ANNIE ALLEN (UK Bureau Chief)
Mercedes-Benz Group has reported a decline in first-quarter earnings for 2026, as intensifying competition in China and rising tariff and cost pressures weighed on performance.
The German automaker posted earnings before interest and tax (EBIT) of €1.9 billion, representing a 17% drop compared with the same period last year. Profit margins also declined to 4.1%, down from 7.3% a year earlier, though still within the company’s full-year guidance range of 3–5%.
The company said the results reflect a challenging operating environment, marked by weaker sales in China and higher input costs.
Mercedes, alongside German peers Volkswagen and BMW, continues to face increasing competition in China from domestic manufacturers such as BYD and NIO. These brands have expanded rapidly into the premium segment, offering competitively priced, technology-focused electric vehicles.
In addition, tariff measures in the United States under President Donald Trump are expected to reduce Mercedes’ core automotive margin by about 1.5 percentage points this year.
Rising raw material costs linked to ongoing tensions in the Middle East are also expected to increase production expenses, according to Chief Financial Officer Harald Wilhelm.
Despite the decline, the company’s performance was stronger than analysts had expected. Estimates had pointed to a steeper drop in profit, and shares rose slightly following the announcement.
Chief Executive Officer Ola Källenius said the company is continuing with its strategy to improve efficiency and strengthen its product offering. This includes cost-cutting measures and a plan to introduce about 40 new models between 2024 and 2027.
Mercedes maintained its full-year outlook, projecting that operating profit will be significantly higher than in 2025, although this assumes an easing of geopolitical tensions and stabilisation of market conditions.
The company described the start of the year as solid despite what it expects to be a complex operating environment in the months ahead.
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