

This compared with a gain of €570 million a year earlier.

The company said the change was mainly due to negative earnings contributions from Chinese at-equity investments.

The income tax rate also increased during the period.

It rose to 30.9% from 29.7%.

Mercedes-Benz said the increase was mainly due to the non-deductible impairment of equity-method investments.

China sales decline 28%

Mercedes-Benz Cars sold 837,195 vehicles in the first half of the year, down 7% from 899,974 units sold during the same period a year earlier.

The decline was particularly pronounced in China.

Unit sales in the country fell 28% to 210,245 vehicles.

Mercedes-Benz said the decline reflected intense competition and weak demand.

The company also pointed to the effects of model changes.

The weaker Chinese market played a key role in the company's decision to lower its 2026 Cars unit sales outlook.

However, the company expects the further ramp-up of electrified vehicles to provide positive momentum during the second half of the year.

Industrial free cash flow falls

Mercedes-Benz also reported a decline in free cash flow from its industrial business.

Free cash flow fell 30% to €2.96 billion in the first half.

That compared with €4.22 billion a year earlier.

Net liquidity of the industrial business also declined.

It fell by €1.7 billion to €30.4 billion since December 31, 2025.

The company attributed the reduction to dividend payments to shareholders and payments related to its share buyback program.

These outflows were partly offset by positive free cash flow generated during the period.

The revised 2026 outlook highlights the pressure facing Mercedes-Benz from weaker sales in China and challenging market conditions.

At the same time, the company continues to expect growth in electrified vehicle sales as it ramps up these models during the second half of 2026.