Europe automaker shares slump after Mercedes becomes latest to cut 2024 guidance

Mercedes shares fell more than 6% Friday after becoming the latest carmaker to cut its guidance this year as sluggish demand in China and trade disputes weigh on the sector.

The company said late Thursday that it now expects group earnings before interest and taxes (EBIT) to come in "significantly below" the previous year and that its adjusted return on sales would be between 7.5% and 8.5%, down from its earlier forecast of 10% to 11%.

Shares pared losses slightly to end 6.8% lower by the session close.

The auto sector was dragged lower, down 3.6%, as Volvo and Stellantis fell 4.5% and 3.4%, respectively.

Mercedes' revision was triggered by a "further deterioration of the macroeconomic environment," primarily driven by weaker Chinese consumption and a prolonged downturn in the country's real estate sector, the firm said in its Thursday statement.

"This affected the overall sales volume in China including sales in the Top-End segment. Overall, the sales mix in the second half of 2024 is expected to remain unchanged versus the first half, and therefore weaker than originally expected," the company said.

Fellow German automaker BMW also recorded steep losses last week after lowering its 2024 profit margin outlook due to slumping sales in China and an issue with a braking system supplied by Continental.

Volvo Cars earlier this month also scaled back its margin and revenue targets, after announcing it was no longer targeting 100% all-electric vehicle sales by 2030.

Analysts from UBS said Mercedes' outlook revision was "not surprising" given the current pressures from China, but they noted that the scale of the warning compared to the firm's peers would likely spark trepidation from investors and lead to further downgrades.

"The fact