Mercedes-Benz Cars reported a sharp drop in second-quarter operating profit after recording major write-downs tied to its Chinese joint ventures.
Mercedes-Benz Cars reported a 94% decline in operating profit for the second quarter of 2025, falling to about $57 million, after recording a about $819 million impairment related to its Chinese joint ventures. At the same time, the Mercedes-Benz Group increased net profit by 13.5%, supported by the sale of its stake in Daimler Truck and stronger results from its financial services division.
Mercedes-Benz's second-quarter financial results require a closer look before drawing conclusions. The group's net profit officially rose 13.5% to about $1.26 billion, which appears encouraging at first glance. However, the picture changes when looking at the passenger car business. Mercedes-Benz Cars' operating profit fell 94%, dropping from about $910 million a year earlier to just about $57 million.
The German automaker is not alone in facing these challenges. BMW, Porsche, and Mercedes-Benz itself have been dealing with slowing demand across Asia for several years. However, the company has not previously recorded an accounting impact of this magnitude.
The source of the problem lies not in Germany's factories or the company's European dealer network, but in China. Mercedes-Benz recorded an impairment of about $819 million on investments in its joint ventures operating in the Chinese market.
Formally, this was an accounting adjustment that did not affect the company's actual cash flow during the quarter, but it had a decisive impact on the reported results. Without the impairment, the decline in operating profit would have been far less severe. Adjusted EBIT for the passenger car division, excluding the China-related impairment, totaled about $1.06 billion, down 26% year over year, with a 4% operating margin that still falls within the company's stated target range of 3% to 5%.
Behind those figures is a sharp decline in China. Passenger vehicle deliveries fell 30% year over year to 417,765 vehicles. By contrast, deliveries increased 4% in Europe and 10% in the United States, indicating that the downturn is concentrated in the Chinese market.
The brand's average selling price also declined from about $78,700 to about $75,200 per vehicle. That reflects growing competitive pressure from a new generation of Chinese automakers offering more advanced technology at more aggressive prices than their European rivals.