Mercedes-Benz has reported a sharp 43% year-on-year decline in net profit for the first quarter of 2025, falling to €1.73 billion from €3.03 billion in Q1 2024. The downturn has been driven by a combination of weaker global vehicle demand, pricing pressures, and slowing growth in the Chinese automotive market.
Strategic Restructuring Underway
In response to these financial setbacks, the German automaker is restructuring its production strategy. The company plans to reduce capacity in Germany and shift some manufacturing operations to lower-cost countries like Hungary. Mercedes-Benz also announced it will increase local production in key markets such as the United States and China, aiming to boost domestic output from 60% to 70%.
Revenue and Sales Performance
Total revenue for the quarter dropped 7% to €33.22 billion. Vehicle sales fell 4% to 446,300 units. While plug-in hybrid sales rose by 8%, battery-electric vehicle deliveries dropped 14%, indicating inconsistent traction in the EV market. The commercial van segment was particularly affected, with a 21% drop in deliveries and a 41% decline in adjusted EBIT.
Financial Indicators
- Earnings Before Interest and Taxes (EBIT) dropped 41% to €2.29 billion.
- Adjusted EBIT declined 29% to €2.55 billion.
- Earnings per share decreased from €2.86 to €1.74.
- Free cash flow rose 6% to €2.36 billion, supported by cost containment.
- Net debt decreased to €84.23 billion, while liquidity increased to €33.33 billion.
Increased Investment Despite Challenges
Despite the downturn, Mercedes-Benz increased research and development spending by 5% to €2.32 billion and raised capital investments by 4% to €685 million, reaffirming its long-term focus on innovation and product development.
Shift in Product Strategy
Mercedes-Benz is adjusting its future product roadmap by planning to launch 19 new internal combustion engine vehicles alongside 17 electric models by 2027. This strategy aims to balance profitability with environmental targets, emphasizing premium models with higher margins.
Cautious Outlook Ahead
The company has withdrawn its full-year earnings guidance, citing global economic uncertainty, potential shifts in U.S. trade policy, and continued softness in the Chinese market. Executives remain cautious but assert that strategic cost-cutting and operational shifts will stabilize performance in the medium term.
Reporter