Mercedes-Benz's Struggles Reflect Broader Trends in the Global Auto Industry

The troubles in the global automobile industry deepened this Friday as German auto giant Mercedes-Benz revealed disappointing quarterly results. The company's profit from its car division plummeted by 64%, with overall quarterly net profit falling 54% to 1.7 billion euros (approximately Rs 15,633 crore).

A struggling economy in China has led to a decline in luxury goods sales across various sectors this year. Additionally, Mercedes-Benz is grappling with challenging market conditions worldwide and rising costs associated with revamping its vehicle models. The automaker recently introduced the Mercedes-AMG G 63 facelift in India, with a starting ex-showroom price of Rs 3.60 crore. India is also set to receive the much-anticipated Mercedes-Benz G-Class SUV later this year.

“The Q3 results do not meet our ambitions,” said Mercedes-Benz Group CFO Harald Wilhelm. He added, “We are taking a prudent view about market evolution going forward, and we will step up all efforts on further efficiency increases and cost improvements across the business.”

With disappointing results and ongoing reductions in profit forecasts this quarter, Mercedes-Benz joins other European car manufacturers in opposing the EU's decision to impose tariffs on China-made electric vehicles. The auto sector fears that such actions could provoke retaliation and further depress sales in an already challenging market. “In the Chinese premium and luxury segment, many foreign manufacturers expect sales to be weaker than last year,” said the company.

Rival BMW Group also reported a decline, with global retail sales dropping 13% in the third quarter, mirroring a similar decrease in sales figures from China.

Impact on the Indian Auto Industry In India, the automobile sector has been bustling, with local players such as Tata Motors and Mahindra & Mahindra performing well. The country's lower compliance on international trade and the emphasis on “made in India” models suggest that the challenges faced by China’s economy may not significantly affect the performance of leading brands in India.

Recent activity, including the oversubscribed Hyundai IPO in early October, has raised hopes for stronger growth in the industry. However, overall market trends remain downward, with foreign investors withdrawing from India. The stock sales by foreign institutional investors (FIIs) are balanced out by local investor activity.

“Post-COVID, India regained its pre-pandemic volumes by 2022, and 2023 has seen further growth beyond that. Many countries are still struggling to reach pre-COVID levels,” said Hyundai Motor India COO Arun Garg during a media event on Tuesday.

Nevertheless, slowing sales during India's festive season have affected the two-wheeler market, with major players like Bajaj Auto and Hero MotoCorp reporting lackluster earnings.

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