High drop in profits

Mercedes wants to expand and save at the same time

Mercedes demands "fighting spirit" from employees against the crisis.

(Bild: THOMAS KIENZLE/AFP)

The German car manufacturer Mercedes-Benz wants to stop the rapid decline in profits with savings and new models. After a 31 percent slump in operating profit last year, the DAX-listed company expects a further significant decline in 2025. 

Mercedes is also only launching a few new models on the market this year and has to invest heavily in renewing its range. Mercedes boss Ola Källenius announced "the biggest product offensive in decades" in Sindelfingen on Thursday. However, it will not pick up speed until 2026. By the end of 2027, 37 new car models are to be launched on the market, almost half of which will be e-cars.

Källenius is also putting the brakes on costs. Ten percent savings are to be made in production alone by 2027. "We are looking at our entire business model and every cost category," said the manager. "To ensure the future competitiveness of the company in an increasingly volatile world, we are taking measures to make the company leaner, faster and stronger."

Job cuts in Germany too
Källenius did not initially name an absolute savings volume. According to insiders, it amounts to 5 billion euros by 2027 and will involve job cuts. A van plant in Argentina will be sold and, if necessary, further capacity will be reduced. The approximately 166,000 employees worldwide are to take on the competition "with a fighting spirit" and not rest on their laurels. "When new animals enter the jungle, we have to be prepared."

Källenius wants to roll up his sleeves.

(Bild: AFP)

CFO Harald Wilhelm said that Mercedes would not close any plants in Germany, but would reduce production capacity and also cut jobs. With a drop of 2.9 percent, the Mercedes share was the biggest loser on the DAX.

More production "in China for China"
A decline in sales in the most important market, China, and the weakness in Europe caused the DAX-listed company to suffer a 31 percent drop in profits to 13.6 billion euros. The adjusted return on sales in the main passenger car segment fell by 4.5 percentage points to 8.1 percent, while profits in the smaller vans segment also shrank.

The result is therefore in line with the forecast, which the DAX-listed company had to lower twice last year. Källenius spoke of a solid result in a very challenging market environment. In China, where the car manufacturer sold eight percent fewer vehicles last year, competition remains more intense than anywhere else. Mercedes must also cut costs there and better meet the expectations of tech-savvy customers. More models are therefore to be produced locally.

Forecast remains gloomy
The situation will hardly improve in the current year: sales and turnover are again expected to be slightly below the previous year. Last year, the Group's revenue fell by 4.5 billion euros to 145.6 billion euros, while passenger car sales shrank by three percent to 1.98 million vehicles. After strong growth in previous years, the van division sold nine percent fewer vans and vans. Mercedes sold fewer highly profitable luxury cars to customers and had to make concessions on prices after they had risen sharply in previous years - by 40 percent to an average of 71,000 euros since 2019.

Investors will also notice the cost-cutting measures.

(Bild: AFP)

Dividend to fall
The outlook for 2025 is not only gloomy due to the weak car economy and the threat of import tariffs in the USA, the brand with the three-pointed star is also only launching a few new models. The compact electric car CLA, for example, is set to score points with its long range, fast charging and new digital functions. The Swabians ran out of steam during the ramp-up with electric cars last year, as the EQS luxury saloon, among other things, was poorly received. The lesson learned from this is to bring the design of electric cars back into line with that of the combustion engine world.

At the bottom line, the Stuttgart-based company earned 10.4 billion euros, 28 percent less than in the previous year. The dividend is therefore to be reduced by one euro to 4.30 euros. At the same time, the DAX-listed company announced a further share buyback program with a volume of five billion euros.