Mercedes makes more profit, but its passenger car division struggles

German carmaker Mercedes-Benz on Tuesday posted a rise in group profit for the first time in three years, but a sharp slump in China sales continued to weigh heavily on its car division.

From April to June, group net profit climbed 13.5% compared with the same period last year, rising from €957 million to around €1.09 billion ($1.2 billion), , the Stuttgart-based carmaker said. 

The last time the DAX-listed company recorded a year-on-year increase in group profit was in the second quarter of 2023.

Revenue, however, fell 3.3% to just over €32 billion. Operating profit, or earnings before interest and taxes (EBIT), rose 21.5% to around €1.55 billion.

Mercedes said it had continued to improve its efficiency and productivity. Cost measures from a savings programme supported the result in the second quarter, the company said. The results of the vans and financial services divisions also helped prop up the weaker car division.

"Despite a demanding market environment, we remained on track in the second quarter while continuing to advance our product launch programme," Mercedes chief executive Ola Källenius said, according to a company statement.

"In the second half, we will focus on bringing more new models to customers while further improving our cost position and productivity," Källenius said.

Sharp drop in China sales

A significant decline in China weighed on sales in the second quarter once again. Mercedes sold around 512,000 cars and vans, a drop of 6% compared with the same quarter last year. Car sales in the key market fell 30%.

The changes in China were driven in part by increased market pressure, a less favourable model mix and costs related to ramp-up campaigns, the company said.

The weak China business had consequences. The car division's operating profit collapsed by around 94%, from €783 million to just €49 million. This figure included an impairment on Chinese equity investments of more than €700 million. Even stripping that out, car division EBIT fell 26% to €909 million.

Outlook partly revised

Against the backdrop of a continued challenging market environment in China, Mercedes adjusted parts of its outlook for the current financial year. The company now expects car sales to come in slightly below the prior-year level, having previously forecast sales on a par with last year. Group revenue is also now expected to come in slightly below the prior-year level.

After the first six months of the year, group net profit is down 6.3% to around €2.52 billion. Revenue for the first half is 4.1% below the same period last year, while EBIT is down 3.1%.

Profit slumps and cost-cutting efforts

Mercedes has been struggling for some time. In 2025, profit fell by nearly half, from €10.4 billion to €5.3 billion, after having already dropped 28.4% year on year in 2024.

More than a year ago, the carmaker responded by launching a savings programme. At the end of June, Mercedes tightened its cost-cutting course and, as an immediate measure, deferred a contractual special payment to next year. 

At the same time, the management board sparked a debate about labour costs in Germany by announcing that employees should work more for the same pay. This was followed by protests from workers.