The full-year financial report for 2025 from Mercedes-Benz Group AG provides stark evidence of a difficult period, marked by a significant drop in profitability. In response, the automaker is launching a major product initiative and emphasizing faster, more cost-effective operations in China. The critical question for investors is whether this dual strategy of austerity and new model launches can yield tangible benefits as early as 2026.
Financial Performance Under Pressure
The past fiscal year presented considerable headwinds for the Stuttgart-based manufacturer. Its adjusted EBIT (earnings before interest and taxes) contracted to 8.20 billion euros from 13.70 billion euros in the prior year. Management cited multiple contributing factors, including tariff costs of approximately 1.2 billion US dollars, intensified competitive pressure in the Chinese market, and adverse currency exchange effects. Group-wide vehicle sales declined by 9 percent.
The downturn is even more pronounced in net profit. Consolidated net income attributable to shareholders plummeted by 48 percent to 5.33 billion euros. The group’s reported EBIT of 5.8 billion euros represents a 57 percent decrease year-over-year. The Mercedes-Benz Cars division was particularly hard hit, seeing its operating profit fall by 45 percent. According to the report, cost-saving measures totaling about 3.6 billion euros helped to partially cushion this severe decline.
Shareholder Returns and Strategic Buybacks
The financial results have direct implications for shareholders. A dividend proposal of 3.50 euros per share is slated for approval at the Annual General Meeting on April 16, down from 4.30 euros per share paid out for the previous year.
Concurrently, the company continues its share repurchase program. Between November and December 2025, Mercedes-Benz bought back its own shares for roughly 329 million euros. A further volume of up to 1.7 billion euros is planned for 2026. In a related strategic move, agreements with major shareholders Beijing Automotive Group and Geely Group ensure both will maintain their voting rights below 10 percent by tendering a proportionate number of shares into the buyback program.
Strategic Pivot in a Critical Market
China remains Mercedes-Benz’s most important single market, accounting for nearly one-third of its global passenger car sales in 2025. However, this region also became a primary source of pressure last year, largely due to fierce competition from domestic electric vehicle manufacturers. Sales in China dropped by 19 percent, a key driver behind the overall profit contraction.
Should investors sell immediately? Or is it worth buying Mercedes-Benz?
The company’s strategic countermeasure is accelerated localization. Mercedes-Benz aims to source more than 80 percent of its vehicles sold in China from local production by mid-2026, a move designed to leverage lower production costs and improve market responsiveness.
New Models Amid Operational Restructuring
To combat declining sales and margin pressure, management is preparing an extensive product rollout. More than 40 new vehicles are scheduled for launch over the next three years. The new CLA model has already been awarded the “Car of the Year 2026” title. The company also points to strong demand for the CLA, GLC, and S-Class lines, with order books reportedly well-filled into the latter half of the current year.
This product offensive coincides with a streamlining of global production capacity. The joint venture plant in Aguascalientes, Mexico, is scheduled to close by May, reducing overall capacity by approximately 100,000 units. Furthermore, management is targeting a 10 percent reduction in production costs per vehicle by 2027.
Guidance for 2026 and Market Sentiment
Looking ahead, Mercedes-Benz anticipates group revenue for 2026 to be in line with the prior year’s level. It forecasts a significantly higher Group EBIT, while the industrial business’s free cash flow is expected to be slightly below the 2025 figure of 5.4 billion euros. The target adjusted return on sales for the Cars division is set between 3 and 5 percent for 2026, with the company not expecting a return to double-digit margins until 2027.
In equity markets, the stock reflects this challenging backdrop. Shares closed at 56.80 euros on Wednesday, trading below the 50-day moving average of 58.80 euros. A 14-day Relative Strength Index (RSI) reading of 36.3 indicates weak short-term momentum.
Investor attention now turns to key upcoming events. Following the publication of the annual report on March 4, the Annual General Meeting on April 16 will be closely watched. The first concrete evidence of whether the China localization strategy, cost-cutting, and new product offensive are supporting 2026 targets will likely come with the release of Q1 2026 results on April 29.
Ad
Mercedes-Benz Stock: Buy or Sell?! New Mercedes-Benz Analysis from March 5 delivers the answer:
The latest Mercedes-Benz figures speak for themselves: Urgent action needed for Mercedes-Benz investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from March 5.
Mercedes-Benz: Buy or sell? Read more here...
