Mercedes-Benz profits more than halved due to duties and China. What about the stock?

German premium car maker Mercedes-Benz reported a sharp drop in annual profit and warned of a challenging outlook amid global duties and increasing competition from Chinese manufacturers. The company's shares fell 2% after the report was published, but then recovered some of the losses.

Mercedes-Benz's operating profit collapsed 57% year-over-year to €5.8 billion, while analysts had forecast €6.6 billion, CNBC reports. The company explained that the results were affected by currency factors and falling sales in China due to high competition with local players, as well as the cost of duties in the amount of € 1 billion.

Mercedes-Benz's annual revenue for 2025 also declined - by about 9% to €132.2 billion. Analysts surveyed by FactSet had expected €133.4 billion, The Wall Street Journal reported.

The adjusted return on sales of the Mercedes-Benz Cars division at the end of 2025 amounted to 5%. The company specified that without the impact of duties this figure would have been 6.1%.

In 2026, according to the top management forecast, revenue will remain at the level of 2025, while the profitability of the automobile business will still be under pressure. The manufacturer promises to keep it in the range of 3-5%.

To maintain profitability, Mercedes plans to cut costs and reduce global production capacity by more than 10% to 2.2 million vehicles per year. At the same time, the automaker announced the launch of a number of new models: it intends to bring more than 40 new models to the market by 2027. In the medium term, Mercedes expects to increase deliveries of models in the upper price segment by more than 15% and expects the share of electric cars in the sales structure to double.

The company's shares fell by 2% at the trading in Munich on February 12, after which they recovered more than half of the losses. Since the beginning of the year, they have lost about 5.4%.

This year will be a test of Mercedes CEO Ola Kellenius' strategy to further push the brand into a more premium segment while shrinking the base model lineup, Bloomberg writes , which has boosted revenue per vehicle but made Mercedes more vulnerable to weakening demand for more expensive cars, especially electric cars.

Wall Street reacted calmly to the report: after the publication several analysts reiterated their recommendations on the company's shares. Jefferies maintained its neutral rating and target price at €65. This implies a potential upside of 12% relative to the close on February 11. Goldman Sachs still recommends buying Mercedes-Benz shares, believing that they could rise by 22%.

12 out of 24 analysts covering the automaker's shares are neutral on them. Ten took a bullish stance, while two suggested selling these securities.

This article was AI-translated and verified by a human editor