S&P revises Mercedes-Benz outlook to negative amid sales decline

S&P Global Ratings revised Mercedes-Benz's outlook to negative while affirming its 'A/A-1' ratings, citing challenging growth prospects and expected credit metric deterioration through 2026. This stems from a 6% decline in H1 2025 wholesale unit sales, notably a 14% drop in China, alongside intensifying EV competition and new U.S.-EU import tariffs estimated at up to €2.1 billion annually. S&P projects adjusted EBITDA margins to dip to 9-10% in 2025-2026 due to these pressures, including R&D for new models, though a recovery to above 11% is anticipated in 2027.

Analysis

S&P Global Ratings has revised its outlook on Mercedes-Benz to negative, signaling elevated risk to its 'A/A-1' credit rating over the next two years. This revision is underpinned by a confluence of material headwinds, most notably a significant 6% decline in wholesale unit sales in the first half of 2025, which outpaces S&P's full-year forecast of a 2-3% drop. The weakness is geographically concentrated in China, where sales plummeted 14% year-on-year, but also extends to North America and Europe. Compounding this volume pressure, the company faces intensifying competition from Chinese EV startups like Xiaomi, Xpeng, and Li Auto, which are eroding the market for legacy premium brands with lower-priced models. Furthermore, new U.S.-EU import tariffs of 15% are projected to create a substantial cost burden, estimated by S&P at up to €2.1 billion in 2026. Mercedes-Benz also appears to be lagging its German peers in the critical European EV market, with its BEV sales down 7% year-to-date. Consequently, S&P projects adjusted EBITDA margins will compress to 9-10% in 2025-2026, with a potential recovery to above 11% only materializing in 2027, contingent on the success of its new MB.EA electric platform models.

Key Decisions for Investors

• Investors should anticipate continued pressure on Mercedes-Benz's profitability and stock performance through 2026 due to declining sales volumes, significant tariff costs, and a challenging model transition period.
• Closely monitor sales data from China and the company's BEV market share in Europe, as a failure to stabilize these metrics could signal a potential credit downgrade and further downside risk.
• For those with a longer-term horizon, the 2026 launch of the new electric GLC and C-class models on the MB.EA platform is a key inflection point to watch for a potential turnaround and margin recovery in 2027.
• Consider the competitive landscape as a primary risk factor, specifically tracking the market penetration and pricing of models from Xiaomi, Xpeng, and Li Auto in the premium segment.