Mercedes-Benz cut its sales expectations for the year, becoming the latest automaker to warn of intensifying pressure in China despite noting that its cost-saving measures will support profitability this year.

The company now expects to sell slightly fewer cars this year than last, while group revenue is also expected to come in slightly below last year, having previously guided for flat unit sales and revenue.

"In the Chinese premium and luxury segment, the ongoing intense price competition, especially by local manufacturers, is expected to lead to significantly weaker development of unit sales for many foreign manufacturers," Mercedes said.

The company saw its car sales in China plunge 30% in the second quarter, offsetting growth in all other regions, amid intense competition, cautious consumer sentiment and continuing model changes.

Geopolitics and trade barriers also continue to cause uncertainty while the impact of the Middle East conflict is exacerbating existing uncertainties. The company's guidance assumes that the war won't fully reignite in the second half of the year, it said.

Volkswagen and its Audi brand have both recently cut sales guidance for the year and pledged to deepen cost-saving measures as they grapple with a deteriorating Chinese market that has seen a surge in car launches from domestic brands this year and a prolonged price war as manufacturers vie for customers.

BMW last month also downgraded its sales expectations for the year, warning that a more intense competitive environment in China and other countries in the Asia-Pacific region will now see its group sales fall.

However, Mercedes said it would sell a greater share of electric-vehicles this year than expected as it backed its other guidance metrics, including for significantly higher earnings before interest and taxes and an adjusted return on sales margin in the car unit of 3%-5%.

The German luxury-car maker expects to benefit from the launch of over 40 new models in the years between 2025 and 2027 as well as its recent efforts to further intensify global productivity measures that are focusing on its German sites.

Last year the company outlined plans to become more efficient through a series of measures that include job cuts and shifting some production from its German home to lower-cost countries such as Hungary. It is also working to lower energy costs, increase automation, and decrease logistics expenses to cut the production cost of each vehicle.

"Customer response to our new models is strong," Chief Executive Ola Kallenius said. "In the second half, we will focus on bringing more new models to customers while further improving our cost position and productivity."

Mercedes reported second-quarter EBIT of 1.55 billion euros ($1.76 billion), up from 1.27 billion euros a year prior, as revenue declined 3.3% to 32.06 billion euros.

Analysts polled by FactSet expected EBIT to come in at 1.51 billion euros on revenue of 31.88 billion euros.

It reported an adjusted return on sales margin for its cars business of 4.0%, down from 5.1%.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

July 28, 2026 02:15 ET (06:15 GMT)

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