As third-quarter profits slipped, Mercedes-Benz said a “brutal” electric vehicle market with substantial price cuts and supply chain challenges meant it would likely meet the lower half of its 12-14% adjusted return on sales target for the vehicles business.

The luxury automaker said on an investor call that it remained dedicated to its EV ambitions. However, improved returns from its combustion engine portfolio might boost profitability if EV margins remained lower than originally projected.

With some traditional players selling battery electric vehicles below the level of internal combustion engine cars despite their higher production costs, this is a pretty brutal space,” Harald Wilhelm said. “I can hardly imagine the current status quo is fully sustainable for everybody,” he said.

According to Wilhelm, discounts provided on specific models in Germany in the fourth quarter did not constitute a change in the carmaker’s pricing policy of keeping prices high to concentrate on profits over volume.

By 0733 GMT, Mercedes shares had dropped more than 6% to their lowest level in over a year and were the largest losers on the eurozone blue-chip index. BMW was down 4%, while VW was down more than 2%.

Carmakers ranging from Ford to Tesla have been reducing prices to stimulate demand in places ranging from the United States to China this year, but Mercedes-Benz has mostly refrained from following suit.

The business recorded a 12.4% adjusted return on sales in its automobiles sector in the third quarter on Thursday.

Earnings before interest and taxes (EBIT) declined 6.8% to 4.8 billion euros ($5.1 billion), somewhat higher than expected, while revenues from vans increased 44% to 715 million euros, with an adjusted return on sales of 15%. Revenue for the group fell 1.4% to 37.2 billion euros.

Mercedes-Benz described the market environment as “subdued”, but Wilhelm said, “We are beyond the worst when it comes to inflation and energy pricing.”

However, rising inflation, a 329-million-euro foreign currency headwind, and supply chain-related expenses reduced third-quarter profitability, according to the business, echoing Porsche, which cautioned in its third-quarter results on Tuesday that the luxury industry was not immune to macroeconomic challenges.

Mercedes-Benz reported a 4% reduction in total third-quarter sales earlier this month, with top-end sales down 11%, due in part to model changes and a shortfall of 48-volt systems provided by Bosch.

Car revenue fell 3.8% owing to a drop in deliveries, while the average selling price remained steady, according to the business.

Looking forward, it anticipates that the rate of sales from the first three quarters will stay about the same in the fourth quarter, and it has not changed its full-year sales objective of no year-on-year change.