Mercedes Profit Slumps 19% in Q1, New Models Aim to Revive Margins

Mercedes profit plunged 19% to €2.9B as sales fell 7% amid fierce competition in China. The Silicon Review reports on the CLA and GLC revamp as the luxury brand targets 12% margin by year-end.

Mercedes profit took a significant hit in the first quarter of 2026, with the luxury automaker reporting earnings before interest and taxes of €2.9 billion ($3.5 billion), a 19% decline from the same period last year. Revenues slipped 5% to €33.5 billion, while car unit adjusted returns fell from 13.5% to 9.5% as global sales dropped 7% to 500,616 vehicles.

The decline was driven by a slowdown in China, where sales fell 12% amid a brutal price war and weak consumer demand. The luxury brand also faced model changeovers for key vehicles like the EQC and EQS sedans, while start-up costs for new vehicles weighed on profitability. Mercedes profit was further pressured by the ongoing Iran war, which disrupted supply chains and raised raw material costs.

"Following a more challenging start to the year, we expect stronger quarters ahead," said CEO Ola Källenius, pointing to a wave of new models. The company's model push includes the revamped CLA entry-level sedan and the new GLC SUV, both of which have seen strong early orders in Europe. The updated S-Class sedan, featuring the brand's latest electric architecture, is also scheduled to launch in the third quarter.

Mercedes profit margins improved sequentially, from 8.9% in Q4 2025 to 9.5% in Q1 2026, as the company's cost-cutting program delivered €500 million in savings. The automaker is targeting double-digit margins in the second half, aiming for a full-year return of 12%.

The company confirmed its 2026 outlook, projecting slightly higher sales than 2025. However, it cautioned that geopolitical tensions, particularly regarding potential new tariffs on Chinese EVs, could impact its European production footprint. Mercedes-Benz Vans was a bright spot, delivering strong profitability with a 15% return.

With Mercedes profit slumping 19% while the company prepares its most aggressive model offensive in years, The Silicon Review examines whether the CLA and GLC can revive the Three-Pointed Star's fortunes or if the China slowdown is structural, not cyclical.