Mercedes-Benz Q1 2025 slides: Profits tumble 41% amid tariff concerns

Introduction & Market Context

Mercedes-Benz (OTC:MBGAF) Group AG (ETR:MBG) reported a steep decline in profits for the first quarter of 2025, with EBIT falling 41% year-over-year to €2.3 billion, according to the company’s Q1 2025 Capital Market Presentation held in Stuttgart on April 30, 2025. The luxury automaker’s shares have declined 1.8% to €54.09 following the announcement, reflecting investor concerns about the company’s performance and outlook.

The presentation revealed significant headwinds across most business segments, with particular challenges in sales volumes and profitability. Despite these challenges, the company maintained positive free cash flow and increased its net industrial liquidity position, demonstrating financial resilience amid difficult market conditions.

Quarterly Performance Highlights

Mercedes-Benz reported group revenue of €33.2 billion for Q1 2025, representing a 7% decline compared to €35.9 billion in the same period last year. Earnings per share fell 39% to €1.74, down from €2.86 in Q1 2024. One bright spot was the company’s free cash flow from industrial business, which increased 6% to €2.4 billion.

As shown in the following chart of key financial figures:

The Cars division, which represents the company’s largest business segment, saw unit sales decline 4% to 446,000 vehicles, with revenue falling 6% to €24.2 billion. The division’s adjusted EBIT dropped 24% to €1.8 billion, resulting in a return on sales of 7.3%, down from 9.6% in the prior year period.

Mercedes-Benz’s sales mix continued to shift toward higher-end vehicles, with the Top-End segment increasing to 15% of total volume from 14% a year earlier. However, battery electric vehicle (BEV) sales declined from 48,000 to 41,000 units, while plug-in hybrid (PHEV) sales increased slightly from 43,000 to 46,000 units.

The following chart illustrates these trends in the Cars division:

The Vans division experienced an even steeper decline, with unit sales dropping 21% to 83,000 vehicles and revenue falling 17% to €4.1 billion. Adjusted EBIT for Vans plummeted 41% to €0.5 billion, with return on sales decreasing dramatically from 19.1% to 5.6%. Despite these challenges, the share of electric vehicles in the Vans portfolio doubled from 3% to 6%.

Detailed Financial Analysis

A deeper analysis of the Cars division’s EBIT performance reveals that volume, structure, and net pricing had a negative impact of €1.026 billion, while foreign exchange rates contributed an additional €140 million decline. These negative factors were partially offset by €732 million in industrial performance improvements.

The following waterfall chart breaks down the drivers of the Cars division’s EBIT performance:

For the Vans division, volume, structure, and net pricing had a negative impact of €407 million, though this was partially offset by €95 million in industrial performance improvements. The division’s EBIT was further impacted by a €246 million adjustment, resulting in a reported EBIT of just €229 million.

Despite the profit challenges, Mercedes-Benz maintained strong cash flow conversion, with the Cars division achieving a cash conversion rate of 1.6. The company’s net industrial liquidity increased to €33.3 billion as of March 31, 2025, up from €31.4 billion at the end of 2024, providing a strong financial buffer against market uncertainties.

The following chart shows the drivers of the group’s net industrial liquidity:

Strategic Initiatives

Mercedes-Benz outlined several strategic initiatives to navigate the challenging environment. The company emphasized its focus on "mastering a dynamic environment" through five key areas: vigilance on tariff dynamics, leveraging localization potential in China and the US, continuing product offensive and technology stack development, accelerating cost efficiency initiatives, and maintaining financial resilience.

The company highlighted product developments including the CLA world premiere in China and the rest of world markets, progress on electric GLC winter testing, and advancements in software-defined vehicles with MB.OS ramp-up. The E-Class was awarded "Best Performer" by Euro NCAP, reinforcing the brand’s safety credentials.

As illustrated in the company’s strategic priorities:

Forward-Looking Statements

Mercedes-Benz has adjusted its guidance for 2025 to reflect additional tariff impacts. The company now expects group revenue to be "slightly below" the previous year, with group EBIT and free cash flow both "lower than before" due to tariff concerns.

For the Cars division, the company maintained its original unit sales guidance of "slightly below" 2024 levels, with a targeted electric vehicle (XEV) share of 20-22% and return on sales of 6-8%. However, the company noted that with additional tariffs, return on sales would be "lower than before" across divisions.

The following guidance chart illustrates the company’s expectations for 2025:

The group’s overall guidance, including tariff impacts, shows a more cautious outlook:

This guidance represents a significant shift from the company’s previous targets. In its Q4 2024 earnings call, Mercedes-Benz had targeted a 10-12% margin for 2024 and announced a €5 billion share buyback program. The current presentation makes no mention of the share buyback and shows margins well below the previous target range.

Mercedes-Benz faces significant challenges in 2025, including tariff pressures, competitive market conditions in China, and the ongoing transition to electric vehicles. Despite these headwinds, the company’s focus on premium positioning, cost efficiency, and financial resilience provides some stability as it navigates through this difficult period.

Full presentation:

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