Mercedes Benz announced its annual results on Thursday. There was an indication of weak numbers with the company’s 2025 outlook gloomy, signifying the continued pressure in Europe.
Europe, its largest market, saw a 4% decline in terms of revenue, led by Germany which fell almost 12%. China is the 2nd largest market which saw a 12% revenue decline during 2024.
Overall EBIT, which is earnings before interest and taxes, was also down 31% and the company’s outlook is estimated ‘Significantly Below’ 2024 levels. This could mean up to a 15% fall based on the company’s definitions. It also expects Free Cash Flow to fall by 25% this year.
2024: A Year To Forget
The company reported a 3% fall in sales at 19.8 lakh units. Top End Cars which includes Maybach, AMG, S-Class, GLS saw a fall of 14% to 2.81 lakh units while Electric Vehicles segment was down 9% for the year to 3.68 lakh units.
With the fall in sales the overall revenues also reported a 4% fall. The earnings before interest and tax fell by a whopping 31% in 2024. This also impacted its Free Cash Flow to fall by 19%.
2024 Financials
- Group revenues down 4% to €145.6 billion vs €152.4 billion YoY
- Group EBIT down 31% at €13.6 billion vs €19.7 billion YoY
- EPS down 24% at €10.19 vs €13.46 per share
- Free cash flow down 19% at €9.2 billion vs €11.3 billion YoY
- Return on Equity at 8.7% vs 12.3% YoY
Outlook 2025: Expects EBIT & FCF To Be ‘Significantly Below’
While 2024 was a forgetful year, Mercedes expects 2025 sales ‘Slightly Below’ 2024 levels. This will also have an impact on revenues which are expected 'Slightly Below’ 2024 levels of €145.6 billion.
But while sales and revenues are expected to be slightly below previous year’s levels, Mercedes expects earnings before interest and tax to be ‘Significantly Below’ 2024 levels of €13.6 billion. The company justifies ‘Significantly Below’ levels for EBIT as a more than 15% impact.
It also expects Free Cash Flow to be ‘Significantly Below’ €9.2 billion and it could be a negative impact of more than 25%. This will have a negative impact on its return of sales metrics as well with expectation of a 6-8% returns vs 8.1% in the same previous year.
Amid this uncertainty though, investments in property, plant & equipment are expected to be ‘significantly above’ 2024 levels of €3.4 billion.
Uncertainty Of Tariffs & Trade Relations
The company in its investor presentation mentioned the current uncertainties in the global market apart from lacklustre demand in the form of tariffs and skewed trade relations. It mentioned the obvious current uncertainty with ongoing tensions between the United States and China, a market that accounts for 15% of overall revenues.
Mercedes also sighted a possible deterioration in relations between the EU and China posing uncertainties.
Chinese auto company BYD has pre-empted measures, inaugurating its first factory in Europe in 2017 in Hungary which could provide a growth pivot going forward as well.
Finally, future development of the relationship between the EU and the United States poses uncertainties. President Donald Trump has signalled that car imports into the USA will see tariffs. This could hamper most European car makers like Mercedes, BMW, Audi, Volkswagen.
An impact could be seen on Jaguar Land Rover as well. For the fiscal year 2025, the USA almost accounts for 25% of overall sales. While JLR doesn’t mention the specific models imported in a specific country, generally these are the high-end models.
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