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Mercedes-Benz has warned that its profits will be “significantly” lower this year and launched a fresh cost-cutting programme, as the German carmaker braces itself for a yet bigger hit if US President Donald Trump follows through on his threats of import tariffs.
The Stuttgart-based company on Thursday said it expected profit margins — which fell to 8.1 per cent in 2024 from 12.6 in the previous year — to range between 6 and 8 per cent in 2025, excluding any potential impact from higher US tariffs.
“The outlook is based on the current regulatory framework, any additional tariffs over and above are not included in this guidance,” said Mercedes-Benz CFO Harald Wilhelm.
He said if tariffs on exports from the EU into the US were to rise from their current level of 2.5 per cent to 10 per cent, the impact on the company’s car margins would be up to 1 percentage point on a gross basis “before any mitigation”.
Trump on Wednesday warned that he was considering a 25 per cent tariff on imported cars. More than half of the 374,000 vehicles that Mercedes-Benz last year sold in the US were imported.
Profits at the company’s car division dropped 41 per cent, while net profits fell 28 per cent to €10.4bn last year. Revenues dropped 5 per cent to €146bn.
Like most of its European rivals, Mercedes-Benz has struggled with sluggish demand in the region and a fierce price war in China, where consumers have lost appetite for luxury cars such as its Maybach limousine. The fall in Chinese demand for high-end vehicles has hit Mercedes-Benz particularly hard, after a focus on selling more luxurious and high-margin cars in recent years.
Mercedes-Benz’s share price, down more than 11 per cent over the past year, fell a further 3 per cent on Thursday as the company outlined its plan to counter weak car demand and rising competition in China — challenges that led the company to cut its profit forecast twice last year.
Chief executive Ola Källenius on Thursday revealed plans to cut production costs by 10 per cent by 2027 after negotiations with the IG Metall union over job cuts in Germany. Alongside a plan to launch a dozen new models over the next few years, starting with its new electric CLA, he said the measures would help revive sales and improve margins.
On Thursday, France’s Renault also warned of a hit to margins in 2025 because of tougher EU emissions regulations that will come into effect this year.
The group was one of few European carmakers not to issue a profit warning in 2024. But it said it expected operating margins equal to or above 7 per cent in 2025, down from 7.6 per cent in 2024 due to more incentives to boost electric vehicle sales and a reduction in petrol vehicles to achieve the emissions targets.
Under the regulations due to apply to a company’s vehicle sales in 2025, carmakers face tougher fines on emissions across their portfolio, as part of the EU’s efforts to phase out new combustion engines in 2035.
“Getting the EVs to be a dominant technology in Europe is a journey that will last 20 years,” said Renault’s chief executive Luca de Meo. “That’s why we’re asking for flexibility.”
