Mercedes-Benz on Wednesday lowered its full-year car sales and profit margin forecasts, citing a nearly $420 million hit from U.S. tariffs in the second quarter and reduced global demand, particularly in China.
The German luxury carmaker now expects a 4% to 6% profit margin for its car division in 2025, down from a previously anticipated 6% to 8%, and said group revenue for both its car and van segments would be “significantly below” 2024 levels. The company had initially issued its guidance in February but withdrew it in April as trade tensions escalated.
The downward revision comes as the U.S. implements higher import duties on European goods. A new trade agreement between the U.S. and the European Union set a 15% import tariff on most EU products—half the initially threatened rate—but still imposed substantial costs on major car exporters.
In the second quarter, Mercedes-Benz said the tariff impact reduced its adjusted operating profit margin by 150 basis points, equal to 362 million euros ($418 million). The company’s adjusted operating income fell by more than half to 1.99 billion euros ($2.30 billion), while reported EBIT dropped further to 1.27 billion euros, affected by the tariff burden, restructuring costs, and the sale of a plant in Argentina.
Revenue declined by 9% to 33.15 billion euros, driven by lower vehicle sales and tariff-related headwinds. In China, a key market for the company, unit sales dropped 10% year-on-year in the first quarter and 19% in the second quarter.
While Mercedes operates a major manufacturing plant in Tuscaloosa, Alabama, and remains one of the largest car exporters from the U.S. to Europe, it still relies heavily on vehicles imported from Europe to serve the American market. The company warned that the outlook for potential car-specific trade agreements with the U.S. remains “very uncertain.”
The announcement mirrors broader challenges facing European automakers this year. Porsche, part of the Volkswagen Group, also cut its annual profitability outlook on Wednesday due to similar pressures.