Mercedes-Benz has announced a cost-cutting initiative after profits fell by nearly a third, driven by a slowdown in its electric vehicle (EV) business.
The German automaker plans to reduce production costs by 10% by 2027 to “ensure the company’s future competitiveness.” Despite a series of upcoming product launches, it expects a sharp decline in profits this year and warned of potential tariff threats from Donald Trump.
Executives forecast that earnings before interest, taxes, and other charges will be “significantly below” the €13.6 billion (£11.3 billion) reported in 2024, which was already down 30% from the previous year.
The decline was largely attributed to a 23% drop in EV sales and a 7% decrease in sales in China, Mercedes’ largest single market.
“In an increasingly uncertain world, we are taking steps to make the company leaner, faster, and stronger,” said CEO Ola Källenius.
Mercedes’ profits fell 28% to €10.4 billion (£8.6 billion) last year, while revenue declined by around 4% to €145.6 billion (£121.4 billion).
Western EV manufacturers are struggling to compete with an influx of lower-cost Chinese-made EVs in Europe and the UK, leading to rising tensions between China and the European Union. This month, the EU voted to increase tariffs on Chinese-made vehicles to as high as 45%. In response, China stated on Thursday that it is “doing its best” to negotiate with the EU over the tariffs.
Automakers also face the risk of new US tariffs after President Trump suggested imposing duties of up to 25% on car imports.
Mercedes CFO Harald Wilhelm warned that tariffs could reduce profit margins by a percentage point this year, with margins already forecast to fall between 6% and 8% in 2025. The company’s profit margin declined to 8.1% in 2024, down from 12.6% the previous year.
To counter declining profits, Mercedes plans a wave of new vehicle launches, beginning with the CLA. This will be followed by an upgraded S-Class in 2026, an all-electric GLC and C-Class, and a series of battery-electric and high-tech internal combustion engine (ICE) models from Mercedes-AMG.
Despite these plans, the company has lowered its car and van sales guidance for 2025. However, it expects overall sales to gain momentum as dozens of new or refreshed models enter the market over the next two years.
