Mercedes-Benz Profits Slide 43% in Q1

China Slowdown and Pricing Pressures Hit Sales

Key Highlights:

• Net profit falls by 43% year-on-year
• Weak sales in China and Europe drag down earnings
• Electric vehicle (EV) sales decline despite rising investment
• Mercedes-Benz warns of continued pressure in 2025
• Free cash flow and net liquidity improve despite profit drop

Mercedes-Benz Sees Sharp Decline in Q1 Profits

Mercedes-Benz Group has reported a 43% drop in net profit for the first quarter of 2025, citing weaker global demand, reduced vehicle pricing, and a sluggish performance in China as key reasons for the downturn.

The German carmaker posted a profit of €1.73 billion, down from €3.03 billion a year earlier. Revenue also fell by 7% to €33.22 billion, and earnings before interest and taxes (EBIT) dropped to €2.29 billion, from €3.86 billion.

Lower Vehicle Sales and Pricing Impact Margins

Vehicle deliveries were down overall, with Mercedes-Benz Cars reporting a 4% drop in unit sales to 446,300 vehicles. Sales in both Europe and China fell, though the North American market showed a modest uptick.

The company also faced challenges with electric vehicle sales. While electrified vehicles made up 19.5% of total car sales (unchanged from a year ago), battery-electric vehicle sales dropped by 14%, though plug-in hybrid sales increased by 8%.

Commercial Vans Take a Hit

The Mercedes-Benz Vans division also struggled, posting a 21% decrease in deliveries to 82,943 units. This was due to a drop in commercial van sales, although private van sales saw a small rise. Electrified vans showed growth, accounting for 5.7% of total van sales, up from 2.8% a year earlier.

Revenue in the vans segment declined by 17% to €4.08 billion, and adjusted EBIT plunged by 41% to €475 million. The division’s adjusted return on sales also dropped significantly, falling from 16.3% to 11.6%.

Mixed Results in Other Segments

The Mobility division remained relatively stable, reporting an EBIT of €287 million, although new business volumes fell 8% to €13.62 billion. The return on equity was flat at 8.6%.

Spending on research and development rose by 5% to €2.32 billion, while capital investment increased by 4% to €685 million, reflecting ongoing investment in future technologies and sustainability efforts.

Cash Flow and Liquidity Improve

Despite falling profits, Mercedes-Benz reported some positive news. Free cash flow in the industrial business rose 6% to €2.36 billion, and net liquidity in the same segment increased to €33.33 billion. The company also reduced its net debt from €90.94 billion to €84.23 billion, helping strengthen its financial position.

Outlook: More Pressure Ahead

Looking ahead, the company warned that economic and geopolitical uncertainty is expected to continue affecting performance. Mercedes-Benz said it anticipates further pressure on earnings, returns, and cash flow for the remainder of 2025, particularly as the Chinese market—an important growth engine—remains subdued.

Conclusion

Mercedes-Benz is navigating a challenging economic environment, with declining sales in key markets and pricing pressures hurting profitability. While its financial discipline and improved liquidity provide some stability, the company faces a tough road ahead, especially in the EV space where competition continues to intensify. With China’s slowdown and trade tensions still unresolved, 2025 is shaping up to be a difficult year for the German automotive giant.

Sources: (Investing.com, Reuters)