Mercedes-Benz Q2 profit rises 13.5% on cost cuts, but China car sales slump forces outlook downgrade

Cost cuts drive profit higher

Mercedes-Benz reported a 13.5% rise in second-quarter group net profit to around €1.09 billion, the first year-on-year increase since the second quarter of 2023. Operating profit (EBIT) jumped 22% to approximately €1.55 billion, although this came in slightly below a Visible Alpha analyst consensus of €1.6 billion. Revenue, however, fell 3.3% to just over €32 billion, and total vehicle sales (cars and vans) declined 6% to around 512,000 units. The profit improvement was powered by a cost-cutting programme, efficiency gains, and strong contributions from the Vans and Financial Services divisions. A €131 million gain linked to the planned sale of leasing subsidiary Athlon also supported the group result.

Despite a demanding market environment, we remained on track in the second quarter while continuing to advance our product launch programme.

Mercedes said it would focus on bringing more new models to customers and further improving its cost position and productivity in the second half.

China woes gut cars profitability

The passenger car business suffered a severe blow from a collapsing Chinese market. Car sales in China plunged 30% year-on-year in the quarter, dragging down the overall volume. The operating result of the cars division crashed by around 94%, from €783 million a year earlier to just €49 million. That figure includes a writedown of more than €700 million on Chinese joint ventures. Even on an adjusted basis, cars EBIT fell 26% to €909 million. The company cited increased market pressure, a less favourable model mix, and costs for launch campaigns as the main drags in China.

Full-year outlook trimmed

Citing the "continuing challenging market environment in China", Mercedes downgraded its expectations for 2026. It now forecasts car sales and group revenue slightly below the prior-year level, whereas previously it had anticipated stagnation. The profit margin guidance for the core cars business was maintained at 3% to 5%, but CFO Harald Wilhelm said it would be at the lower end of that range. For the first half overall, group net profit was down 6.3% to about €2.52 billion.

In the second half of the year we will focus on bringing more new models to our customers and further improve our cost position and productivity.

EV and vans provide support

While the combustion-engine cars business struggled, the electric-vehicle segment offered a bright spot. Battery-electric vehicle sales jumped 51% globally, including an 87% surge in Europe. The Vans division and Financial Services arm also continued to perform solidly, helping to offset the weakness in passenger cars. The company stressed that its ongoing product offensive and the accelerated rollout of new models are key to navigating the transformation.

Cost measures to intensify in German plants

Mercedes has already reduced fixed costs by 25% since 2019, and in June it began intensifying global productivity measures with a particular focus on its German locations. The firm is under mounting pressure from tariff costs and fierce competition from Chinese rivals, which have ended the decades-long dominance of foreign automakers in the world’s largest auto market. The coming quarters will test whether the cost-saving momentum can continue to compensate for the revenue headwinds.