Traditional automotive giants BYD and Mercedes-Benz both reported troubling first-quarter earnings for 2026, highlighting a deepening slowdown in the Chinese auto market. While both companies face headwinds, their results diverged in market reception, with BYD shares rising on a 'better-than-feared' report and Mercedes-Benz stock declining on a significant profit drop.
BYD's Q1 net profit plummeted 55.4% year-on-year to 4.09 billion yuan ($600 million), its steepest fall since 2020. Revenue declined 11.8% to 150.23 billion yuan, marking the third consecutive quarterly drop. Despite these bleak figures, results largely met or slightly exceeded market expectations, as revenue beat estimates of around 140 billion yuan. Consequently, BYD's Hong Kong-listed shares jumped 3.9% to HK$107.70. The core issue for BYD remains the domestic market, where scaled-back government subsidies for entry-level EVs and plug-in hybrids have squeezed demand. Domestic sales fell for a seventh straight month in March, and competition from rivals like Geely and Leapmotor is intensifying. However, overseas sales provided a critical lifeline, accounting for roughly 45% of BYD's total 700,463 vehicle sales in Q1. The company is 'highly confident' of hitting its 2026 overseas sales target of 1.5 million vehicles.
Mercedes-Benz experienced a more straightforward negative impact from the Chinese slowdown. Its Q1 net profit dropped 17.2% to €1.43 billion, with revenue slipping 5% to €31.6 billion. EBIT fell 17% to €1.90 billion, and adjusted EBIT saw a steeper 30% decline. The primary driver was a disastrous performance in China, its largest single market, where sales plunged 27% to 111,621 units. The Cars segment bore the brunt, with EBIT collapsing 54% to €809 million. Offsetting factors included a strong U.S. market, where car sales rose 20% to 81,060 units, and the Vans division, where EBIT surged 71% to €392 million. Despite the weak quarter, Mercedes-Benz reaffirmed its 2026 guidance, projecting EBIT well above the 2025 level.
