Mercedes-Benz Expects New Models and Cost Cuts to Drive Earnings Higher This Year — Update

By Dominic Chopping

Mercedes-Benz expects earnings to significantly improve this year as it benefits from new model launches and a group-wide effort to boost competitiveness.

The German luxury-car maker expects to launch over 40 new models by 2027 and said Thursday that its order books are filled well into the second half of 2026 with production running on three shifts to meet high demand.

"Strong demand for our new CLA, GLC or S-Class proves that our customers are excited about our new models. We are moving forward with a clear game plan and a very competitive product portfolio," Chief Executive Ola Kallenius said.

Last year the company outlined plans to become more efficient through a series of measures that include job cuts and shifting some production from its German home to lower-cost countries such as Hungary.

Production capacity is being adjusted to around 2.2 million units by 2028 and as a result, it announced Thursday that assembly of Mercedes-Benz vehicles at the joint venture plant it has with Nissan in Aguascalientes, Mexico, will end in 2026. Production capacity in Germany will be at 900,000 units, while Kecskemet in Hungary will be able to produce up to 400,000 vehicles, it said.

On top of capacity adjustments, Mercedes said it would also work to lower energy costs, increase automation, lower logistics costs and lean on artificial intelligence as it targets a 10% cut to the production cost of each vehicle from 2027 compared to 2024 levels.

Job cuts launched last year and further measures that include a reduction in management positions and outsourcing of some non-core activities will further increase efficiency this year and next, with fixed costs falling 10% between 2024 and 2027, it said.

European automakers have been rushing to slash costs and improve competitiveness as the industry navigates stuttering electric-vehicle demand, a shifting trade landscape following President Trump's tariff regime and intense competition in China.

It said its efforts boosted profit by over 3.5 billion euros ($4.16 billion) in 2025.

In China, the company is working to defend and build its position over the coming years through a series of initiatives such as using more local suppliers and optimizing production.

China is a key region for the company and it has previously outlined plans to unify some aspects of its technology and design which will allow it to tailor products to specific markets like China.

In the U.S., the company has pledged to localize more production from Europe to limit damage from import duties.

Mercedes said it expects car sales this year to remain at 2025 levels while the adjusted margin in the car unit is guided at 3%-5% compared with 5% in 2025. It said the margin would have hit 6.1% in 2025 had it not been for tariffs.

Group revenue in 2026 will also be at the 2025 level of 132.21 billion euros and group earnings before interest and tax are expected to be significantly above the previous year's level of 5.82 billion euros, it said.

Analysts polled by FactSet had expected 2025 revenue of 133.35 billion euros, down from 145.59 billion euros in 2024, and EBIT of 6.32 billion euros from 13.6 billion euros in 2024.

The company reported a 45% drop in earnings at its car unit last year on lower volumes, particularly in China, negative net pricing, tariffs and currency headwind.

In the mid-term, car sales are seen at around 2 million vehicles, including a more than 15% increase in top-end vehicle sales and a doubling of the electric-vehicle share.

Mercedes lowered its dividend to 3.50 euros from 4.30 euros a share in 2024 and said it still has 1.7 billion euros of its current share buyback program to run in 2026.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

February 12, 2026 02:36 ET (07:36 GMT)