Mercedes-AMG GT 43 4MATIC+ at the Brussels Expo on January 9, 2020 in Brussels, Belgium.

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Shares of Mercedes-Benz fell sharply on Thursday after the German automaker reported a decline in profit and sales as challenges from electric vehicle competition hit supply chains.

Shares fell 5.7% at 10 a.m. London time, putting the stock on track for its worst day since May 4, according to LSEG data.

The company said it faced a “subdued market environment characterized by intense price competition,” particularly for electric vehicles.

In an analyst earnings call, Chief Financial Officer Harald Wilhelm described the electric vehicle market as a “pretty brutal space,” Reuters reported. This is because some traditional automakers sell electric vehicles at a cheaper price than regular internal combustion engine cars – despite higher production costs.

“I can hardly imagine that the current status quo is completely acceptable for everyone,” said Wilhelm, according to the news agency.

Group earnings before interest and taxes (EBIT) fell 7% to 4.8 billion euros (US$5.06 billion) in the third quarter. Sales fell 1.4% to 37.2 billion euros, below the consensus estimate, as passenger car sales fell 5%, partly due to supply chain challenges.

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Mercedes-Benz share price.

Inflation was one of the company’s biggest challenges, along with supply chain issues and exchange rate losses.

The results showed that total car sales remained roughly stable in the first nine months, with growth in Germany and decline in China.

Mercedes-Benz is aiming for a global share of 50% hybrid and electric vehicles by 2025 and has announced that from then on it will only bring purely electric models onto the market. The company said Thursday it remains committed to those goals.

Despite a slow start to the shift to electric vehicles, legacy automakers have announced ambitious goals in recent years but face stiff competition from Elon Musk’s Tesla and Chinese players like Warren Buffett-backed BYD.

According to the results, Mercedes-Benz’s share of all-electric vehicle sales rose from 6% to 11% in the first nine months of the year.

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