Mercedes, Porsche Slash Projections Amid U.S. Tariff Fallout

() – The Mercedes-Benz Group AG and Porsche AG reduced their annual profit forecasts, highlighting the impact that President Donald Trump's trade conflict is having on several of Europe's top luxury vehicle manufacturers.

Two German companies highlighted on Wednesday the dual challenges posed by fresh U.S. tariffs and rising competition in China, where an electric vehicle pricing battle is reducing interest in more expensive options.

Mercedes currently anticipates its automotive profit margin could drop as much as 4%, down from a minimum of 6% before, due to the impact of tariffs affecting prices and sales. Porsche, which does not have a manufacturing plant in the U.S., has revised its projections downward for the third time this year following Trump's agreement with the European Union, which imposed a 15% tariff on vehicles coming from the region.

Aston Martin Lagonda Global Holdings PLC as well Aston Martin Lagonda Global Holdings plc too Also Aston Martin Lagonda Global Holdings Plc In addition, Aston Martin Lagonda Global Holdings Plc Furthermore, Aston Martin Lagonda Global Holdings Plc Along with Aston Martin Lagonda Global Holdings Plc Plus Aston Martin Lagonda Global Holdings Plc Aston Martin Lagonda Global Holdings Plc included Together with Aston Martin Lagonda Global Holdings Plc Moreover, Aston Martin Lagonda Global Holdings Plc walked back forecasts on Wednesday, one day following Stellantis NV's warning about U.S. tariffs will weigh regarding the Jeep manufacturer's currently troubled North American operations.

Increasing trade restrictions are contributing to a fundamental transformation in China, where an intense electric vehicle pricing competition driven by domestic brands like BYD Co. is reducing profit levels. Porsche and Mercedes have found it challenging to make an impact in the world's largest automotive market with their higher-end models, such as the Taycan and the EQS, which is the all-electric variant of Mercedes' top-of-the-line S-Class luxury sedan. At the same time, Chinese automobile manufacturers like BYD and Geely are expanding into Europe's slow-moving car market.

We are still dealing with major difficulties across the globe," stated Oliver Blume, CEO of Porsche. "And this is not a crisis that will soon fade away.

The automobile manufacturer owned by Volkswagen AG is working to recover and regain stability by replacing Several senior executives, reducing expenses even more—such as via layoffs—and introducing additional internal combustion engine and plug-in hybrid vehicles.

The U.S. has become Porsche's largest individual market, surpassing China, although the company does not have a domestic manufacturing facility and brings all vehicles sold there from Europe. As part of Volkswagen's broader plan to expand production in the U.S., one possibility under evaluation is the final assembly of Porsche models within the country. previously reported Mercedes intends to move the manufacturing of the GLC SUV to the U.S. to counteract the tariffs.

For Mercedes, challenges are threatening a plan launched in 2022 aimed at improving profits by moving more towards premium markets. The company is focusing on its highest-profit products—such as Maybach sedans, AMG high-performance vehicles, and the G-Wagon—while reducing production of less profitable budget-friendly models like the small A-Class.

However, U.S. tariffs and underwhelming sales in China are affecting Mercedes' pricing strategy and overall sales figures. The firm has cautioned that total revenue for 2025 will be notably lower than the previous year. During the second quarter, Mercedes' automotive profit margin fell to 5.1%, far from the standards set during CEO Ola Källenius's initiative aimed at enhancing the brand's luxury image. Additionally, the company noted reduced demand for commercial vehicles and falling income within its mobility services segment, both of which have negatively impacted its financial outcomes.

Mercedes' stocks fell up to 2% in Frankfurt. The stock has dropped approximately 1% so far this year. Porsche increased by 2.3% as of 10:12 a.m. local time after analysts highlighted stronger-than-anticipated earnings and operating cash flow. However, the company's shares remain lower by over 20% this year.

Porsche indicated that its annual profit margin might drop as low as 5%, down from an earlier target of at least 6.5%. This revised projection accounts for the impact of U.S. tariffs and approximately €1.3 billion ($1.5 billion) in expenses tied to the company's strategic overhaul.

Several automobile manufacturers face significant risks due to trade conflicts. Mercedes and Porsche are particularly vulnerable. For a large portion of the second quarter, vehicles shipped from the European Union to the United States were subject to a 27.5% tax. Additionally, Mercedes sends SUVs manufactured in its Alabama facility to China, where these products previously had tariffs surpassing 100%, though an agreement in mid-May lowered the duty to approximately 35%. Earlier this year, the German firm removed its financial projections following President Trump's trade policies, but on Wednesday, it restored them.

If not for the effect of tariffs, Mercedes stated that its automotive profit margin would stay within the previous range of 6% to 8%. The company’s profitability was further affected by restructuring efforts, such as a voluntary exit initiative for administrative employees and the divestiture of its van business in Argentina.

- Assisted by Jamie Nimmo and Craig Trudell. - With help from Jamie Nimmo and Craig Trudell. - Supported by Jamie Nimmo and Craig Trudell. - Collaborating with Jamie Nimmo and Craig Trudell. - Thanks to Jamie Nimmo and Craig Trudell for their support.

(Updates include shares in the 11th paragraph.)