Seoul Gazette - Mercedes-Benz flags cost cuts, tough year ahead after torrid 2024

Shares of the car giant fell over three percent in Frankfurt following the announcement of its results, which marked the latest bit of bad news for Germany's crisis-wracked auto sector.

In 2024, the manufacturer's net profit slid 28 percent to 10.4 billion euros ($10.8 billion) while revenues were also down about four percent to 145.6 billion euros.

The group announced plans to slash production costs by a tenth in the next two years and warned that 2025 would be another difficult year, with sales set to slow further and profit margins worsening.

CEO Ola Kallenius insisted that Mercedes was "taking steps to make the company leaner, faster and stronger", in "an increasingly uncertain world".

Germany's auto titans, long a pillar of the economy and among the country's major employers, are reeling from a stuttering shift to electric vehicles, fierce competition in China from local rivals and weakening demand elsewhere.

The fading fortunes of the auto sector have become symbolic of a broader malaise affecting Europe's struggling top economy -- a key battleground ahead of a general election at the weekend.

The Stuttgart-based group, which employs 166,000 people worldwide, did not immediately give details on the cost-cutting drive, such as on potential job losses.

- 'Intense market' China -

In China, Mercedes's biggest single market, sales dropped seven percent in 2024.

German manufacturers all invested heavily in China in recent decades and came to rely on the world's biggest auto market for a hefty chunk of their sales and profits.

But they are increasingly threatened by successful Chinese rivals, such as electric carmaker BYD, which are eroding foreign manufacturers' market share as they offer technology-packed models that appeal to local consumers.

Kallenius described China as "the most intense market in the world, with 100-plus companies vying for the new energy vehicle market", while also noting that consumer demand had generally been weak in the region since the coronavirus pandemic.

While the Chinese market represented a "very hard competition going forward", Mercedes is "gearing up for it and we're going to fight for our position," he added.

Sales of Mercedes's electric vehicles in 2024 plunged 23 percent, underlining the slowdown in the shift to EVs that is weighing heavily on carmakers across Europe.

On the outlook for 2025, the manufacturer said it expected slightly lower revenues than last year as vehicle sales slow further and lower profit margins in its car division.

Pal Skirta, an analyst from Metzler Bank, said the 2024 results were in line with expectations but the outlook for this year was "disappointing, particularly regarding profitability".

The market had expected a higher outlook for the car division's profit margins, he said, while adding that the announced cost-cutting measures were "unlikely to provide immediate relief".

Despite the bleak results, the carmaker sought to strike an upbeat note, saying it expected sales to pick up in the coming years due to the release of new and refreshed models.

There was also more positive signs in the final quarter of 2024, with overall sales up slightly, driven by a rise in China.

Germany's auto sector has had a steady stream of bad news in recent times.

In December, Europe's biggest carmaker Volkswagen announced plans to cut 35,000 jobs in Germany by 2030, although it held off from closing factories on home turf for the first time, as had been feared.

BMW has also seen its profits slump due to worsening sales in China, while a string of auto suppliers, such as Continental and Bosch, have slashed jobs.

G.Seong--SG