Mercedes-Benz Stock Offers Deep-Value Potential as Citi Sees Recovery Catalysts

Mercedes-Benz Group’s depressed stock valuation could offer a significant value opportunity if near-term pressures ease, according to Citi analysts following recent executive roadshows in New York.

Shares of the German luxury automaker have fallen to non-COVID decade lows. Citi noted that Mercedes-Benz’s market capitalization is now roughly equivalent to its approximately €30 billion net cash position plus its stake in Daimler Truck. At current levels, investors are effectively assigning little or no value to the company’s core passenger car operations and Mercedes-Benz Financial Services, which holds about €13 billion in equity.

Citi maintains a Neutral rating on Mercedes-Benz stock but sees a potential “value Buy” case if margins stabilize and investor concerns diminish. The bank believes European auto stocks are being heavily discounted as markets prioritize near-term earnings risks over underlying assets and long-term cash generation.

Four issues remain central to the Mercedes-Benz outlook: declining market share in China, competition from Chinese electric vehicle manufacturers in Europe, U.S. tariff pressures, and the costly transition to battery electric vehicles.

However, Citi argues several risks may already be reflected in the valuation. Mercedes-Benz may be deliberately avoiding unprofitable market share in China’s aggressive price war, while its strong brand, roughly €70,000 average selling price and resilient residual values could help protect European profitability. Meanwhile, U.S. tariff pressures are increasingly reflected in Mercedes-Benz Cars margins, and peak investment in next-generation EV platforms appears to have passed.

Cost reductions could provide another major catalyst. Mercedes-Benz is targeting roughly €4 billion in fixed and variable cost savings through measures including capacity reductions in Germany and China and increased production in Hungary.

A substantial product rollout featuring refreshed GLS and GLE SUVs, a new V8 combustion engine and several electric vehicles could also improve volumes and product mix through fiscal 2027 and 2028.

Even under Citi’s trough fiscal 2026 margin assumptions, Mercedes-Benz could generate approximately €4 billion in base free cash flow. That may support around €6 billion in annual shareholder returns, including share buybacks equivalent to 4%–5%.

Citi nevertheless expects investors to seek clearer evidence of margin stabilization before Mercedes-Benz stock can achieve a meaningful revaluation.