Sharp Decline in Annual Profit

Luxury car manufacturer Mercedes-Benz reported on Thursday a steep decline in its full-year profit, warning of challenging times ahead in 2026 after a year marked by intense competition from Chinese rivals and global tariff costs.

The company posted an annual operating profit of €5.8 billion ($6.9 billion) in 2025, a 57% drop compared to the previous year, significantly below analyst expectations of €6.6 billion. Mercedes-Benz said results were shaped by foreign currency headwinds, competition in China, and reported tariff costs of €1 billion ($1.2 billion).

“In a dynamic market environment, our financial results remained within our guidance thanks to a sharp focus on efficiency, speed, and flexibility,” said Ola Källenius, Chairman of the Board of Management of Mercedes-Benz Group.

Market Challenges and Global Pressures

The results come as European automotive giants face rising production costs, supply chain disruptions, regulatory pressures, and the complex transition to electric vehicles.

The company’s stock, traded on the Munich Stock Exchange, fell about 2% during morning trading, partially offsetting previous losses, after dropping roughly 7% year-to-date.

Looking Ahead

For 2026, Mercedes-Benz plans further cost reductions and a series of product launches, aiming for a targeted sales margin of 3–5%, down from the 5% growth reported in 2025. Revenue is expected to remain in line with the previous year, while group EBIT is projected to be “significantly above” last year’s level.

The company’s industrial free cash flow is expected to be slightly below the 2025 level of €5.4 billion, reflecting cautious expense management amid ongoing global challenges.