On transfer to Army Group South, the division fought to stem the Soviet effort to cut off the 1st Panzer Army in the Caucasus. The division checked the Soviet advance on Rostov, maintaining an avenue of escape for the 1st Panzer Army. It continued in actions along the Don and Donetz river lines, and in the Third Battle of Kharkov. In the summer of 1943, the division took part in the offensive at Kursk, serving as part of the armoured formations of Army Detachment Kempf as they attempted to screen the eastern flank of the southern German pincer. The division suffered heavy casualties in this battle, and by the end of the battle the division was down to 15 tanks and had an infantry combat strength equivalent to three battalions.