Mercedes-Benz cuts costs, renews focus oncombustion engine models in bid to revive earnings

By Victoria Waldersee

February 20, 20258:59 PMGMT+10Updated 9 hours ago

Item 1 of 2 A logo of Mercedes-Benz is seen inside aMercedes-Benz car dealer in Arnhem, Netherlands February 18, 2025.REUTERS/Piroschka van de Wouw/File Photo

[1/2]A logo of Mercedes-Benz is seen inside aMercedes-Benz car dealer in Arnhem, Netherlands February 18, 2025.REUTERS/Piroschka van de Wouw/File Photo Purchase Licensing Rights, opens new tab

· Summary

· Companies

· Launching 19 combustion engine and 17 EVs by 2027

· Carmaker expects significantly lower earnings in 2025

· Plans 10% cut to production costs by 2027, 20% by 2030Notclosing plants in Germany - CFO

BERLIN, Feb 20 (Reuters)- Mercedes-Benz (MBGn.DE), opens new tab on Thursday announced further cost-cutting and more petrol and diesel cars than EVs in its new product range, in a bid to revive margins as the company braces for a sharp drop in earnings in 2025.

The German luxurycarmaker will release 19 new combustion engine models and 17 battery-electriccars by the end of 2027, in a sign of a renewed focus on its combustion engineoffering after its battery-electric sales collapsed by a quarter last year.

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Most of the new modelswill be in its top-end price tier, showing that the carmaker is still committedto its strategy of selling a lower volume of higher-margin vehicles, despitesome investors and labour representatives expressing concern in recent monthsthat the strategy had failed.

"The strategy ofvalue over volume remains in place - it has not been abandoned," CFOHarald Wilhelm said, adding it was good news for its margin that combustionengine cars were still far outselling electric vehicles.

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The carmaker will alsolocalise more production in China and the United States, Wilhelm said,protecting itself from rising trade tensions including threats from U.S. President Donald Trump of a 25% tariff on all vehicle imports from April.

The company's shares weredown 1.5% at 1011 GMT, the biggest faller on the blue chip euro STOXX 50E index,as some investors expected more news on capital returns.

Mercedes-Benz' forecastwill underscore investor concerns about its ability to weather a tough globalmarket, as German carmakers' longstanding success exporting cars and deployingits technological prowess are under threat from a more protectionist UnitedStates and Chinese EV rivals.

"Luxury and Chinasimply isn't working, and both are vital to the Stuttgart-based carmanufacturer's business success," said investment strategist Jürgen Molnarat brokerage RoboMarkets.

BLEAK OUTLOOK

After a 30% slump inearnings in 2024, and 40% in its cars division, this year will see earningsfall even further, Mercedes-Benz said, expecting a rate of return in its cardivision of just 6-8%.

The bleak outlook is asobering reassessment of the more optimistic vision it outlined at its lastcapital markets day in 2022 of an adjusted return on sales of up to 14% in goodtimes and no less than 8% in difficult ones.

Europe's auto industryfaces a swathe of challenges this year, with Volkswagen (VOWG_p.DE), opens new tab and other carmakers as well as component makers announcing deep cuts as executives warn that the region's energy and labour costs have become uncompetitive.