Mercedes-Benz trims profit margin forecast due to $420 million US tariff impact

Reuters

6 days ago

July 30 (Reuters) - Mercedes-Benz (MBGn.DE), opens new tab trimmed its annual car sales and profit margin forecasts on Wednesday, flagging a nearly $420 million impact from U.S. tariffs in 2025.
The German luxury carmaker said it expects a profit margin of 4% to 6% for its car business this year and annual group revenue "significantly below" 2024 levels, both for its cars and vans, factoring in the impact of tariffs.
The company had said in February, prior to the U.S. tariff changes, that it expected the profit margin for its car division to be 6-8% this year, after earnings fell 30% in 2024, with a 40% slump in the car business. It withdrew that guidance in April.
Excluding tariffs, the unit's margin outlook would have been at the lower end of the original guidance, it said on Wednesday.
Mercedes shares were down 1.5% in early Frankfurt trading.
The result reflect the wider repercussions of Trump's tariff policy, which has seen European carmakers hit with higher U.S. import taxes this year. Volkswagen's luxury brand Porsche (P911_p.DE), opens new tab cut its full-year profitability target on Wednesday.
The U.S. struck a framework trade agreement with the EU on Sunday, imposing a 15% import tariff on most EU goods - half the threatened rate - and averting a bigger trade war between the two allies that account for almost a third of global trade.
Mercedes halved its expectations for the impact of tariffs on its car business margin to about 150 basis points, a company spokesperson said. That would result in a tariff effect of 362 million euros ($418 million) on the division's adjusted operating profit (EBIT) in 2025.
Chancellor Friedrich Merz welcomed the trade deal, which averted a trade conflict that would have hit Germany's export-driven economy and its large auto sector hard.
Mercedes is among the most significant beneficiaries of the U.S.-EU trade deal due to its greater share of imports into the U.S. from Europe than from Mexico or Canada, Morningstar analysts wrote in a research note on Monday.
It also produces cars in its U.S. plant of Tuscaloosa, Alabama.
The company's second-quarter adjusted operating income more than halved to 1.99 billion euros ($2.30 billion).
The impact of tariffs, efficiency measures and a 750 million euro impact from the sale of a plant and restructuring in Argentina lowered its reported EBIT, or operating profit, even further to 1.27 billion euros, it said in a statement.
Its revenues dropped 9% to 33.15 billion euros on lower car and van sales, as well as the impact of tariffs.
Sales and operating profit figures were "no surprise", Jefferies said in a note, pointing to lower volume and price and sales in China.
Unit sales in China decreased by 10% and 19% respectively in the first and second quarters of 2025 compared to last year, it had said earlier this month.
The company and other German carmakers face a decline in China due to intensifying local competition.
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