Rough waters at Mercedes: in 2025, profit fell by 48.8%, from €10.4 billion to €5.33 billion, while revenue dropped by 9.2%, from €145.59 billion to €132.21 billion. And 2026 is shaping up to be another challenging year despite an avalanche of new models.
2025 marked yet another year of declining sales and profits for Mercedes. Ola Källenius’s strategy of focusing on the luxury segment, mistakes in the development of the EQE/EQS and the electric lineup in its early phase, new U.S. tariffs, and declining sales in China have created a tsunami that continues to hit Mercedes’ profits and sales.
While the 9% drop in sales in 2025, down to 1,800,800 units, and the 9.2% decline in revenue to €132.21 billion are concerning, the 48.8% plunge in profits is a major alarm signal. In practical terms, Mercedes’ profit was cut in half in 2025, from €10.4 billion in 2024 to just €5.33 billion in 2025.
And 2026 is expected to be a complicated year despite being the first full sales year for the new CLA and the launch of numerous new models, including the new GLC EQ, C-Class EQ, electric AMG GT 4-Door Coupe, VLE, S-Class Maybach, GLE/GLE Coupe, and GLS.
The new Mercedes CLA, especially the electric version, has been very well received in Europe, where demand is high and delivery times stretch to several months. However, in China, sales figures are disappointing despite its attractive pricing there. Oliver Thöne (42), the new and young member of the Mercedes-Benz Group Board of Management since February 1, 2025, responsible for the Chinese market, says that in China the CLA plays only the role of a niche model.
Ola Källenius also remains cautious regarding the Chinese market, even though Mercedes is preparing seven new models tailored specifically for China in 2026, including the new long-wheelbase Mercedes GLE. Despite this, sales are not expected to return to an upward trend in China, and Mercedes estimates that sales will continue to decline in 2026. In 2025, 551,000 units were sold there. In the long term, Mercedes hopes for stabilization between 500,000 and 600,000 units.
Besides China, another issue has arisen in the U.S. due to tariffs imposed by the Trump administration. Chief Financial Officer Harald Wilhelm estimates that the new tariffs cost Mercedes around €1 billion—about 20% of its 2025 profit. In 2026, the amount will be even higher because in 2025 the tariffs were not applied from the beginning of the year.
On the other hand, Mercedes has better chances of returning to profitability in the U.S. than in China. While Donald Trump is seen as the negative figure regarding tariffs, he also plays a positive role by encouraging traditional gasoline engines. In the U.S., combustion-engine models hold an 85% market share.
Of the 40 new Mercedes models to be launched by 2027, in the Core and Top-End segments 11 will have diesel or gasoline engines, while in the Entry segment there will be five electric models and five combustion-engine models.
In Europe, however, Källenius, as president of ACEA, is expected to support the EU’s plans to phase out internal combustion engines starting January 1, 2035. But in light of recent developments, the end of the combustion engine is no longer so certain. Many countries and manufacturers are opposed, and this year the EU will consider relaxing the 100% CO2 neutrality target by 2035.
Therefore, Mercedes, like other premium manufacturers, must meet conflicting objectives. On the one hand, it must continue offering attractive gasoline-powered models in the U.S.—which it is already doing, for example by dropping the electrified four-cylinder Mercedes-AMG GLC 43 and 63 models that customers did not favor, in favor of a revised six-cylinder engine with mild-hybrid assistance that delivers much greater driving pleasure.
On the other hand, it must continue developing its electric model range, even though for now Europe is the only major market for them, while in China they must be sold at lower prices—and even then, success is not guaranteed.
Thus, Källenius must steer Mercedes back onto the right track in a very complicated context. The Swede has realized this and has already taken some measures: the company will no longer focus solely on the luxury segment but will also consider volumes—hence the decision to keep the A-Class in production.
However, sales growth will not happen overnight, so a return to 2 million units annually is unlikely before 2028/2029. Profit will not increase this year either, after hovering around 4% in 2025. A similar figure is expected in 2026.
Källenius knows he must regain shareholders’ trust and therefore needs to clearly explain his plans. On paper, things look good both in terms of developing the new electric lineup and in the renewed approach of continuing to offer emotional combustion-engine models. On the other hand, Källenius cannot control the geopolitical situation, and here things are complicated and beyond Mercedes’ control.
