February 26, 2025
Mercedes-Benz, one of the world’s leading luxury automobile manufacturers, is undergoing significant strategic adjustments following a notable decline in global sales and profits. The German automotive giant reported a 4.5% drop in revenue for the fiscal year 2024, amounting to €145.594 billion. Additionally, the company’s net profits fell by a staggering 28%, marking one of the most challenging financial periods in recent years (Longport). This downturn has prompted Mercedes-Benz to recalibrate its business strategy, blending traditional combustion engine models with electric vehicles (EVs) to meet shifting market demands.
Factors Contributing to the Decline
Several factors have contributed to the company’s current situation:
- Electric Vehicle Slowdown: While the automotive industry is transitioning towards electrification, the adoption rate of EVs has been slower than anticipated in some regions. Mercedes-Benz reported a 23% decline in EV sales in 2024, mainly in China and parts of Europe, where infrastructure and affordability challenges persist.
- Global Economic Uncertainty: Rising inflation rates, supply chain disruptions, and geopolitical tensions have impacted consumer purchasing power, particularly in key markets like China and the European Union.
- Increased Competition: The rise of new EV manufacturers such as Tesla, BYD, and local Chinese brands has intensified competition, particularly in the premium segment.
Strategic Shift: Balancing Powertrains
In response to the evolving market landscape, Mercedes-Benz has announced a balanced approach to its product lineup. The company plans to introduce 19 new petrol and diesel models alongside 17 battery-electric vehicles by the end of 2027 (The Times). This strategic shift represents a departure from the company’s previous plan to exclusively offer electric models by 2030.
“We are adapting our strategy to better align with customer needs and regional demands,” said Mercedes-Benz CEO Ola Källenius. “While our commitment to sustainability remains unwavering, we recognize the importance of offering a diverse range of powertrains to support this transition.”
Cost-Cutting Initiatives
Mercedes-Benz is also implementing a comprehensive cost-cutting program aimed at reducing production expenses by 10% by 2027. This initiative involves several measures:
- Production Localization: Expanding manufacturing facilities in the United States and China to reduce reliance on exports and mitigate tariff risks.
- Supply Chain Optimization: Streamlining supplier partnerships to improve efficiency and lower costs.
- Workforce Restructuring: Optimizing staff allocation and offering voluntary retirement packages in certain regions.
Market-Specific Adjustments
China: China remains one of Mercedes-Benz’s largest markets, accounting for over 30% of global sales. However, the company reported a 7.3% decline in Chinese sales in 2024, delivering 683,600 units (Longport). To counter this trend, Mercedes-Benz is adopting a more localized approach by:
- Adjusting production outputs at its Beijing factory.
- Expanding partnerships with local technology firms.
- Introducing region-specific models, including plug-in hybrids.
United States: The U.S. market showed resilience despite global challenges, prompting Mercedes-Benz to increase investments in electric vehicle infrastructure and customer service programs.
Future Outlook
Looking ahead, Mercedes-Benz expects profit margins to shrink to between 6% and 8% in 2025, down from 8.1% in 2024 (Financial Times). Nevertheless, the company remains committed to long-term sustainability goals. Upcoming model launches include the all-electric CLA sedan and a refreshed lineup of SUVs.
Despite the current challenges, Mercedes-Benz’s strategic recalibration demonstrates its ability to adapt to market shifts while maintaining its position as a premium automaker. The company’s balanced approach to powertrain offerings, combined with cost-cutting measures and market-specific strategies, is expected to position Mercedes-Benz for sustainable growth in the coming years.
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