Mercedes-Benz (MBG.DE) reported decent results on Tuesday, highlighting strength in its core business, but continuing weakness in China. The report comes as the German automaker’s US business is under threat of a ban due to ownership stakes by Chinese companies.
In the second quarter, Mercedes reported passenger car revenue of 22.99 billion euros ($26.18 billion), down 5% compared to a year ago, with adjusted EBIT coming in at 909 million euros ($1.035 billion), down 26% year over year.
But its adjusted return on sales (similar to EBIT margin) in the car unit fell slightly to 4% from a year earlier, beating analyst expectations per Bloomberg.
Mercedes stock trading in Germany pulled higher.
But the good news in its operations comes at a tricky time for Stuttgart-based Mercedes.
Senators Bernie Moreno (R-OH) and Elissa Slotkin’s (D-MI) bill to ban the sale of connected vehicles with Chinese control passed through its committee vote, clearing the path for a full senate vote.
The senators’ the bill would prohibit the import, sale, and operation of vehicles manufactured in China—or any other country of concern—and ban the use of Chinese-developed connected vehicle technologies, such as software and data systems, on American roads.
Mercedes shareholding by Chinese entities is almost 20%, crossing the 15% threshold. China’s BAIC Group currently holds 9.98 % of the company’s voting rights, making it Mercedes’s largest individual shareholder. Billionaire Li Shufu, founder and Chairman of Geely holds an 9.69% stake in Mercedes through his Tenaciou3 Prospect Investment Limited.
If passed, the bill would ban vehicle sales like Mercedes connected cars starting in 2027.
In a statement to Yahoo Finance, Mercedes defended its structure, noting it wasn’t under any foreign control:
“No shareholder holds more than 10 percent of our stock, and our major shareholders are not directly represented on the Supervisory Board or have any control or decision-making authority when it comes to the company and its operations. Those decisions are made solely by the Board of Management of Mercedes-Benz.”
The company added that it is committed to ensuring any new legislation does not impact its operations, and it will continue to “safeguard” its employees, dealers, suppliers and other workers in the US. The company noted it directly and indirectly responsible for 160,000 jobs in the US, has plants in Alabama and South Carolina, and has invested $1 billion annually over the last years.
While there is a long way to go for this bill to become law, and lawmakers like Senator Ted Cruz (R-TX) have said this bill should not punish automakers like Mercedes, the threat is real for Mercedes, with US sales comprising 20% of its global total.
