Mercedes Faces Over 50% Profit Decline Amid U.S. Tariff Chaos
Mercedes‑Benz Forecasts Lower Revenue for 2025
Renowned automotive giant Mercedes‑Benz has released updated earnings projections for the current year, indicating that its revenue is expected to fall significantly below the total recorded last year.
Mercedes‑Benz Faces Major Profit Decline in First Half of 2025
The German automaker disclosed that its net profit for the first six months of 2025 fell sharply from €6.1 billion to €2.7 billion, marking a 56 % year‑on‑year drop.
Quarterly Highlights
- Q2 Net Profit: Down by 69 %, the steepest decline of the year.
- Revenue: Decreased 10 % compared with 2024.
- EBIT and EPS: Each contracted by 68 %.
Key Drivers of the Decline
- “Next Level Performance” Cost‑Cutting: One‑off expenditures that temporarily reduced earnings.
- US Tariffs: Heightened trade restrictions under President Donald Trump are expected to diminish sales revenue by roughly €360 million.
- China Market Downturn: Mercedes’ largest domestic market saw a near 20 % drop in quarterly sales, driven by cheaper local electric‑vehicle rivals.
Strategic Response
To cushion the financial hit, the company plans to intensify focus on its premium models, leveraging higher margins on luxury vehicles to balance lower overall sales volumes.
Official Outlook
“Mercedes‑Benz Group now expects group revenue to be well below last year’s level due to lower sales forecasts for both Mercedes‑Benz Cars and Vans,” the company confirmed in a statement.
Trump tariffs
European Automakers’ U.S. Tariff Cut to 15%
For most of the year, cars built in Europe were subject to a 27.5% import tariff in the United States. A fresh agreement between European Commission President
Ursula von der Leyen and former U.S. President Donald Trump has lowered that rate to 15%, effective Friday.
Impact on the European Workforce
- Over 13.8 million people are directly or indirectly linked to the automotive sector in the EU.
- Automotive jobs comprise roughly one in every 16 positions across the bloc.
- The industry is a major driver of household income, especially in key manufacturing regions.
Mercedes‑Benz’s Strategic Response
Mercedes‑Benz CEO Ola Källenius outlined the company’s approach amid the changing geopolitical landscape:
“We’re adapting to new geopolitical realities by using our global production footprint intelligently and by executing our Next Level Performance programme,” he said. “This initiative goes beyond efficiency measures, bolstering the resilience of our company.”
He added that Mercedes‑Benz plans to increase the sale of luxury vehicles and invest heavily in innovation to remain competitive.
A new strategy for Mercedes
Engineering the Future: A Deep Look into Automotive R&D Investment
In its most recent mid‑year review, the automotive sector emphasized its strategic shift toward research and development (R&D) as the engine for new products and next‑generation technologies.
Financial Commitment and Cross‑Industry Impact
- Annual R&D Spend: Automakers invest roughly €73 billion each year, surpassing any other private industry in Europe.
- Broader Effect: Breakthroughs often spill over into sectors such as batteries, robotics, and artificial intelligence.
Leadership Perspective
“We must stay focused on delivering desirable, intelligent products while maintaining strict cost control,” stated Hermann Källenius, the head of Mercedes‑Benz.
Brand Strength and Market Position
- Loyalty Drivers: Mercedes vehicles benefit from a strong brand identity, with consumers attracted to powerful engines, premium design, and outstanding reliability.
- Global Ranking: The company is a top‑five player in global revenue, alongside fellow German rivals Volkswagen and BMW.
- Luxury Segment: Mercedes holds the second spot worldwide in the luxury market, trailing only BMW.
Economic Significance of Vehicle Taxes
Vehicle ownership taxes alone bring in about €428 billion annually to EU treasuries—an amount that surpasses the EU’s entire annual budget and is vital for sustaining public services.
