Mercedes-Benz moves to cut costs, revive sales after earnings slump

Berlin, February 20, 2025 – Mercedes-Benz has launched a fresh cost-cutting initiative aimed at reviving sales and margins, as the German carmaker forecasts a significant drop in earnings in 2025.

The new plan comes on the heels of a 40% slump in the car division’s earnings in 2024, driven by weak sales in key Chinese and German markets and subdued demand in Europe.

Chief Executive Ola Kaellenius acknowledged that the company faces “an increasingly uncertain world,” prompting a reassessment of previous growth targets. While the firm had previously set an adjusted return on sales of up to 14% in favorable conditions - and no less than 8% during tougher times - current projections for the car division indicate a return of only 6-8% this year.

Mercedes-Benz’s cost-cutting measures include plans to reduce production costs by 10% by 2027. This new target builds on an ongoing initiative launched in 2020, which aimed for a 20% reduction in costs between 2019 and 2025-a goal that has already seen a 15-16% reduction. Further details are expected to be outlined later at the company’s upcoming earnings conference.

The company’s cautious outlook reflects broader challenges in Europe’s automotive sector, where manufacturers contend with tightening carbon emissions regulations, rising trade tensions with the United States, and intensified competition from Chinese electric vehicle startups. While competitors such as Volkswagen and various suppliers have announced deep cost cuts, some rivals like Renault have reported record operating profits in 2024, bolstered by lower costs and new product launches.

Mercedes-Benz also projected that unit sales will fall below the 1.98 million vehicles sold in 2024 - a figure that may disappoint investors and labor representatives who had aimed for a minimum target of 2 million units to fully utilize production capacity.

“To ensure the company's future competitiveness in an uncertain world, we are taking steps to make the company faster, leaner, and stronger,” Kaellenius said in a statement.

In addition to the cost-cutting measures, the company’s board will propose a reduced dividend of 4.30 euros per share, down from 5.30 euros in 2023.

As the automotive industry navigates a period of volatility, Mercedes-Benz’s strategy underscores the balancing act between cost management and maintaining market share amid shifting global economic conditions.

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