Mercedes-Benz is bracing for potential trade conflicts under the Trump administration, intensifying efforts to cut costs and accelerate its electric vehicle (EV) and hybrid programs following a challenging financial year. However, Ola Källenius, CEO of Mercedes-Benz, has a direct message for Washington: Recognize the substantial investments Mercedes-Benz has made and continues to make in the United States.
“We consider ourselves an American company,” Källenius stated firmly during a video call with reporters on Thursday, addressing the company’s strategy to navigate potential tariffs. “While our headquarters are in Germany and our roots are European, our connection to America is profound. Having spent six years of my own career at Mercedes-Benz in the US, and with my children being born there, my personal ties to the United States are deep and strong.”
Källenius emphasized Mercedes-Benz’s ongoing commitment to the American economy. “We are prepared to invest billions more and expand our footprint in the United States. It’s a little-known fact that we are a significant industrial exporter from the US. Two-thirds of the vehicles produced at our Tuscaloosa, Alabama plant are exported globally, with a substantial portion destined for Europe.” This underscores the intricate global supply chains and the potential disruption that tariffs could cause.
Automotive Industry Braces for Trump-Era Trade Tensions
The specter of automotive tariffs has returned as President Trump considers implementing tariffs of up to 25%. Such measures could severely impact both domestic US automakers like General Motors and Ford, and international brands like Mercedes-Benz. The potential for a “Trump Mercedes” tariff war is a serious concern for the industry.
According to company data, over half of the 374,000 Mercedes-Benz vehicles sold in the US last year were imports. Germany’s automotive industry is particularly exposed, with the United States being the largest single destination for German car exports, accounting for approximately 13% of the total, according to the German auto association VDA.
Hildegard Müller, president of the VDA, has voiced strong opposition to tariffs, stating, “Tariffs are the wrong negotiating tool.” The Trump administration has previously imposed a 25% tariff on imported steel and a 10% tariff on Chinese imports, leading to retaliatory tariffs from China on specific goods. While tariffs on Canada and Mexico were temporarily paused, the auto industry remains on edge.
Industry Leaders Speak Out Against Tariffs
Auto industry executives are increasingly vocal about their concerns regarding tariffs and their potential detrimental effects on the US economy. Paul Jacobson, CFO of General Motors, highlighted the uncertainty tariffs create. “If they become permanent, it forces a fundamental rethink of plant allocation and potential plant relocation,” Jacobson commented at an investor conference. He emphasized the financial risks, stating, “Think about a world where, on top of market pressures and lost profitability, we’re spending billions in capital, and then the tariffs end.”
These sentiments echo earlier warnings from GM CEO Mary Barra and Ford CEO Jim Farley. Farley, in an earnings call, cautioned that “tariffs at the 25% level from Canada, Mexico, if protracted, would have a huge impact on our industry, wiping out billions of dollars in industry profits and negatively affecting US jobs and the entire value system.” He also noted the inevitable consequence of higher prices for consumers. The potential impact of “trump mercedes” tariffs extends beyond just manufacturers, affecting the entire automotive ecosystem and consumer affordability.
Mercedes-Benz’s US Workforce and Strategic Shift
Källenius underscored Mercedes-Benz’s significant US employment footprint, urging policymakers to consider this aspect. “We have substantial operations in the US passenger car sector, with plants in Alabama and South Carolina. We directly employ over 11,000 people in the United States,” he stated. This highlights the real-world impact of trade policy on American jobs and communities.
Financially, Mercedes-Benz reported a challenging 2024, with sales declining by 4.5% to 145.6 billion euros and operating profits dropping 31% to 13.6 billion euros. The car division experienced the most significant profit decrease, down 40%, largely due to weakened demand in China. In response to these pressures, Mercedes-Benz is implementing measures to reduce production costs by 10% by 2027 and is strategically pivoting towards electric vehicles and hybrids.
Unit sales also saw a year-over-year decrease to 1.98 million, falling short of the estimated 2 million. Operating margins for 2024 decreased to 8.1% from 12.6% the previous year, and are projected to be between 6% and 8% this year.
In conclusion, Mercedes-Benz, like much of the global automotive industry, is navigating a period of uncertainty fueled by potential trade tariffs under a returning Trump administration. While focusing on internal efficiencies and the shift to EVs, CEO Ola Källenius is actively communicating the importance of Mercedes-Benz’s US operations and investments, hoping to mitigate the impact of potential “trump mercedes” tariffs and advocate for policies that support, rather than hinder, international trade and investment.
