Mercedes-Benz Delivers Results Within Guidance Amid Global Complexity
Mercedes-Benz Group AG (ticker symbol: MBG) closed 2025 with financial performance in line with its guidance, demonstrating resilience amid a highly complex and dynamic global operating environment. Strong demand for Top-End Vehicles, disciplined cost management, and focused execution enabled the Group to generate solid cash flow while maintaining strategic momentum. Top-End models accounted for 15% of total Mercedes-Benz Cars sales in 2025, underscoring the success of the brand’s premium-focused strategy. Building on this foundation, and marking 140 years since Carl Benz registered the patent for the world’s first automobile, Mercedes-Benz is accelerating its most ambitious product and technology rollout to date to fuel sustainable growth in the years ahead.
Leadership Perspective and Strategic Confidence
Ola Källenius, Chairman of the Board of Management of Mercedes-Benz Group AG, highlighted the company’s operational discipline and innovation-driven strategy, emphasizing that 2025 marked the successful launch of the largest product and technology program in the company’s history. Mercedes-Benz introduced class-leading advancements such as the MB.OS operating system, a new point-to-point assisted driving system, and a new benchmark in electric performance with the Concept AMG GT XX. Despite market volatility, financial results remained within guidance due to a strong focus on efficiency, speed, and flexibility. With more than 40 new models scheduled to launch within three years, demand for vehicles such as the new CLA, GLC, and S-Class confirms strong customer enthusiasm and validates the company’s competitive product portfolio heading into 2026.
Product Launch Momentum and Market Reception
Mercedes-Benz began 2025 with the market introduction of the all-new CLA and concluded the year by unveiling the all-new GLB, both positioned as entry points into the Mercedes-Benz brand, alongside the all-new GLC, a cornerstone model in the core segment. The all-new CLA earned the prestigious title of Europe’s “Car of the Year 2026” and was named Euro NCAP’s “Best Performer” among vehicles tested in 2025, reinforcing its leadership in safety, design, and technology. These vehicles are part of a broader campaign to introduce more than 40 new models by 2027, with market reception exceeding expectations, order books extending well into the second half of 2026, and production operating on three shifts to meet demand, contributing to a strong sequential increase in quarterly battery-electric vehicle volumes.
Advancing the Top-End Portfolio and S-Class Evolution
Mercedes-Benz further strengthened its Top-End portfolio with a major upgrade to the flagship S-Class, featuring a comprehensive powertrain refresh including a new V8 engine and the integration of the Mercedes-Benz Operating System (MB.OS). This upgrade extends advanced digital intelligence deeper into both Top-End and internal combustion engine segments. The enhanced S-Class incorporates an updateable MB.OS supercomputer, fourth-generation MBUX, and MB.DRIVE ASSIST PRO point-to-point assisted driving, initially launching in China and scheduled for U.S. availability later in 2026, reinforcing Mercedes-Benz’s leadership in intelligent luxury mobility.
Medium-Term Margin Ambitions and Sales Targets
Mercedes-Benz Cars aims to achieve annual sales of approximately two million vehicles in the medium term, supported by a more than 15% increase in Top-End Vehicle sales and a doubling of the xEV share. The company targets an adjusted Return on Sales of 8% to 10% through a combination of strong product momentum from its expansive launch program and relentless cost discipline. These objectives are supported by the Next Level Performance initiative, which encompasses reductions in fixed and variable costs as well as lower capital intensity, strengthening cash conversion and long-term value creation.
Manufacturing Footprint Optimization and Capacity Alignment
Production operations are being restructured to enhance efficiency and flexibility, with global production capacity aligned to approximately 2.2 million units by 2028. Assembly operations at the COMPAS Joint Venture plant in Aguascalientes, Mexico, will conclude in 2026, while production capacity in Germany will be optimized to around 900,000 units annually. The Kecskemét plant in Hungary will scale up to a capacity of 400,000 vehicles, reinforcing Mercedes-Benz’s European manufacturing backbone while supporting regional demand and cost efficiency.
Cost Reduction Through Operational Excellence and Technology
Mercedes-Benz is implementing wide-ranging measures to reduce production costs per unit by a total of 10% from 2027 onward compared to 2024 levels. These measures include lower energy costs, increased equipment utilization, higher automation, the application of artificial intelligence, and logistics optimization through improved transport routing and selective outsourcing. Together, these initiatives are designed to enhance productivity, reduce complexity, and strengthen competitiveness across global operations.
Fixed-Cost and Personnel Optimization Measures
Significant fixed-cost reductions were implemented in 2025, complemented by a comprehensive personnel cost reduction program launched during the year. These actions are expected to further improve efficiency in 2026 and 2027, supporting a targeted 10% reduction in fixed costs between 2024 and 2027. Additional measures include a reduction in management positions, outsourcing of non-core activities, the sale of company-owned retail operations in Germany, and the consolidation of customer-facing activities from Sales & Customer and Financial Services into a fully integrated organization.
Material Cost Savings and Supply Chain Strategy
Material cost reductions are projected to reach approximately 8% by 2027 and increase to 10% beyond that timeframe. These savings will be driven by a strengthened local-for-local sourcing approach, increased procurement from best-cost countries, and radical cost engineering initiatives. Close collaboration among research and development, purchasing teams, and suppliers, along with greater standardization of components and modular systems, will further enhance cost efficiency and supply chain resilience.
Capital Expenditure and R&D Investment Outlook
Capital expenditure and research and development investments reached their peak in 2025 and are expected to decline starting in 2026. Between 70% and 80% of platform investments will be allocated to Top-End and core segment vehicles, ensuring focus on the most profitable and strategically important segments. A scalable technology stack, including MB.OS and MB.DRIVE advanced driver assistance systems, will be deployed across the entire product portfolio, covering both internal combustion and battery-electric architectures in every vehicle segment.
Strategic Expansion and Localization in China
Mercedes-Benz continues to strengthen its position in China through a focused strategy that expands local research and development partnerships and accelerates deep localization across the supply chain. With a customer base exceeding seven million in China, direct consumer insights are shaping China-specific models that integrate top-tier intelligence and advanced technologies across both ICE and BEV lineups. Strategic partnerships with leading technology players such as Momenta and ByteDance are accelerating innovation tailored for Chinese consumers while contributing to global technology development.
Advancing ADAS and China-Focused Innovation
As part of its Chinafit technology roadmap, Mercedes-Benz is advancing Level 2 urban and highway navigation solutions, defining a new benchmark for safety engineering in advanced driver assistance systems. These solutions, co-developed with Momenta, deliver a distinctly Mercedes-Benz driving experience while meeting the specific demands of China’s complex traffic environments. By 2027, Mercedes-Benz and its local joint venture aim to achieve a highly efficient value chain with a 10% reduction in local material costs, 20% lower variable production costs, and a 20% reduction in fixed costs compared to 2024, alongside continuous network optimization.
Dividend Proposal and Shareholder Returns
At the Annual General Meeting scheduled for April 16, 2026, the Board of Management and Supervisory Board will propose a dividend of €3.50 per share, compared with €4.30 for the prior year. The dividend reflects the company’s balanced approach to rewarding shareholders while preserving financial flexibility to support ongoing transformation and investment priorities.
Capital Allocation and Share Buyback Program
In November 2025, Mercedes-Benz launched a share buyback program of up to €2 billion, excluding incidental costs, to be executed over a period of up to 12 months. By the end of 2025, approximately €300 million worth of shares had been repurchased, leaving up to €1.7 billion available for buybacks in 2026. This initiative aligns with the company’s established capital allocation framework, under which future free cash flow from the industrial business, after potential mergers and acquisitions, will be used to fund dividend payments and share repurchases, reinforcing long-term shareholder value.
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