Mercedes-Benz Warns of Lower Auto Margins Amid Tariffs and China Weakness
Mercedes-Benz signaled a cautious outlook for its automotive division, warning that profit margins could decline further as the luxury carmaker faces high costs, a challenging Chinese market, and ongoing global tariffs.
The company expects its adjusted return on sales in the car division to fall to between 3% and 5% in 2026, compared with 5% in 2025. The weaker margin outlook reflects continued pressure on profitability across key markets.
Shares in Mercedes-Benz were indicated 3.7% lower in pre-market trading following the announcement.
Operating Profit Drops Sharply in 2025
At the group level, operating profit more than halved to 5.8 billion euros in 2025. The result was hit by approximately 1 billion euros in tariff-related costs, intense competition in China, and negative currency effects.
The figure also fell short of the 6.6 billion euro consensus forecast compiled by Visible Alpha, underscoring the severity of the headwinds facing the German automaker.
Revenue for 2025 came in at 132.2 billion euros.
Mercedes-Benz Focuses on Cost Discipline and Efficiency
To address these challenges, Mercedes-Benz plans additional cost reductions and new product launches. The company aims to restore its automotive division’s profit margin to a range of 8% to 10% over the medium term through what it described as “relentless cost discipline.”
Cost-saving measures include job cuts initiated in 2025 and efforts to streamline production. The company is placing greater emphasis on efficiency at its manufacturing facilities, particularly at its plant in Hungary.
CEO Ola Kaellenius stated that despite a dynamic and difficult market environment, the company delivered results within its guidance range, supported by a focus on efficiency, speed, and operational flexibility.
Looking ahead to 2026, Mercedes-Benz expects group revenue to remain broadly in line with 2025 levels, while earnings before interest and taxes (EBIT) are projected to be significantly higher than the previous year.
