Mercedes-Benz has announced a recall of 523,094 vehicles in China, an operation that involves both imported and locally produced models. According to the Chinese State Administration for Market Regulation, the recall will specifically affect 241,861 cars of the model years A-Class, B-Class, CLA and GLAall produced between August 2011 and April 2019. Not only that: 281,233 units of the GLA model, imported and manufactured between March 2014 and October 2019, will also be recalled. The operation will officially start on November 27.
Impact on the market and sales
This recall comes at a critical time for Mercedes-Benz, which has recently had to revise your estimates downwards for the whole of 2024, due to a significant deterioration in the auto market in China. The group’s main auto division now expects adjusted returns of between 7.5% and 8.5%, compared to 11% previously. China, which represents the most important market for the companyhas shown signs of further cooling, negatively impacting sales of more expensive models such as the S-Class and Maybach sedans.
Market reactions they didn’t keep us waiting: Mercedes shares lost 7.7% on the Frankfurt Stock Exchange. In addition, both EBIT (operating income) and free cash flow are expected to be “significantly” below the previous year’s levelsafter initial estimates predicted a “slight” decline compared to 2023.
Analysis and future prospects
Jefferies analysts have defined surprising the extent of the cut in estimates, and RBC has expressed doubts about the handling of the situation by Mercedes, which is certainly not the only manufacturer to have had to adopt measures of this type. But while BMW’s recall was attributed to a specific problem with a supplier, the star brand has adopted a more vague approachciting the overall macroeconomic weakness in China.
Outlook for the second half of 2024 they don’t look promising, with analysts expecting a further deterioration in the macroeconomic environment. Overall, the sales mix is expected to remain unchanged compared to the first half, suggesting that the challenge for Mercedes-Benz in China is not over yet.
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