Mercedes crisis adds to German industrial woes

Germany’s industrial crisis deepened yesterday when Mercedes-Benz cut its full-year profit forecast for the second time in less than two months.

The company has suffered as demand for cars falls amid economic problems in China.

After lowering its profit forecasts in July, it did so for the second time yesterday, sending shares down 6.8% in Frankfurt. The car giant’s full-year profits are expected to be “significantly lower” than the £17bn it announced last year.

Chief executive Ola Kaellenius said there was “a huge amount of caution” at the company. He added: “How long will this last? I don’t know, but I remain cautious for the foreseeable future with regard to China.”

Stifel analysts said the forecast cut was “not a big surprise” but the magnitude was a “negative surprise.” Mercedes is not the only company in this situation. BMW was also forced to reduce its forecasts earlier this month due to weak demand in China.

Volkswagen has announced it may close factories in the country for the first time in its 87-year history. There are fears the move could mean the loss of up to 30,000 jobs. Germany, the continent’s largest economy and a former industrial powerhouse, is in the throes of a prolonged manufacturing crisis that has led to it being dubbed “the sick man of Europe”.

This is partly because China is gaining ground and competing directly with its auto manufacturing sector.

And this month’s figures show that manufacturing activity in Germany is falling at the fastest pace in five months.

Cyrus de la Rubia, chief economist at Hamburg-based Commercial Bank, said the German industrial crisis “is dragging on much longer than expected.”

The automotive industry has also been hit by the collapse in demand for electric vehicles.

According to figures from the European Automobile Manufacturers Association (ACEA), just 92,627 battery-powered cars were registered in the European Union last month, a 44% drop compared to August last year.

ACEA said the drop was “driven by a spectacular fall” of 69 percent in Germany and 33 percent in France, the region’s two largest markets for battery electric vehicles.

“The electric car market is now on a continuous downward trajectory,” a spokesman said.