Q2 preview: China raises the cost challenge; FY26 guidance still at risk

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Q2 preview: China raises the cost challenge; FY26 guidance still at risk

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Mercedes-Benz Group AG

Q2 preview: China raises the cost

challenge; FY26 guidance still at risk

Reiterate Rating: NEUTRAL | PO: 50.00 EUR | Price: 45.51 EUR

Postcard from Kescemet: A more rigorous focus on costs 20 July 2026

On 13 July 2026, Mercedes hosted analysts at its new Kecskemét plant (see page 3), Equity

where production capacity has doubled to 400k units to produce the new electric C-Class

and GLC, as well as the A-Class, GLB and electric G-Class. By 2028, it should become

Mercedes’ largest plant outside China (BofAe). Factor costs in Hungary are around 70% Key Changes

lower than in Germany, reflecting longer working hours of c40 hours per week versus 35, (EUR) Previous Current

lower absenteeism and, of course, lower wages. Against this backdrop, we discussed Inv. Opinion B-2-7 B-2-8

further production-related cost savings in Germany and elsewhere, including China. The Price Obj. 56.00 50.00

message is clear: the China downturn, which appears to be spreading to other regions, a 2026E Rev (m) 131,793.5 130,689.5

rising and margin-dilutive BEV mix, higher material costs, adverse FX and persistently 2027E Rev (m) 135,837.1 133,397.4

high tariffs require further cost savings. Otherwise, margins will continue to decline.

2028E Rev (m) 133,110.4 132,839.9

Q2 broadly resilient, but Cars outlook stays challenging 2026E EPS 6.22 5.45

We expect a mixed Q2, with Group results supported by Vans and Financial Services but 2027E EPS 7.74 6.10

continued pressure at Cars. We forecast a 3.4% adjusted EBIT margin for Cars, within 2028E EPS 7.45 6.81

the 3-5% FY26 range, as weak China demand, a higher and margin-dilutive BEV mix, a 2026E DPS 3.50 2.75