Mercedes-Benz is bracing for potential trade headwinds under a possible resurgence of Trump administration tariffs, focusing on aggressive cost management and a strategic pivot towards electric vehicles (EVs) and hybrid technologies. This comes after a year marked by significant financial challenges for the luxury automaker.
Ola Källenius, CEO of Mercedes-Benz, directly addressed the elephant in the room – the potential return of tariffs under a future Trump administration. Speaking to reporters, Källenius emphasized Mercedes-Benz’s deep ties to the United States, essentially making a case to the Trump administration to reconsider tariffs that could negatively impact companies with substantial US operations.
“We’re also an American company,” Källenius stated firmly, underscoring the company’s significant investments and footprint in the US. “Yes, we have our headquarters in Germany and we have European origins, but we feel American. I myself have spent six years of my Mercedes career in the United States too. My children are born in the United States. I feel deeply, deeply connected to the US.” This personal touch from the CEO aims to resonate with policymakers and the American public, highlighting the human element behind the corporate giant.
Källenius further elaborated on Mercedes-Benz’s commitment to the US economy, stating, “We are prepared to continue to invest billions, and we want to grow our footprint in the United States. So we are committed.” He also pointed out a lesser-known aspect of their US operations: “A little-known fact, we are one of the major industrial exporters out of the United States. Two-thirds of the vehicles that we make in our Tuscaloosa plant actually go out into the world, a significant part of them, obviously, to Europe.” This detail serves to counter the narrative of Mercedes-Benz as solely a foreign entity, positioning them as a significant contributor to US exports and employment.
The shadow of potential automotive tariffs, like those once proposed by President Trump at 25%, looms large over the industry. Such tariffs would not only impact overseas manufacturers like Mercedes-Benz but also domestic giants such as General Motors and Ford, raising costs for consumers and potentially disrupting the entire automotive market.
Data reveals the significant exposure of German automakers to the US market. A substantial 13% of German car exports are directed to the United States, exceeding any other single nation. This dependency underscores the vulnerability of the German automotive industry to changes in US trade policy, particularly concerning “Mercedes Trump” era protectionist measures.
Hildegard Müller, president of the German auto association VDA, has voiced strong opposition to tariffs, stating, “Tariffs are the wrong negotiating tool.” This sentiment is echoed across the automotive industry, which fears the destabilizing effects of increased trade barriers. The Trump administration previously implemented a 25% tariff on imported steel and a 10% tariff on Chinese imports, triggering retaliatory tariffs and highlighting the potential for escalating trade disputes.
While Trump has, at times, paused tariff implementations, the underlying threat remains. Industry leaders are increasingly vocal about their concerns, attempting to communicate the potential economic fallout to policymakers.
GM CFO Paul Jacobson articulated the industry’s dilemma at an investor conference, “If they become permanent, then there’s a whole bunch of different things that you have to think about in terms of, where do you allocate plants, and do you move plants, etc.” He emphasized the long-term uncertainty tariffs create, potentially leading to misallocation of capital and hindering strategic planning.
Echoing these concerns, Ford CEO Jim Farley warned of the drastic financial consequences of protracted tariffs, stating, “There’s no question that tariffs at [the] 25% level from Canada, Mexico, if they’re protracted, would have a huge impact on our industry, with billions of dollars of industry profits wiped out and adverse effect on the US jobs as well as the entire value system in our industry.” Farley also pointed out the direct impact on consumers, noting, “Tariffs would also mean higher prices for customers.”
Mercedes-Benz, in its defense against potential “mercedes trump” tariffs, highlights its substantial US workforce. Källenius emphasized, “We have two large operations on the passenger car side, one in Alabama and one in South Carolina. Directly, we employ more than 11,000 people in the United States.” This significant job creation within the US is a key argument in their plea for tariff consideration.
Financially, Mercedes-Benz is navigating a challenging period. The company reported a 4.5% decrease in 2024 sales, amounting to 145.6 billion euros ($152 billion), and a significant 31% drop in operating profits to 13.6 billion euros ($14.2 billion). The car division experienced the most substantial setback, with profits plummeting 40% due to weakened demand in key markets like China.
In response to these financial pressures and the looming tariff threats, Mercedes-Benz is implementing a two-pronged strategy. Firstly, they aim to aggressively reduce production costs by 10% by 2027. Secondly, they are accelerating their investment and production of EVs and hybrid vehicles to adapt to changing market demands and environmental regulations.
The company’s unit sales of 1.98 million in the past year fell short of estimates, and operating margins have declined from 12.6% to 8.1%. Looking ahead, Mercedes-Benz anticipates operating margins to remain in the 6% to 8% range this year, indicating continued pressure on profitability.
As Mercedes-Benz and the wider automotive industry grapple with economic headwinds and the potential for renewed trade tensions under a “mercedes trump” scenario, the focus on innovation, cost efficiency, and highlighting their contributions to the US economy will be crucial for navigating the uncertain road ahead.
