Mercedes, Porsche Cut Forecasts as US Tariffs Hammer German Cars
The two German manufacturers on Wednesday flagged the twin pressures of new US tariffs and intensifying competition in China, where an electric-vehicle price war is undermining demand for pricier models.
Mercedes now expects its carmaking margin to slide as low as 4%, from at least 6% previously, as the duties weigh on pricing and sales. Porsche, which lacks a US factory, cut its outlook for the third time this year after Trump's deal on Sunday with the European Union slapped 15% tariffs on autos imported from the bloc.
Aston Martin Lagonda Global Holdings Plc also walked back forecasts on Wednesday, a day after Stellantis NV warned that the US duties will weigh on the Jeep maker's already struggling North American business.
The mounting trade barriers are adding to a structural shift in China, where a fierce EV price war led by local brands including BYD Co. is eroding margins. Porsche and Mercedes have struggled to gain traction in the world's biggest auto market with their more premium models like the Taycan and the EQS, the battery-powered version of Mercedes' flagship S-Class limousine. Meanwhile, Chinese automakers such as BYD and Geely are pushing into Europe's stagnant car market.
'We continue to face significant challenges around the world,' Porsche Chief Executive Officer Oliver Blume said. 'And this is not a storm that will pass.'
The sports-car maker controlled by Volkswagen AG is trying to get back on its feet by replacing several top managers, slashing costs further — including through job cuts — and adding more combustion-engine and plug-in hybrid models.
The US recently overtook China as Porsche's single biggest market, but the company has no local factory and imports all of the cars it sells there from Europe. One of several options being considered as part of parent Volkswagen's US production expansion is final assembly of Porsche models there, Bloomberg previously reported. Mercedes plans to shift production of the GLC SUV to the US to offset the charges.
For Mercedes, the headwinds are undermining a strategy initiated in 2022 to bolster profitability by shifting further upmarket. The company is prioritizing its most lucrative offerings — such as Maybach limousines, AMG performance models and the G-Wagon — while scaling back lower-margin entry-level cars like the compact A-Class.
But the US duties and the poor China performance are weighing on Mercedes' pricing and sales, and the company warned that group revenue for 2025 will come in significantly below last year's level. In the second quarter, Mercedes' automaking margin dropped to 5.1% — well below levels associated with the luxury push started by CEO Ola Källenius. The company also flagged weaker demand for vans and declining revenue in its mobility services division as drags on performance.
Mercedes shares declined as much as 2% in Frankfurt. The stock is down around 1% this year. Porsche rose 2.3% as of 10:12 a.m. local time as analysts pointed to better-than-expected revenue and cash flow. The company's shares are still down more than a fifth this year.
Porsche flagged that its return on sales for the year could slide as low as 5%, having previously targeted at least 6.5%. The updated forecast includes the US tariff hit and roughly €1.3 billion of costs related to the brand's strategic reset.
Mercedes and Porsche are among automakers most exposed to trade friction. They faced a 27.5% levy on vehicles exported from the EU to the US for much of the second quarter. Mercedes also exports SUVs built at its Alabama plant to China, where they incurred duties exceeding 100% before a mid-May trade truce reduced the rate to about 35%. The German company earlier this year withdrew its guidance in response to Trump's trade moves and on Wednesday reinstated it.
Without the impact of tariffs, Mercedes' carmaking margin would remain within the prior 6% to 8% guidance range, the company said. Profitability also got hit by restructuring measures, including a voluntary redundancy program for back-office staff and the sale of its van operations in Argentina.
With assistance from Jamie Nimmo and Craig Trudell.
This article was generated from an automated news agency feed without modifications to text.
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