Mercedes-Benz Announces Cost-Cutting Measures Amid Electric Vehicle Sales Decline

Mercedes-Benz has embarked on a cost-cutting campaign as profits plummeted by almost a third due to a slowdown in its electric vehicle (EV) sales. The German automaker intends to reduce production costs by 10% by 2027 to maintain "the company's future competitiveness."

Despite a planned series of product launches, the company anticipates a significant decrease in profits this year. It also highlighted potential threats from tariffs imposed by Donald Trump.

Executives stated that earnings before interest, taxes, depreciation, and amortization (EBITDA) were expected to fall "well below" the €13.6 billion (GBP 11.3 billion) achieved in 2024, representing a 30% decline year-over-year. This occurred as EV sales plummeted by 23%, while sales in China, the company's largest single market, decreased by 7%.

Chief Executive Officer Ola Kallenius said: "In an increasingly uncertain world, we are taking steps to make the company leaner, faster, and stronger." Mercedes' profits dropped by 28% to €10.4 billion (GBP 8.6 billion) in 2024, while revenues declined by around 4% to €145.6 billion (GBP 121.4 billion).

Western EV manufacturers have struggled to compete with a flood of lower-priced Chinese-made EVs in Europe and the UK, leading to an escalating standoff between China and the European Union. The EU recently voted to raise tariffs on Chinese-made cars to as high as 45%.

China has expressed its commitment to seeking negotiations with the EU regarding tariffs on Chinese-made EVs. This comes as automakers worldwide face the risk of US tariffs, with President Trump suggesting tariffs on car imports of up to 25%.

Mercedes' Chief Financial Officer Harald Wilhelm cautioned that tariffs could reduce its profit margins by a percentage point this year, which are currently projected to range between 6% and 8% in 2025. Its profit margin fell to 8.1% in 2024, down from 12.6% the previous year.

Mercedes plans to address its declining profits with a program of new vehicle launches, beginning with the CLA. This will be followed by an upgrade of the S-Class in 2026, all-electric GLC and C-Class models, and a range of BEV and electrified high-tech ICE launches at Mercedes-AMG. The company expects overall sales to gain momentum as dozens of new or refreshed models enter the markets over the next two years, although it has reduced its car and van sales forecast for 2025.