Investing.com — Mercedes Benz Group AG (ETR:) cut its earnings outlook on Thursday as the luxury automaker grapples with softer demand amid China-led macroeconomic weakness.
The company cut its adjusted return on sales forecast for its Mercedes-Benz (OTC:) Cars unit to range of 7.5% and 8.5%, down from its previous forecast of 10% to 11%.
“The downgrade comes amid further deterioration of the macroeconomic environment, mainly 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.
Earnings before interest and taxes, or EBIT, is now expected to be significantly below the prior year level, Mercedes-Benz Group said, compared with a previous forecast for slightly below the prior-year level.
The back half of the year is expected to be impacted by various valuation adjustments, Mercedes-Benz warned, adding that “the dynamic pricing environment is expected to continue.”
But there could be some macroeconomic reprieve for the automaker, analysts at Vital Knowledge argue, as the outsized Federal Reserve rate cut in September could give the People’s Bank of China more flexibility to loosen monetary policy further.