Mercedes shares drop by more than 3% as its quarterly profits decline by 64%.

Shares of German automaker Mercedes Benz Mercedes Benz AG (MBG.DE) fell by 3.2% to €56.61 after the company announced a sharp decline in profits in its core automotive division for the third quarter amid increasing competition in China.

The earnings report showed that Mercedes' profits – before interest and taxes – dropped by 64% in the third quarter year-on-year to €1.198 billion (approximately $1.296 billion) with revenues decreasing by 6% year-on-year.

Mercedes clarified that the decline in sales within its automotive unit was a result of deteriorating macroeconomic conditions and fierce competition facing the company, especially in Asia, where Chinese companies have come to dominate a significant market share.

Mercedes had already issued a warning last month about the likelihood of a significant drop in its profits, as major German automakers are trying to shift towards greater reliance on electric vehicles in the face of a weak domestic economy and declining demand in China, which is the largest car market in the world.