Mercedes-Benz, under the leadership of CEO Ola Källenius, is bracing for potential impacts from ongoing trade tensions, particularly those initiated during the Trump administration. Despite facing a challenging economic landscape, the luxury automaker is focusing on innovation in electric vehicles (EVs) and hybrid technology while strategically managing costs. Källenius, however, has directly addressed the US administration, emphasizing Mercedes-Benz’s significant investments and operational footprint within the United States.
“We’re also an American company,” Källenius stated in a video call with reporters, responding to questions about how Mercedes-Benz plans to navigate potential tariffs. “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 connection underscores the CEO’s commitment to the American market and workforce.
Källenius further elaborated on the company’s dedication to growth in the US, “We are prepared to continue to invest billions, and we want to grow our footprint in the United States. So we are committed. 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 highlights the crucial role Mercedes-Benz plays in the US economy, not just as a seller, but also as a significant exporter of vehicles manufactured on American soil.
The automotive industry is currently navigating a complex environment, with potential tariffs posing a significant threat. The prospect of a 25% automotive tariff, as floated by the Trump administration, could have far-reaching consequences for both domestic US automakers like General Motors and Ford, and international brands such as Mercedes-Benz.
Data reveals the extent of Mercedes-Benz’s reliance on both imports and US-based production for the American market. Of the 374,000 vehicles Mercedes-Benz sold in the US last year, over half were imported. Germany’s automotive sector also has a strong link to the US market; approximately 13% of German car exports are directed to the United States, surpassing any other single country.
Hildegard Müller, president of the German auto association VDA, has voiced concerns about tariffs, stating, “Tariffs are the wrong negotiating tool.” This sentiment is echoed across the industry, as businesses grapple with the implications of increased trade barriers. The US administration has already implemented a 25% tariff on imported steel and a 10% tariff on Chinese imports, leading to retaliatory tariffs from China on specific goods.
Auto industry leaders are increasingly vocal about their concerns regarding tariffs and their potential negative impact on the US economy. Paul Jacobson, CFO of General Motors, spoke at an investor conference, noting the uncertainties tariffs create regarding plant allocation and investment strategies. His comments reflect the broader industry apprehension about the long-term effects of trade policies.
Similarly, Ford CEO Jim Farley has warned of substantial profit losses and adverse effects on US jobs if tariffs at the 25% level were to become prolonged. He emphasized that tariffs would inevitably lead to higher prices for consumers, impacting the entire automotive value chain.
CEO of Benz, Ola Källenius, also highlighted the significant number of US workers employed by Mercedes-Benz, urging policymakers to consider this aspect. “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,” Källenius pointed out. This substantial US workforce underscores Mercedes-Benz’s economic contribution to the country.
In recent financial reporting, Mercedes-Benz announced a 4.5% decrease in 2024 sales, 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 profit decline, plummeting 40% year-over-year, primarily due to weakened demand in China. In response to these financial pressures, Mercedes-Benz aims to reduce production costs by 10% by 2027 and is strategically shifting towards electric vehicles and hybrid models to enhance profitability and meet evolving market demands.
Unit sales for Mercedes-Benz were reported at 1.98 million, falling short of the estimated 2 million and indicating a year-over-year decrease. Operating margins also declined from 12.6% to 8.1% in 2024 and are projected to be between 6% and 8% this year, reflecting the ongoing economic challenges and the company’s efforts to adapt.
In conclusion, Ola Källenius, CEO of Benz, is navigating Mercedes-Benz through a period of trade uncertainty and economic headwinds by emphasizing the company’s deep integration with the US economy, while simultaneously driving innovation in EVs and implementing cost-saving measures. The automotive industry as a whole remains concerned about the potential ramifications of tariffs, and Mercedes-Benz, under Källenius’s leadership, is strategically positioning itself to weather these challenges and maintain its global competitiveness.
