Automotive News Europe — 2025-07-30
Automotive Industry
Mercedes-Benz lowered its guidance for the year, citing pressure from President Donald Trump’s tariffs and tough competition in China, where local brands are dominating on electric vehicles.
The automaker now expects a car-making margin of as low as 4 percent this year, below the at least 6 percent it had projected before withdrawing its outlook due to Trump’s trade moves.
The tariffs are weighing on prices and sales, and Mercedes warned that group revenue will come in significantly below last year’s level.
The mounting trade hurdles add to a deeper structural challenge in China, where a fierce EV price war led by domestic automakers is hurting margins.
Mercedes has struggled to gain traction there with its more expensive models such as the EQS, the battery-powered version of its flagship S-Class sedan. Meanwhile, Chinese automakers such as BYD are expanding aggressively into Europe’s stagnant car market. Peers including Porsche and Audi also lowered their outlooks.
Mercedes’ luxury push is becoming harder
The headwinds are testing the viability of Mercedes’ luxury-first strategy, started in 2022 to boost profitability by shifting further upmarket. The company is prioritizing its most lucrative offerings — such as Maybach limousines, AMG performance models and the G-Wagon — while scaling back lower-margin entry-level cars like the compact A-Class.
But those structural challenges are making it harder to hit the higher automaking margins associated with the luxury push. In the second quarter, the figure dropped to 5.1 percent after unit sales fell 9 percent. The company also flagged weaker demand for vans and declining revenue in its mobility services division as drags on performance.
Mercedes is among the automakers most exposed to trade friction. It faced a 27.5 percent levy on vehicles exported from the European Union to the U.S. for much of the second quarter. In addition, SUVs built at its Alabama plant and exported to China were hit with duties exceeding 100 percent before a mid-May trade truce reduced the rate to about 35 percent.
Mercedes earlier this year withdrew its guidance in response to Trump’s trade moves and on July 30 reinstated it.
Without the impact of tariffs, Mercedes’ carmaking margin would remain within the prior 6 percent to 8 percent guidance range, the company said. Profitability also got hit by restructuring measures, including a voluntary redundancy program for back-office staff and the sale of its van operations in Argentina.