Summary
- Pretax profit sinks 17% in Q1 but beats expectations
- China sales slump deepens as EV rivals gain ground
- Cost cuts continue with car margins near lows
BERLIN, (Reuters) – Mercedes-Benz reported a sharp 17% drop in operating profit in the first quarter, but the premium carmaker said new model launches and cost controls should lift momentum even as competition and tariffs squeeze margins, especially in China.
Tariffs, fierce China competition and a rocky EV transition have impacted German carmakers like Mercedes, spurring CEO Ola Kaellenius to cut costs and jobs while accelerating new model launches.
The automaker reported earnings before interest and tax (EBIT) of 1.9 billion euros ($2.22 billion) in the quarter on Wednesday, down 17% on the year.
RESULTS ‘SOLID’ DESPITE PROBLEMS IN CHINA
The result still beat the average analyst estimate of 1.6 billion euros, according to a poll conducted by Visible Alpha.
Shares were indicated 2.2% higher in premarket trading.
Chief Financial Officer Harald Wilhelm said the company was on track to reach its guidance of 2026 group EBIT “significantly above” last year’s 5.8-billion-euro result.
“Strong demand for our new products and healthy order books position us well for improved momentum in the second half of the year,” Wilhelm said.
Mercedes is launching 40 new models between 2025 and 2027, including the all-electric CLA sedan in its entry-level segment and a revamped S-class range to defend its status as a top luxury brand in China.
The finance chief said the company would maintain tight cost controls while aiming for a cautious return to higher margins in its core car business, with a mid-term target of 8-10%.
First-quarter margins slipped to 4.1%, down from 7.3% a year earlier, but within the expected full-year range of 3-5%.
Bernstein analysts called it a “solid set of results,” even as China continued to cause problems.
Mercedes’ sales decline in the world’s largest auto market worsened to a 27% drop in the first quarter.
Lower-cost local brands like BYD and Nio are making moves on the premium market in the region, pressuring Mercedes and German rival BMW.
($1 = 0.8543 euros)
Reporting by Rachel More; Editing by Harikrishnan Nair and Bernadette Baum
