Following a year marked by US tariffs and severe competition from China, the German car manufacturer Mercedes recorded a huge drop in operating profits in 2025.
Analysts expected Mercedes-Benz to report poor figures but the €5.8bn in operating profits for 2025, announced this Thursday, were significantly lower than the predicted €6.6bn.
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The car manufacturer's operating profits fell by 57% and turnover fell by 9% last year.
This is mainly due to the poor sales figures in China, which fell by 19% compared to 2024.
China remains the most important market for the German car making behemoth, with almost a third of all Mercedes cars are sold there.
In addition to the "intense competition with China", Mercedes-Benz cites "global tariffs and negative exchange rate effects" as reasons for the slump in profits.
Moreover, the company has not been able to smoothly transition to the EV market.
"In a dynamic market environment, our financial results were in line with our forecast, driven by a clear focus on efficiency, speed and flexibility" Mercedes bossOla Källenius said in response to the group's poor figures.
Mercedes-Benz is expecting to increase profits in 2026, particularly through planned cost cuts as well as several new product launches. The company is targeting an adjusted return on sales of 5% from the current 3%.
However, as it stands, profits at Mercedes-Benz have fallen for the third year in a row.
The firm's shares are trading around 7% lower than at the start of the year due to the negative trajectory.
Countermeasures with a savings programme
The DAX-listed company has already initiated a comprehensive savings programme.
The company explains that "cost savings of more than €3.5 billion at Mercedes-Benz Cars compensated for some of the headwinds".
In the medium-term, Mercedes-Benz expects to sell around 2 million vehicles and the car manufacturer intends to double the amount of EV sales.
The company is trying to motivate employees and potential buyers with words of praise, claiming the "team has done an outstanding job in 2025. We have successfully launched our biggest product and technology offensive to date and introduced cutting-edge technologies".
However, the German car manufacturer faces all sorts of challenges, such as supply chain disruptions and consequently rising production costs, as well as other regulatory pressures.
