German automaker’s annual profit plummets 49% as US tariffs and Chinese market competition take heavy toll.

Mercedes-Benz has reported its lowest annual profit since the COVID-19 pandemic, with earnings down 49% as the luxury automaker grapples with mounting challenges from US tariffs and intensifying competition in China, one of its most critical markets.

The dramatic profit decline marks a significant setback for the German manufacturer, which had been recovering from pandemic-era disruptions only to face a new wave of headwinds that have reshaped the global automotive landscape. The results underscore the mounting pressures facing traditional luxury carmakers as they navigate trade tensions and shifting market dynamics.

US tariffs have emerged as a major burden for Mercedes-Benz, adding substantial costs to vehicles exported to the American market, which represents a key source of high-margin sales for the brand. The trade measures have forced the company to absorb costs or pass them on to consumers, either of which has impacted profitability and competitiveness.

Meanwhile, the Chinese market—historically a profit engine for Mercedes-Benz—has become increasingly challenging as local manufacturers ramp up production of competitive electric and luxury vehicles. Chinese brands have gained ground with technologically advanced offerings at lower price points, forcing established European automakers to cut prices and offer incentives to maintain market share.

The dual pressures from tariffs and Chinese competition have created what executives describe as an exceptionally difficult operating environment. Mercedes-Benz has been investing heavily in electric vehicle development and digital technologies to stay competitive, but these expenditures have further strained margins during a period of weakened sales performance.

Industry analysts note that Mercedes-Benz’s struggles reflect broader challenges facing the global automotive sector, particularly European luxury brands that have traditionally relied on strong performance in the US and China. The company’s results may signal tough times ahead for competitors facing similar market conditions.

Mercedes-Benz has indicated it will continue restructuring efforts and accelerate its electric vehicle transition, though company officials acknowledge that near-term profitability will likely remain under pressure as these strategic shifts take time to yield results.