Mercedes-Benz Group has released its full-year 2025 financial results revealing a dramatic decline in profitability that marks the company’s weakest performance since the depths of the Covid-19 era.
The German carmaker said today its operating profit more than halved over the year amid external pressures, including new US tariffs, fierce competition in China, and unfavourable currency movements. It said aggressive internal cost-cutting efforts had helped cushion some of the blow.
Group revenue fell 9.2 per cent to €132.2 billion from €145.6 billion the previous year.
Reported earnings before interest and taxes (EBIT) dropped 57.2 per cent to €5.82 billion, well below analyst expectations of around €6.6 billion, according to Visible Alpha polls.
Adjusted EBIT, which strips out one-off items such as restructuring charges, came in at €8.2 billion — still a 40 per cent decline from €13.7 billion in 2024.
Net profit attributable to shareholders nearly halved to €5.3 billion from €10.4 billion, translating to earnings per share of €5.34 compared with €10.19 a year earlier.
The passenger car division bore the brunt of the pain, posting an adjusted return on sales of 5.0 per cent, or 6.1 per cent excluding tariff impacts, down sharply from 8.1 per cent in 2024 and missing some forecasts.
Mercedes-Benz Vans held up better with a double-digit adjusted return on sales of 10.2 per cent, while Financial Services – finance and leasing – delivered a respectable 9.7 per cent adjusted return on equity.
Overall unit sales suffered: Passenger cars dropped 9 per cent to 1.801 million vehicles, with particularly weak demand in China pushing volumes back to levels last seen around 2016.
Management attributed the downturn primarily to three major headwinds.
US tariffs imposed under the current administration inflicted a more than €1 billion hit in direct costs, it is estimated.
In China, the world’s largest car market, intense price competition from local manufacturers eroded margins and volumes significantly.
Sales of Mercedes were almost 20 per cent down in China.
Negative foreign exchange effects and softer net pricing added further pressure.
These challenges were partially offset by the “Next Level Performance” programme, which generated more than €3.5 billion in cost savings across materials, production efficiencies and selling/general/administrative expenses in the cars division alone.
CEO Ola Källenius emphasised the team’s execution in a tough environment.
“Amid a dynamic market environment, our financial results remained within our guidance,” he said, highlighting the launch of the company’s biggest-ever product and technology rollout programme.
“The auto industry and our company, we’re in a once-in-a-hundred-year transformation,” Kaellenius stressed.
“It’s happening in an environment that is more dynamic than we have experienced in many, many years.”
He pointed to strong order books for upcoming models such as the new CLA and GLC, along with more than 40 new vehicles planned by 2027, as foundations for recovery.
Group revenue is expected to hold about flat at around €132 billion in 2026, according to cautious estimates.
Group EBIT should rise significantly, largely because 2025’s exceptional restructuring charges of about €1.6 billion will not be repeated, while free cash flow from the industrial business is seen slightly below last year’s €5.4 billion.
For the core cars division, though, adjusted return on sales is guided at a weaker 3 per cent to 5 per cent, signalling continued margin pressure.
Mercedes-Benz remains financially robust, with net industrial liquidity at €32.2 billion, up slightly from the prior year, and a commitment to shareholder returns.
There is a proposed dividend of €3.50 per share and an ongoing share buyback programme of up to €2 billion.
Today’s results, though, underscore broader strains across Europe’s premium auto sector.
Chinese rivals, benefiting from domestic advantages and state support, are squeezing incumbents already burdened by stringent European Union CO₂ regulations and the looming 2035 combustion-engine phase-out.
Consumer uptake of battery-electric vehicles has been slower than anticipated, forcing heavy electrification investments amid subdued demand.
Mercedes-Benz is scaling back production capacity toward 2.2 million units by 2028 and doubling down on top-end models and efficiency.
