Mercedes-Benz Faces a Cash-and-Margin Reckoning as Analysts Turn Cautious
Published on 11/11/2026 at 13:21 | Editorial boerse-global.de
Mercedes-Benz has spent the past week burnishing the long-term credentials of its supply chain and its charging network. Investors, though, are far more focused on a pair of numbers that tell a less flattering story: a passenger-car margin that has roughly halved and a free cash flow figure that has all but evaporated.
Jefferies gave that tension a public airing on Tuesday, cutting its rating on the Stuttgart carmaker from "Buy" to "Hold" and trimming its price target to EUR 44 from EUR 46. Analyst Philippe Houchois pointed to the need for a deep renewal of the business model and a less differentiating liquidity profile. He also flagged the absence of clarity on a possible fresh share buyback once the current repurchase programme runs its course.
Margin Pressure Moves to Center Stage
The downgrade lands squarely on the metric that matters most for the equity story. Adjusted return on sales in the cars division came in at 2.5% in the third quarter of 2026, down from 4.8% a year earlier. Mercedes blamed fiercer competition in China, adverse currency moves and the costs of launching new models.
Those headwinds fed straight through to the bottom line. Adjusted operating profit fell 15% to EUR 1.78 billion over the same three months. Free cash flow from the industrial business was hit far harder, tumbling 87% to EUR 172 million, a decline the company attributed to temporarily built-up inventories of new vehicles.
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Whether those stockpiles unwind as planned is now a pivotal question. A slower drawdown would leave Mercedes with less room to fund product launches and supply-chain upgrades at the same time — precisely the parallel commitments it has been announcing.
Aluminium Deal Extends Beyond 2030
The most recent of those commitments is a long-term aluminium supply agreement with Hydro, unveiled on Monday. The contract covers at least 10% of Mercedes' primary aluminium needs and runs past 2030, giving a slice of its material sourcing a contractual footing.
Embedded in the deal are concrete emissions targets. The material footprint of Hydro's primary aluminium is set to fall from roughly 4 kg CO2e per kilogram today to 3.5 kg by 2028, with a further reduction to 3 kg pencilled in from 2030. From 2027, Hydro CIRCAL — an alloy with a high share of aluminium recycled from consumer products — will also feature in upcoming Mercedes models.
The commercial worth of the arrangement ultimately hinges on whether the group can pair this kind of structural overhaul with a recovery in earnings power. A supply contract alone does not move a margin.
Charging Network Widens Across Europe
On the electric side, Mercedes and Electra agreed on 3 November to expand their fast-charging partnership. Mercedes customers gain access to more than 800 Electra stations and over 5,000 charge points across ten European countries. The two sides will also fold the 47 Mercedes-Benz High-Power Charging hubs in Europe into the Electra network, so the tie-up runs in both directions — customer access out, infrastructure integration in.
Product Offensive Keeps Combustion Alive
Hopes for a better margin rest partly on the product pipeline. Mercedes has 40 models slated for launch within three years, blending electric vehicles with combustion-engine cars; further new vehicles are due in 2027. The mix could let the company serve divergent customer demand, provided the cars find buyers. Continued development of conventional powertrains would then shore up the existing business while electric alternatives open additional sales channels.
Chief executive Ola Källenius, speaking at a media briefing in Pune, said combustion engines would remain in use for at least ten and possibly fifteen years. Mercedes is developing petrol and diesel units to Euro 7 standards, with the offering to be dictated by demand.
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Labour Tensions Flare in Ludwigsfelde
Alongside the financial questions, industrial relations added a fresh irritant. Workers at Mercedes-Benz and Gestamp in Ludwigsfelde staged a two-hour warning strike on Monday, called by IG Metall Ludwigsfelde over the pay dispute in the metal and electrical industry. The third round of negotiations for Berlin and Brandenburg had ended on Friday without the sides drawing any closer.
The Fourth-Quarter Test
For now, the bull case rests on Mercedes paring back inventory commitments and lifting its car margin, which would make a credible pairing of model offensive and lower-emission sourcing look achievable. Should profitability deteriorate further, the priority ranking among transformation projects moves to the fore.
The next hard data point is the fourth-quarter results, expected on 18 February 2027. The trajectory of the passenger-car margin and industrial cash flow will show whether Mercedes is regaining the financial headroom its long-term supply and product plans require.
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