German luxury carmaker Mercedes-Benz has reported a steep drop in profit for the third quarter of 2025, citing sluggish sales in China and the negative impact of U.S. tariffs.
According to figures released Wednesday, net profit fell 30.8% to €1.19 billion ($1.38 billion) — a significant decline from the previous year but still slightly above analyst expectations of €1.09 billion, according to data compiled by FactSet.
Mercedes-Benz CEO Ola Källenius described the results as “in line with full-year guidance” but acknowledged the mounting challenges the automaker faces amid shifting global trade dynamics.
Trade Tensions and Tariffs Weigh on Performance
In July, Mercedes-Benz revised its annual outlook downward following the escalation of trade tensions under U.S. President Donald Trump’s tariff policies. The company now expects its 2025 revenue to be “significantly below” the €146 billion it earned last year.
Under a new EU-U.S. trade agreement unveiled in July, European car exports to the United States are now subject to a 15% tariff — down from 27.5%, but still much higher than the 2.5% rate in place before Trump launched his trade war in April.
In addition, the company must navigate 25% U.S. duties on imported car parts from outside North America, a policy that has particularly affected its Tuscaloosa, Alabama plant, which relies on global supply chains.
China Sales Drop as Competition Intensifies
The automaker’s struggles were compounded by a 27% drop in sales volume in China, its largest global market. The downturn in China — the world’s biggest car market — dragged overall global sales down 12% during the quarter.
China’s auto market has become increasingly competitive, with local electric vehicle (EV) makers like BYD and other domestic brands waging an aggressive price war that has squeezed foreign automakers. Mercedes-Benz, BMW, and Audi have all faced pressure to cut prices or risk losing market share.
Outlook: Challenges Ahead
Despite the disappointing results, Mercedes-Benz executives say they remain confident in the company’s long-term strategy, pointing to ongoing investments in electric mobility, software innovation, and automation.
“Our third-quarter results are in line with our full-year guidance,” Källenius stated. “However, global headwinds — from tariff measures to slowing demand in key markets — continue to weigh on the broader automotive sector.”
As competition in China intensifies and trade barriers persist in the United States, analysts warn that Mercedes-Benz could face another tough year, especially as EV adoption accelerates and global supply chains remain unstable.
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