Mercedes-Benz Group AG Reports Q1 2025 Earnings: Strong Cash Flow and Top-End Vehicle Growth Amid Tariff Challenges.

Mercedes-Benz Group AG reported a strong Q1 with a free cash flow exceeding EUR 2 billion and a 17% increase in AMG sales. However, the company faces uncertainties related to shifting trade policies and tariffs, which could impact its business. The van market is experiencing competitive pressure and challenging dynamics, and Mercedes-Benz is navigating a dynamic environment with high volatility. The company is in constructive discussions with US officials about expanding its US footprint, but specific details are not disclosed.

Mercedes-Benz Group AG (MBGAF) reported a robust first quarter in 2025, with a free cash flow exceeding EUR 2 billion, and a 17% increase in AMG sales. The company's top-end vehicle segment, including AMG and G-Class, performed exceptionally well, contributing to the overall financial resilience [1].

The company's Mobility Return on Equity (ROE) stood at 8.6%, with a potential increase to nearly 10% excluding charging impacts. However, MBGAF is navigating significant challenges due to shifting trade policies and tariffs, which could materially impact its business. The company anticipates a potential 300 basis points impact on car margins and 200 basis points on van margins if tariffs persist [1].

Despite these challenges, Mercedes-Benz is actively implementing efficiency measures and structural changes, which are starting to yield operational efficiencies. The company is also focused on innovation and product launches, with more than 25 new products planned for 2025-2027, including the all-electric GLC [1].

The van division produced healthy results despite challenging market dynamics, and the company is undergoing a significant technological and product transformation in this segment. However, the van market is experiencing increased competitive pressure and challenging market dynamics, affecting sales [1].

Mercedes-Benz is in constructive discussions with US officials about expanding its US footprint, but specific details are not disclosed. The company is considering various strategies to mitigate the impact of US tariffs, including product allocation and pricing strategies [1].

In a separate conference call, Mercedes-Benz warned that US tariffs could reduce its targeted return on sales by around 3 percentage points over a full year. The company had previously assumed that 6 to 8 percent of sales in its passenger car division would remain as earnings before interest, taxes, and special items in 2025, but this target range does not yet include any tariff effects [2].

Mercedes-Benz is working on effective countermeasures, which could include significant price increases. However, the company acknowledges that these measures could also impact demand. The company aims to expand its production in the US, with plans to increase SUV production in Alabama [2].

Overall, Mercedes-Benz Group AG demonstrated strong financial performance in Q1 2025, but faces significant challenges due to trade policies and tariffs. The company is actively working to mitigate these impacts and maintain market participation.

References:
[1] https://www.gurufocus.com/news/2818548/mercedesbenz-group-ag-mbgaf-q1-2025-earnings-call-highlights-strong-cash-flow-and-topend-vehicle-growth-amid-tariff-challenges
[2] https://www.marketscreener.com/quote/stock/MERCEDES-BENZ-GROUP-AG-436541/news/Mercedes-Benz-warns-US-tariffs-threaten-almost-half-of-operating-profit-from-passenger-cars-49767997/