Mercedes-Benz, under the leadership of its CEO, Ola Källenius, is navigating a challenging economic landscape, bracing for potential impacts from trade disputes while simultaneously accelerating its electric vehicle (EV) and hybrid innovation efforts. Despite a demanding year marked by sales declines and profit drops, Källenius has a clear message for the US administration regarding trade tensions: recognize and value Mercedes-Benz’s substantial investments and contributions within the United States.
“We’re also an American company,” asserted Ola Källenius in a video conference with reporters, addressing concerns about potential tariffs and their impact on the automotive giant. “Yes, our headquarters are in Germany, and we have European roots, but we consider ourselves American. Having spent six formative years of my career at Mercedes-Benz in the US, and with my children being born there, my connection to the United States is profound and deeply personal.”
Källenius emphasized Mercedes-Benz’s ongoing commitment to the US market, stating, “We are prepared to continue investing billions and are dedicated to expanding our footprint in the United States. It’s a lesser-known fact that we are a significant industrial exporter from the US. Notably, two-thirds of the vehicles manufactured at our Tuscaloosa plant are exported globally, with a considerable portion destined for Europe.”
The automotive sector is facing potential disruption as trade policies and tariffs come under scrutiny. Recent proposals for a 25% automotive tariff by the US administration have raised concerns across the industry, potentially impacting both domestic manufacturers like General Motors and Ford, and international brands such as Mercedes-Benz.
According to company data, over half of the 374,000 vehicles Mercedes-Benz sold in the US in the previous year were imports. Germany’s automotive industry is particularly exposed, with the United States being the largest single recipient of German car exports, accounting for approximately 13% of the total, according to the German Association of the Automotive Industry (VDA).
Hildegard Müller, president of the VDA, has publicly criticized tariffs as an ineffective negotiation tool. This sentiment echoes across the automotive industry as companies grapple with existing tariffs, including a 25% tariff on imported steel and a 10% tariff on various Chinese imports. These measures have already prompted retaliatory tariffs from China on specific goods.
While some tariffs, like those on Canada and Mexico, have been temporarily paused, the uncertainty remains. Industry leaders are increasingly vocal about the detrimental effects of tariffs on the US economy and businesses.
Paul Jacobson, CFO of General Motors, highlighted the significant strategic challenges posed by sustained tariffs. Speaking at an investor conference, Jacobson explained, “If tariffs become a permanent fixture, it forces a comprehensive reassessment of manufacturing footprints, potentially leading to plant relocations and other significant capital allocation shifts. These are complex considerations without immediate answers, but the implications for the market, profitability, and capital expenditure are substantial.”
These concerns are mirrored by Ford CEO Jim Farley, who previously warned of the devastating financial impact of prolonged tariffs. Farley stated in an earnings call that “tariffs at the 25% level from Canada and Mexico, if maintained long-term, would inflict billions of dollars in lost profits across the industry and negatively impact American jobs and the entire value chain. Ultimately, tariffs translate to higher prices for consumers.”
Ola Källenius further reinforced Mercedes-Benz’s significant US employment footprint as a crucial factor for policymakers to consider. “We maintain substantial operations on the passenger car side, with major facilities in Alabama and South Carolina. Collectively, we directly employ over 11,000 individuals in the United States,” Källenius pointed out.
Financially, Mercedes-Benz recently reported a 4.5% year-over-year sales decrease for 2024, totaling 145.6 billion euros ($152 billion), and a 31% drop in operating profits to 13.6 billion euros ($14.2 billion). The car division experienced the most significant downturn, with profits plummeting by 40%, primarily due to weakened demand in key markets like China.
In response to these financial pressures, Mercedes-Benz is implementing strategic measures to reduce production costs by 10% by 2027 and intensify its focus on electric and hybrid vehicles. Unit sales for 2024 totaled 1.98 million, falling short of the estimated 2 million mark and representing a year-over-year decline. The company projects operating margins between 6% and 8% for the current year, a reduction from the 8.1% margin in 2024 and significantly lower than the 12.6% recorded the previous year.
Mercedes Benz Ceo Ola Källenius’s assertive stance underscores the intricate balance global automakers must strike between international trade dynamics, economic pressures, and strategic investments in key markets like the United States. As trade policies evolve, Mercedes-Benz’s commitment to its US operations and its strategic pivot towards electric mobility will be crucial in navigating the challenges and opportunities ahead.
