European Carmakers Face Uncertain Future Amid Trump's Trade Tariffs

Strategic Insights -

The European car industry continues to face significant uncertainty as a result of Donald Trump's trade policies, despite a recent deal between the US and the EU to reduce tariffs. German carmakers, led by Mercedes-Benz and Porsche, have been lobbying for concessions to offset import tariffs, but now admit that this is unlikely to happen. The industry is bracing for the impact of the tariffs, with both companies expecting their adjusted operating profit to be significantly lower than forecast.

Key Takeaways:

  • Mercedes-Benz expects its adjusted return on sales margin at its car division to be between 4 and 6 per cent in 2025, down from a previously forecast range of 6 to 8 per cent.
  • Porsche expects its return on sales margins at 5 to 7 per cent, down from a previously forecast range of 6.5 to 8.5 per cent.
  • Both companies reported significant losses in the second quarter, with Mercedes-Benz's adjusted operating profit halved to €2bn and Porsche taking a €400mn hit from US tariffs.
  • The decline in sales in China and Europe contributed to the fall in deliveries, leading to restructuring and tariff costs.
  • The EU-US trade deal is likely to lead to a tariff rate of 15 per cent, down from 27.5 per cent, but this is still a significant burden on the industry.

Statistics:

  • 4-6 per cent: Adjusted return on sales margin at Mercedes-Benz's car division in 2025 (down from 6-8 per cent forecast)
  • 5-7 per cent: Return on sales margins at Porsche (down from 6.5-8.5 per cent forecast)
  • €2bn: Adjusted operating profit at Mercedes-Benz in the second quarter (down 50% from previous year)
  • €400mn: Hit in operating profit at Porsche from US tariffs
  • €33bn: Revenue at Mercedes-Benz in the second quarter (down 9.8% from previous year)
  • 27.5%: Tariff rate before EU-US trade deal (expected to fall to 15%)
  • 15%: Expected tariff rate under EU-US trade deal

Sources:

  • The heads of Mercedes-Benz and Porsche
  • Bloomberg
  • Reuters
  • Automotive News Europe