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Mercedes-Benz And BMW Takes A Rough Patch In China
BMW, which had been doing well up until now, is starting to hit a rough patch in China, its main market. Mercedes is not doing any better and is seeing sales of its top-of-the-range products continue to fall.
If sales of the “S” range began to decline at the beginning of the year, things have not improved at Mercedes, which had to revise its financial targets downwards for 2024. But while BMW seemed to be the only German manufacturer more or less safe from trouble, it is now suffering lightning in China, where its sales have fallen sharply in recent months. A bad signal, as China is preparing to toughen its stance on German cars in response to customs duties on imports of Chinese cars into Europe. But this is not the only explanation for the general decline in German sales in China. It should also be remembered that the Chinese are moving upmarket and in power, and in a country where national preference is strong, it is becoming more difficult to justify the purchase of a very expensive and sometimes electric German model compared to a Chinese vehicle that will offer the on-board space so sought after by the Chinese and all the technology they can imagine.
BMW in trouble in China
The second half of the year is looking difficult for BMW, which is disappointing in its largest global market. In China, the group’s sales (BMW and Mini) fell by 13% compared to the third quarter of 2023. And while the first half of the year limited the damage, this second half of the year is breaking BMW’s momentum, which finds itself in the red in China. Mini is particularly affected with a 21% drop in sales. BMW recalls the economic situation in China, which is still tense with a slowdown in demand, which is particularly visible in the building and construction sector. But since the automobile is the second largest expense after housing, manufacturers are also heavily impacted. BMW has also warned that the financial results in 2024 will not be as good as hoped.
Mercedes is not there
For Mercedes, things are no better in the world’s leading car market, quite the contrary. While the group will unveil its financial results at the end of October, it is already warning that we should not expect miracles from this slightly more complicated year. The very high-end (S-Class, EQS, GLS, etc.) is experiencing a real slowdown. – 12% for this one and even – 31% for electrics in China. Ola Kallenius, who, like Carlos Tavares, places “pricing power” at a very high level and profitability above all else, is therefore starting to feel the wind turning. Is this cyclical in the face of the current economic environment or structural within the Mercedes strategy itself? Perhaps both. Ultimately, Mercedes should achieve an operating margin of around 8%. A far cry from the 14% that the group had set for itself at the end of Covid when demand was strong and supply was weak. A blessed time for manufacturers who could inflate prices and focus on the high end.
