And it warns that could bite into profit margins over the coming months.

The luxury car maker on Thursday (October 26) posted a near-7% drop in pre-tax earnings.

They sank to just over $5 billion in the third quarter.

Mercedes said fierce price competition and supply chain issues were making the EV market a tough battle.

The company says some rivals are selling electric cars for less than traditionally powered models - even though they cost more to make.

Chief Financial Officer Harald Wilhelm said the status quo could not be sustainable for the industry.

Mercedes shares fell around 5% in early trade following the warning.

Carmakers from Ford to Tesla have been slashing prices this year in a bid to prop up demand.

Mercedes has largely refrained from following suit, but says inflation and other factors weighed on earnings over recent months.

That echoes comments earlier in the week from Porsche, which said the luxury sector wouldn't be immune to global economic worries.

On a more positive note, Mercedes said the industry was "beyond the worst" on inflation and energy costs.