German automakers report sharp profit drops amid US tariff uncertainty

Leading European car manufacturers Volkswagen (VW) and Mercedes-Benz reported sharp drops of around 40% in their profits in the first quarter of 2025.

According to Der Spiegel, the companies attributed this situation to a weakening Chinese market, rising costs, and uncertainties regarding US tariff policies.

The Volkswagen Group, headquartered in Wolfsburg, announced that its net profit in the first quarter of 2025 fell by approximately 41% compared to the same period last year, decreasing to 2.19 billion euros.

Revenue from the company’s joint ventures in China, one of its key markets, decreased significantly, while losses in the battery business increased.

Special costs amounting to billions of euros also contributed to the profit decline. In contrast, the group’s revenue increased by approximately 3% to 77.6 billion euros.

Like VW, Stuttgart-based Mercedes-Benz was also negatively affected by weakening business in China in the first quarter.

The company announced that its operating profit fell by over 40% to 2.3 billion euros.

Mercedes-Benz also stated that it would no longer provide an annual forecast due to uncertainty in US tariff policies.

The company, listed on the Dax index, expects significant impacts on its results if current and announced US import tariffs continue until the end of the year.

The volatility in US President Donald Trump’s tariff policy and its effects on the automotive market are so uncertain that the business development for the rest of the year cannot be reliably assessed, it was stated.

Harald Wilhelm, Chief Financial Officer of Mercedes-Benz, stated in a conference call that if the current tariff policy were to extend over a full year, it would reduce the targeted return on sales (profit as a % of revenue) in the passenger car business by approximately 3 percentage points.

Wilhelm stated that this situation could jeopardize almost half of the passenger car profit.

Currently, car imports into the US are becoming more expensive due to a 25% tariff.

Tariffs for car parts are also planned to be effective from May onwards.

Yesterday, US President Trump announced that he would mitigate the consequences of the special tariffs he had implemented. Companies producing vehicles in the US are particularly expected to benefit from this.

Stellantis, the parent company of Opel, also withdrew its annual targets in the face of increasing uncertainties due to US tariff policy.

The company, which includes brands such as Fiat, Peugeot, and Jeep, reported that the impacts on sales volumes and the competitive environment are currently difficult to estimate.

General Motors had also withdrawn its annual targets for similar reasons.

Stellantis experienced a 64% profit drop in 2024 and burned over 6 billion euros in cash, particularly due to weak business in the US.

In the first quarter of 2025, the group’s revenue fell by 14% to 35.8 billion euros.

VW is also acting cautiously. Although the group confirmed its annual forecast, this forecast still does not include the tariff effects.

The Wolfsburg-based group had previously presented preliminary figures regarding daily operations.

Special issues such as carbon dioxide provisions in Europe, restructuring at the software subsidiary Cariad, and provisions set aside for the diesel scandal led to additional costs of approximately 1.1 billion euros, reducing the operating result by approximately 37% to 2.9 billion euros.

Arno Antlitz, Chief Financial Officer of VW, stated during the presentation of the figures, “The group needs to secure a competitive cost structure to remain successful in a rapidly changing world.”

Antlitz added, “Especially because global economic conditions are currently so uncertain, we must focus on what we can influence ourselves.”

Many car manufacturers, including Volkswagen, and representatives from other sectors had recently warned about the potential consequences of tariffs in a joint letter.