ISTANBUL

German luxury automobile manufacturer Mercedes-Benz Group reported Thursday a sharp decline in full-year earnings and warned of difficult times ahead after a year characterized by fierce rivalry from Chinese competitors and high global tariff charges.

In 2025, the carmaker reported a full-year operating profit of €5.8 billion ($6.9 billion), a 57% decrease from the previous year, missing market expectations.

In addition to a reported €1 billion ($1.2 billion) in tariff-related expenses, Mercedes-Benz Group said competitiveness in China and foreign exchange headwinds influenced its earnings.

“Amid a dynamic market environment, our financial results remained within our guidance, thanks to our sharp focus on efficiency, speed, and flexibility,” Ola Kallenius, chairman of the board of management at Mercedes-Benz Group, said in a statement.

Targeting an adjusted return on sales for Mercedes-Benz cars of 3% to 5%, the Mercedes-Benz Group said it projected additional cost reductions and a flurry of new product launches in 2026. That is down from a 5% adjusted return on sales in 2025.

During morning trading, the Munich-listed company's shares dropped 4.3%. The stock is down about 10% this year.

In 2025, Mercedes-Benz Group reported revenue of $157 billion and said it anticipates revenue will be in line with the previous year. Group earnings before interest and taxes, or EBIT, are expected to be “significantly above” the level of the previous year.

The results follow challenges facing European automakers, including increased production costs, supply chain disruptions, regulatory demands and a difficult transition to electric vehicles.