Germany’s luxury automakers, those titans of Teutonic engineering, are embracing the art of pessimism as they slash their earnings forecasts. Mercedes-Benz and Porsche, the crème de la crème of carmakers, find themselves caught between the rock of Trump’s tariffs and the hard place of China’s cooling demand. It’s as if the universe decided that German efficiency needed a bit of cosmic irony.
Mercedes, with all the grace of a stumbling elephant, announced that its revenue in 2025 will be “significantly below” last year’s. That’s corporate speak for “brace yourselves for a bumpy ride.” The profit margins, once the envy of the automotive world, now look like a New Year’s resolution—ambitious yet elusive.
In the first half of the year, the company reported a profit plunge, more than halving from the previous year. U.S. vehicle sales shrank by 6%, while China, ever the fickle market, saw a 14% drop. Tariff policy, they claim, is the villain of this story. It’s almost as if globalization has a dark side—who could have seen that coming?
Porsche, under Volkswagen’s wing, is having its own existential crisis, cutting earnings forecasts for the third time this year. Their profit nosedived by two-thirds, thanks to a €400 million ($462 million) tariff bill. It’s a bit like expecting to find a Porsche in your driveway and instead getting a hefty parking ticket.
The U.S. tariffs hit Porsche particularly hard since every vehicle they sell there is shipped from Europe. It’s almost poetic, really; the company that makes cars designed to conquer Autobahns is itself conquered by tariffs. Meanwhile, in China, demand for their high-end chariots has collapsed faster than a soufflé in an earthquake.
Porsche did see a glimmer of hope in North America, with deliveries rising as dealers rushed to beat the tariff clock and the company vowed to keep prices steady. But in China, sales plummeted nearly 30%, citing “intense competition.” Perhaps the competition is just reality reminding Porsche that even luxury has its limits.
For a while, German automakers faced a 27.5% tariff for vehicles headed to the U.S., but a recent trade deal between the European Union and the U.S. reduced this to 15%. Mercedes and Porsche, ever the optimists, adjusted their forecasts accordingly. It’s as if they expect the market to react rationally—how quaint.
Mercedes, with its SUVs rolling off the line in Tuscaloosa, Alabama, might benefit from zero E.U. tariffs on American-made vehicles. Harald Wilhelm, the CFO, assures us that the U.S.-E.U. trade deal isn’t a gift to the Americans. But the notion that this deal “will help, not hurt us,” sounds like the kind of optimism you’d expect from someone trying to sell you a bridge.
Yet the Alabama-made cars face tariffs as high as 100% when shipped to China. As if the company didn’t have enough problems, this springtime tariff tango added another layer of complexity to Mercedes’ woes in China, which accounted for around a third of its sales so far this year. It’s a bit like trying to solve a Rubik’s cube with one hand tied behind your back.
In this grand theater of economic absurdity, Germany’s luxury automakers find themselves grappling with geopolitical follies and market caprices. And while they may be trimming their expectations, one can’t help but wonder if they’re also trimming a bit of their hubris. After all, even the mightiest empires have their moments of reckoning.
