Earnings before interest and tax fell 17% to 1.9 billion euros, but this was above analyst expectations of 1.6 billion euros. Revenue was 31.6 billion euros, slightly below forecasts.
The car division’s return on sales fell to 4.1% from 7.3% a year earlier. This was within the company’s full-year target range of 3% to 5% and around the midpoint of its annual goal.
The company said, “In China, intense competition and subdued demand continued to weigh on the market.”
China remains the company’s largest market but has become more competitive, with pressure from local carmakers such as BYD and Geely. Mercedes-Benz said sales in China fell 27% in the first quarter, while sales increased in Europe and North America. China’s sales were already at their lowest level since 2016 last year.
Investors and analysts are monitoring whether the company can recover in China, which has been a key source of profit. Mercedes-Benz said it is increasing local development and partnerships to better tailor vehicles to Chinese customers, including “a new generation of China-fit vehicles.” Management also said it expects a prolonged slowdown due to economic weakness in the country.
Chief Financial Officer Harald Wilhelm said the company is “on track” to meet its targets. He added: “Strong demand for our new products and healthy order books position us well for improved momentum in the second half of the year.” He also said the company will maintain strict cost control.
Mercedes-Benz plans to launch about 40 new models between 2025 and 2027, including electric and updated versions of key models.
The company said it will reduce global production capacity by more than 10% to about 2.2 million units. Labor agreements in Germany, which accounts for nearly half of output, protect jobs until 2035. As a result, reductions will rely on attrition and take place mainly outside Germany.
The automaker also warned that geopolitical risks could affect demand. It cited possible impacts on consumer confidence from the Middle East conflict, noting that higher fuel prices, rising interest rates, or falling asset prices can reduce car sales. General Motors has said inflation pressures linked to the conflict are affecting its business.
Mercedes-Benz said US tariffs on imported vehicles are affecting profitability and complicating pricing. The company reported a $1.2 billion impact from tariffs last year.
Other carmakers are facing similar pressures. Volkswagen Group plans to cut 50,000 jobs by the end of the decade. BYD said its first-quarter profit more than halved due to slower domestic sales.
Chief Executive Officer Ola Källenius is implementing cost cuts and restructuring measures as the company responds to weaker demand, tariffs, and the shift to electric vehicles.
