Mercedes-Benz's Electric Surge Fails to Offset China Collapse

Mercedes-Benz Group AG is navigating a starkly divided global landscape as it heads into a pivotal shareholder meeting this week. The automaker's first-quarter delivery figures for 2026 reveal a company being pulled in opposite directions: record-breaking demand for its new electric vehicles in some regions is crashing against a severe downturn in its most important single market, China.

The contrasting performance was highlighted in a pre-close analyst call on Monday, an event that provided a preview of quarterly results due on April 29. The signals were enough to lift the automaker's shares by approximately 1.5 percent. RBC Capital Markets subsequently affirmed its "Sector Perform" rating with a price target of EUR 56.

Regional Performance Splits the Business

A six percent year-on-year decline in group-wide vehicle deliveries to 499,700 units tells only part of the story. The collapse was concentrated in Asia, where sales in China plummeted by 27 percent. Company management attributed the drop to intense competitive pressure, macroeconomic uncertainty, and pending model changes for several key vehicles, declaring 2026 a transition year for the market.

This weakness overshadowed robust growth elsewhere. Deliveries in the United States surged by 20 percent, while Europe saw a 7 percent increase. The performance was even stronger in specific markets, with Germany posting a 9 percent gain. However, these advances were insufficient to compensate for the Chinese shortfall, with additional pressure coming from a 14 percent decline in the "Rest of World" region, partly due to geopolitical tensions in the Middle East and softer sales in Turkey.

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Electric Models Drive Production to Capacity Limits

The brightest spot for Mercedes-Benz is its accelerating electric vehicle offensive. Global deliveries of battery-electric vehicles (BEVs) jumped 11 percent to 50,400 units in Q1. This growth is being fueled by two new models generating exceptional demand.

The electric GLC recorded the strongest first order quarter of any EV in the company's history. To meet this demand, the Bremen plant has introduced additional Saturday shifts. Meanwhile, the new electric CLA, recently crowned "Car of the Year 2026," is driving growth in Europe and Germany by 34 and 36 percent respectively. Its popularity has led to three-shift operations at the Rastatt plant, with global production capacity fully utilized.

A similar pattern emerged in the van segment, where overall sales dipped by 3 percent but electric van deliveries rose by 29 percent.

Shareholder Vote and Financial Targets Loom

Attention now turns to the company's purely virtual Annual General Meeting on Thursday, April 16. Shareholders will vote on a management proposal to cut the dividend to EUR 3.50 per share, down 80 cents from the previous year. If approved, the payout would be made on April 21.

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This proposed reduction aligns with a broader financial recalibration. The company's adjusted EBIT fell to EUR 8.2 billion in 2025 from EUR 13.7 billion a year earlier, pressured by tariffs, exchange rates, and price competition in China. In response, management has launched a cost-saving program exceeding EUR 3.5 billion for 2026, which includes the planned closure of its Aguascalientes plant in Mexico by May.

For the current year, Mercedes-Benz anticipates group revenue at prior-year levels. It is targeting an EBIT margin of 3 to 5 percent for its Cars segment and 8 to 10 percent for Vans, aiming for a group EBIT significantly above the 2025 figure. Whether the electric vehicle momentum in Europe and the U.S. can fully balance the profound weakness in China will become clearer when the full first-quarter financial report is released at the end of April.

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