Mercedes-Benz Maps Out a China-Built Electric E-Class While Buybacks and Margins Hang in the Balance
Published on 11/12/2026 at 03:11 | Editorial boerse-global.de
Mercedes-Benz is preparing to assemble its electric E-Class in China starting in the second half of 2027, according to Bloomberg, which reported yesterday on a strategy that would tilt production squarely toward the Chinese market. The move comes as Chief Executive Ola Källenius acknowledged that the company's luxury business in the country is running 30% below year-earlier levels and needs a rethink.
Speaking at the Automobilwoche congress in Berlin yesterday, Källenius said Mercedes must overhaul both its business model and its operating systems in China. He struck a similar note on home soil, pressing for far-reaching steps to lift productivity and trim labor costs at a Süddeutsche Zeitung event, with talks to that end already underway with works councils, according to dpa-AFX.
Jefferies Cuts to Hold as Buyback Questions Linger
The strategic recalibration coincides with a more guarded stance from the sell side. On Tuesday, Jefferies downgraded Mercedes-Benz from "Buy" to "Hold" and trimmed its price target to 44 EUR from 46 EUR. Analyst Philippe Houchois pointed to the need for a deep renewal of the business model, a liquidity profile that no longer stands out from peers, and a lack of clarity over whether the share buyback will continue.
That buyback has been running at a steady clip. In the past week the group repurchased 566,868 of its own shares for a total of 23,411,312.36 EUR, a disclosure published on Friday. How much financial room Mercedes can generate once the current program wraps up is now the open question for investors weighing a durable recovery.
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Margin Guidance Is the Yardstick
The debate has sharpened since the profit warning issued at the end of October. Mercedes-Benz now expects an adjusted return on sales at Mercedes-Benz Cars of 2% to 3% for 2026, and it projects group EBIT at the prior-year level rather than the marked increase previously guided. Management blamed a deteriorating market environment in China and higher fourth-quarter costs, including materials.
That makes the passenger-car margin the number to watch. A stabilization within the announced range, paired with easing cost pressure, could shore up the case for further capital returns. Should sales or costs deteriorate further, extending the buyback would become a tougher call.
The company is also tying up long-term supply. A binding aluminum purchase agreement with Hydro, announced today, covers at least 10% of primary aluminum requirements and runs beyond 2030, with Hydro CIRCAL slated for use from 2027. Investors are likely to judge the deal on whether it makes procurement more reliable and holds up economically.
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Two Paths From Here
In the brighter scenario, Mercedes absorbs the charges within its lowered expectations, the margin holds in the guided band, and the cost squeeze lets up—leaving the current buyback as part of a financially sound strategy and leaving room for both renewal spending and shareholder returns. A decision on a fresh buyback program after the current one ends would be the clearest catalyst, its weight depending on the earnings that underpin it.
The darker path starts with the pressures already flagged. A further slide in China or costs rising faster than expected could squeeze the margin again, forcing the company to weigh operating needs against possible additional repurchases under tighter conditions. If reshaping the business model ties up substantial funds, financing that overhaul could take precedence over extra capital returns—especially if the earnings base stays weak. Either way, the passenger-car return remains the benchmark against which buybacks and renewal will be measured. The stock slipped 0.2% yesterday to close at 41.59 EUR.
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