Mercedes-Benz forecasts car business profit margin at 4% to 6% for 2025

Mercedes-Benz has significantly lowered its profit margin forecast for its car business this year to 4-6% from an earlier 6-8%, attributing the revision to the impact of U.S. trade tariffs. The German luxury automaker reported a more than halved second-quarter adjusted operating income of €1.99 billion and anticipates annual group revenue "significantly below" 2024 levels for both its car and van divisions, highlighting the substantial financial repercussions of trade tensions on the automotive sector.

Analysis

Mercedes-Benz has issued a significant profit warning, lowering its full-year profit margin forecast for its core car business to a range of 4% to 6%, a material reduction from the 6-8% guidance provided in February. The company explicitly attributes this revision to the financial impact of U.S. trade tariffs, crystallizing the risk that led it to withdraw its initial forecast in April. This negative outlook is substantiated by a severe decline in second-quarter performance, where adjusted operating income was more than halved to €1.99 billion due to the combined effects of tariffs and a divestment in Argentina. The pressure is not isolated to margins, as the company also anticipates that annual group revenue for both its cars and vans businesses will be "significantly below" 2024 levels, signaling broad-based top-line deterioration and fundamental weakness directly linked to geopolitical trade disputes.

Key Decisions for Investors

• Given the material downward revision in both profit margin and revenue guidance, investors should adopt a cautious stance and re-evaluate their exposure to the company.
• The primary risk identified is geopolitical, meaning positions should be managed with close attention to developments in U.S. trade policy and its direct impact on the automotive sector's supply chain and profitability.
• Investors should scrutinize upcoming earnings reports for any signs of margin stabilization, as the current forecast implies significant and sustained pressure on profitability.
• Valuation models for Mercedes-Benz must be updated to reflect the new, lower earnings and revenue base projected by the company for the full year.