BAIC Motor, a Chinese joint venture partner of Mercedes-Benz, expects to book a net loss of up to RMB 1.65 billion (USD 243.9 million) (USD 244 million) for the first six months of the year, as price war pressure builds even at the higher end of the market.
For BAIC, the anticipated red ink marks a reversal from a net profit of RMB 359.96 million (USD 53.2 million) for the first half of 2025 and RMB 1.97 billion (USD 291.2 million) for the same period of 2024.
The core listed unit of state-owned Beijing Automotive Group attributed the loss to “intense competition in the domestic automotive industry” during the first half, as “sales fell short of expectations.” The company, which also has a joint venture with South Korea’s Hyundai Motor, mentioned “the impact of rising raw material costs, increased market investment and other factors.”
Chinese automakers are being hit hard due to a combination of economic stagnation and overcapacity, fueling a pricing race to the bottom. BAIC’s filing did not elaborate on the situation, but its German partner said more when it announced its first-half earnings on July 28.
Mercedes-Benz said its total sales for the period came to 837,195 units, down 7% from last year, “impacted by intense competition and subdued consumer sentiment in China, as well as by the effects of model changes.” The sales decline in China was particularly steep, at 28% on the year to 210,245 units.
“The Chinese market was significantly down,” the company said. The “market situation in the premium and luxury segment in China remained strained, with foreign manufacturers in particular experiencing significant decreases in unit sales.”
Mercedes is pessimistic about the near-term outlook in China. “The market is expected to be significantly below the previous year’s level,” the carmaker warned, as “the ongoing intense price competition, especially by local manufacturers, is expected to lead to significantly weaker development of unit sales for many foreign manufacturers,” both in the luxury and the midsize van segments.
The weak sales and prospects led Mercedes to book an impairment charge of EUR 752 million (USD 865.7 million) for the second quarter in connection with its Chinese equity-method investments.
“While we took a cautious view on China at the beginning of the year, market conditions have proved more challenging than expected,” Chief Financial Officer Harald Wilhelm said in an earnings conference all. Since the Chinese market is much weaker than originally thought, he said the company has lowered its full-year sales guidance to “slightly below 2025 levels.”
Ola Kallenius, the German company’s chief executive, stressed, “We remain strategically fully committed to China” as a key part of the equation of global competition, which he acknowledged has “become tougher, especially in light of the Chinese … going global.”
US carmaker Ford Motor last week announced it will sell roughly 30% of its factory in Valencia, Spain, to Chinese peer Geely, effectively inviting another Chinese automaker onto European shores.
“At this stage in the game, the phenomenon is more on the volume market side, and more concentrated to specific markets,” Kallenius said of China’s inroads. However, he stressed that it is “not a reason to sit back and be relaxed, even if you have a very strong position like Mercedes-Benz.”
“The Chinese ambition to broaden their footprint in Europe has only started,” he added.
Ford CEO Jim Farley said in an earnings conference call on July 28 that the deal with Geely “will bring speed and capital efficiency to our European operation.” He did not talk about China beyond that, but instead complained about Japan and South Korea.
Rivals in those two Asian countries have an “extremely strong local supply chain” while enjoying a “huge currency advantage” but only “modest” 15% tariffs charged by America.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.
Note: EUR, RMB figures are converted to USD at rates of EUR 0.87 = USD 1 and RMB 6.77 = USD 1 based on estimates as of August 4, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.