BMW and Mercedes experienced significant sales declines in Q3 2024 due to weakening demand and fierce competition in China
BMW and Mercedes reported declining third-quarter sales due to sluggish demand and stiff competition in China. BMW's sales dropped 13%, while Mercedes faced a 3% dip. Both German automakers are struggling with high production costs, rising competition from local manufacturers, and a shift to electric vehicles.
The downturn in China, the world's largest auto market, was severe. BMW's sales there plunged by a third, and Mercedes' fell by 13%. The Chinese market has been impacted by a slowing economy and rising competition from domestic automakers offering cheaper models, particularly electric vehicles (EVs). Mercedes' luxury segment, which includes its high-end S-Class series, took a significant hit. Prices for these models in China start at 451,800 yuan ($63,700).
The weak demand has forced German automakers to reconsider their strategies. Volkswagen, Europe's largest automaker, is contemplating closing plants in Germany to manage costs. This move highlights the mounting pressure on the industry to adapt to evolving market conditions.
BMW faced further challenges with its global sales of Rolls-Royce limousines dropping by 16% and MINI brand sales down by 25%. Mercedes reported a 31% decline in global battery electric vehicle (BEV) sales. However, BMW saw a 10% increase in BEV sales, showcasing a stark contrast between the two companies' performances in the electric segment.
The European Union's recent tariffs on Chinese-made EVs have added to the woes. The EU claims these vehicles benefit from unfair state subsidies, which Beijing denies. China has threatened retaliation, raising concerns among German automakers, who derive about a third of their profits from the Chinese market. Both companies have urged further negotiations to resolve trade tensions.
In response to declining demand, China is considering raising tariffs on large-engine vehicle imports. This move would severely impact German automakers, as last year’s exports of cars with 2.5-litre engines or larger to China totaled $1.2 billion.
European consumers remain hesitant to buy EVs, partly due to the region's inadequate charging infrastructure. This reluctance affects the overall growth of the electric vehicle market in Europe, putting more pressure on automakers to innovate and reduce costs.
Shares of BMW and Mercedes remained flat following the release of the sales data. The companies had already revised their annual forecasts downward in September, citing the weakened Chinese market. BMW also mentioned ongoing issues with a braking system supplied by Continental.
The German automotive industry is facing one of its toughest periods. Alongside challenges in China, automakers must navigate rising production costs and the transition to EVs in Europe. As competition heats up and demand slows, German automakers may need to explore further cost-cutting measures or strategic shifts to regain their footing.