Mercedes-Benz Reports 28.4% Plunge in Annual Net Profit, Outlining German Industry Slowdown
Stuttgart, Germany – German carmaker Mercedes-Benz announced on Thursday a significant decline in its annual net profit for 2024, citing a drop in sales, particularly of its luxury models and in its key market of China.
The company’s net profit declined by 28.4% year-over-year to €10.41 billion in 2024, according to a statement, reflecting a broader slowdown in German industry, a cornerstone of Europe’s largest economy.
Sales and Profitability Slide
Mercedes-Benz projects a slight decline in sales for the current year, along with a reduced sales profitability. The company anticipates a 10% reduction in production costs by 2027 to boost its sales profitability margin, which dropped to just 8.1 points in 2024.
This decline marks a continuation of a downward trend, with the margin standing at 14.6% in 2022 and 12.6% in 2023.
Challenges in China, Luxury Market
Mercedes-Benz’s sales in China, its largest market, have been hit hard by economic headwinds and increased competition from domestic automakers. While the company remains a leader in the luxury segment, it has faced challenges from rivals such as BMW and Audi.
The global economic slowdown has also contributed to the decline in demand for luxury cars, as consumers become more cautious about major purchases.
Cost-Cutting Measures
In response to these challenges, Mercedes-Benz is implementing cost-cutting measures to improve its profitability. The company plans to reduce its fixed costs by €1 billion by 2025, while also streamlining its global production network.
Additionally, Mercedes-Benz is exploring opportunities to increase revenue through new business models, such as subscription-based services and software development.
Electric Vehicle Strategy
Amid the industry-wide shift towards electric vehicles (EVs), Mercedes-Benz is investing heavily in its EQ brand of EVs. The company plans to launch a range of new EV models in the coming years, with a goal of becoming all-electric by 2030.
However, the transition to EVs has also added to the company’s costs, with investments in battery technology, charging infrastructure, and new production lines.
Outlook for 2025 and Beyond
Mercedes-Benz remains optimistic about its long-term prospects, despite the current challenges. The company believes that its strong brand, technological innovation, and global presence will enable it to navigate the industry headwinds.
In 2025, Mercedes-Benz anticipates an improvement in its financial performance, driven by cost-cutting measures, increased sales of EVs, and a recovery in the Chinese market.
The company is also exploring new growth opportunities in emerging markets, such as India and Southeast Asia, to diversify its revenue streams.
