Mercedes-Benz has reported a drop of more than 50 percent in operating profits for 2025, reflecting mounting pressure from U.S. tariffs and intensifying competition in the Chinese automotive market.
The German luxury car manufacturer described 2025 as a challenging year, marked by geopolitical trade tensions and aggressive pricing strategies from Chinese electric vehicle (EV) makers. The combination significantly eroded margins across key global markets.
Industry analysts say U.S. tariff policies increased export costs and disrupted supply chains, while in China, one of Mercedes’ largest and most profitable markets, local EV manufacturers expanded market share with lower-priced, technologically advanced alternatives.
The sharp decline in operating profit underscores broader headwinds facing European automakers, particularly those navigating the transition to electric mobility while managing global trade uncertainty. Rising production costs, investments in electrification and digitalisation, and weaker demand in certain regions also contributed to financial strain.
Mercedes has been accelerating its electric vehicle strategy in recent years, aiming to strengthen its presence in the premium EV segment. However, analysts note that profitability in the EV space remains under pressure due to price competition and high development costs.
Despite the downturn, the company has indicated it remains focused on cost optimisation, strategic restructuring and expanding its electric portfolio to regain momentum in 2026.
The earnings slump highlights the shifting dynamics of the global automotive industry, where legacy manufacturers face growing disruption from new entrants and rapidly evolving consumer demand.
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