German luxury automaker Mercedes-Benz Group has reported a sharp decline in full-year profits for 2025, highlighting the combined impact of global tariff costs, currency fluctuations, and rising competition in key markets such as China. The company posted an operating profit of 5.8 billion euros (approximately US$6.9 billion), a 57 percent drop from the previous year and below analyst expectations of 6.6 billion euros (US$7.9 billion).
Mercedes-Benz attributed a significant portion of the earnings decline to tariffs, which cost the company around 1 billion euros (US$1.2 billion) in 2025. These trade-related expenses underscore the broader challenges facing global automakers amid ongoing geopolitical tensions and trade disputes that affect supply chains and pricing.
Chairman of the Board of Management Ola Källenius said the results came in “amid a dynamic market environment” but added that the company’s financial performance remained within its guided expectations. Despite the drop in profit, Mercedes-Benz emphasized that it continues to execute its strategic initiatives, including electrification of its vehicle lineup, technological innovation, and expansion in high-growth regions.
Shares of Mercedes-Benz Group reacted to the results with a decline of over 4 percent in morning trading, reflecting investor concerns about sustained margin pressures and the competitive landscape. The company faces intensified rivalry in the Chinese market, where local automakers such as BYD, Nio, and XPeng are gaining market share with competitively priced vehicles and advanced electric mobility solutions.
Foreign exchange headwinds also played a significant role in the earnings contraction. Mercedes-Benz operates in over 100 countries, with revenues and costs denominated in multiple currencies. Fluctuations in exchange rates, particularly the weakening of the euro against major trading currencies, reduced the value of international earnings when converted to euros, further impacting profitability.
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The US$1.2 billion tariff-related loss reflects a broader trend of rising trade barriers that have affected global auto manufacturers. Tariffs imposed on imported vehicles and components in key markets, including China and the United States, have added costs that cannot always be passed directly onto consumers, squeezing margins in an already competitive market.
Despite these pressures, Mercedes-Benz remains committed to its long-term transformation strategy. The company continues to invest heavily in electric vehicles (EVs), autonomous driving technologies, and connected services, aiming to maintain its position as a leader in the luxury automotive sector. The group’s EV portfolio, including the EQ line of electric vehicles, is central to its growth ambitions as demand for cleaner, sustainable mobility increases globally.
Källenius highlighted that while the past year was challenging, the company is well-positioned to navigate market fluctuations and emerging opportunities. “We continue to execute on our strategy to deliver innovative, premium products while managing costs and adapting to market dynamics,” he said.
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Looking ahead, Mercedes-Benz faces continued uncertainty in key international markets. Analysts note that trade tensions, currency volatility, and intensifying competition could weigh on earnings in 2026, even as the company invests in product development and digitalization. The luxury segment remains resilient, but margin pressures from tariffs and price competition are likely to persist, requiring careful management of production costs and operational efficiency.
In summary, Mercedes-Benz’s 2025 results reflect a challenging operating environment characterized by US$1.2 billion in tariff costs, stiff competition in China, and adverse foreign exchange movements. While full-year profits more than halved, the company is pursuing strategic initiatives to strengthen its global position, expand its EV lineup, and adapt to evolving market conditions, aiming to deliver sustainable growth in the years ahead.
