Last Update 09 Dec 25

Fair value Increased 1.60%

MBG: Future Performance Will Reflect Balance Sheet Strength Amid Tariff And China Risks

Analysts have nudged their price target for Mercedes-Benz Group modestly higher, lifting fair value by about EUR 1 to roughly EUR 62.5. They cite a healthier balance sheet, shareholder friendly capital allocation and recent upward revisions to Street targets, despite lingering concerns around tariffs and China exposure.

Analyst Commentary

Street research on Mercedes-Benz Group has turned incrementally more constructive, with several firms lifting price targets while at least one voice has turned more cautious on near term macro and policy risks. The spread between the most optimistic and more conservative views underscores a debate around how resilient the group can be in a tougher external environment.

Bullish Takeaways

Bullish analysts highlight the group’s healthy balance sheet and shareholder friendly capital allocation as key supports for higher fair value, underpinning confidence in sustained dividends and buybacks.
Recent price target upgrades and a fresh Buy initiation at a major global investment bank suggest upside to consensus expectations, with some seeing intrinsic value meaningfully above current mid EUR 50s to low EUR 60s levels.
Supportive views argue that the premium segment remains undervalued relative to fundamentals, with negative industrial stub valuations seen as premature given Mercedes-Benz’s brand strength and pricing power.
Despite industry headwinds around tariffs, BEV transition and regulation, constructive research notes see Mercedes-Benz as relatively well positioned to execute on its strategy and protect margins.

Bearish Takeaways

Bearish analysts flag near term risks from potential U.S. tariffs, which could pressure profitability and constrain valuation multiples if trade frictions escalate.
Concerns about a deteriorating backdrop in China, including softer demand and competitive intensity, are viewed as a material overhang for growth and earnings visibility.
More cautious research maintains Neutral or Hold stances even after raising targets, indicating limited upside from current levels as macro and policy uncertainty offset company specific strengths.
The balance of views suggests that although the stock may screen attractively on valuation metrics, execution through a volatile regulatory and geopolitical cycle remains a key risk to rerating.

What's in the News

Senate Republicans plan a January hearing to challenge auto safety technology mandates, raising questions about future regulatory costs for carmakers including Mercedes-Benz Group (Wall Street Journal)
European carmakers such as Mercedes-Benz face potentially devastating production disruptions from renewed chip shortages tied to internal disputes at supplier Nexperia (Financial Times)
Automakers including Mercedes-Benz are racing to secure rare earths ahead of tighter Chinese export controls, amid fears of parts shortages and plant shutdowns (Reuters)
The White House is set to extend an arrangement easing tariffs on imported auto parts for another five years, offering cost relief to manufacturers including Mercedes-Benz (Bloomberg)
Senator Bernie Moreno says President Trump is weighing significant U.S. auto tariff relief that would favor vehicles with higher domestic content, with implications for Mercedes-Benz’s U.S. manufacturing footprint (Reuters)

Valuation Changes

Fair Value: risen slightly from approximately €61.55 to about €62.54 per share, reflecting a modest uplift in intrinsic value estimates.
Discount Rate: unchanged at 9.98 percent, indicating a stable view of the group’s risk profile and cost of capital.
Revenue Growth: inched higher from roughly 2.46 percent to about 2.47 percent, signaling a marginally more optimistic top line outlook.
Net Profit Margin: edged down slightly from around 5.84 percent to about 5.83 percent, pointing to a marginally more conservative profitability assumption.
Future P/E: increased modestly from about 9.12x to roughly 9.27x, implying a slightly higher expected valuation multiple on forward earnings.

Expansion into electric vehicles, digital platforms, and advanced in-car technologies is expected to support premium pricing, recurring revenues, and long-term earnings growth.
Operational efficiency, supply chain optimization, and sustainability initiatives aim to strengthen cost resilience, net margins, and adaptability to shifting industry dynamics.
Weak China demand, trade tensions, high electrification investment, underwhelming electric vehicle rollout, and persistent industry pressure threaten margins, earnings, and Mercedes-Benz's transition.

Catalysts

About Mercedes-Benz Group

Operates as an automotive company in Germany and internationally.What are the underlying business or industry changes driving this perspective?

The upcoming launch of over 25 new models-including core segment EVs built on the advanced, flexible Mercedes-Benz Electric Architecture (MB.EA)-positions Mercedes-Benz to capitalize on the global shift toward electric vehicles and premium electrification, supporting future revenue growth and higher average selling prices.
Strategic emphasis on proprietary digital platforms, notably the MB.OS operating system, will enable Mercedes-Benz to generate high-margin, recurring revenue through over-the-air updates and connected services, driving long-term improvement in operating margins and earnings.
The company's continued focus on premium brand positioning and operational efficiency (e.g., model line streamlining, supply chain optimization, NLP efficiency program) supports structurally higher net margins and cost resilience, counteracting current margin pressures and laying groundwork for future margin expansion.
Active investments in advanced driver assistance systems (ADAS) and next-generation in-car software enable Mercedes-Benz to address growing demand for safety, convenience, and autonomous features, bolstering product differentiation and supporting sustained premium pricing in future sales.
Ongoing efforts to localize supply chains, achieve battery flexibility (NMC/LFP), and adopt sustainability-led manufacturing practices are expected to grant cost advantages, greater supply resilience, and favorable ESG capital allocation, positively impacting future net margins and lowering cost of capital.

Mercedes-Benz Group Earnings and Revenue Growth

Mercedes-Benz Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Mercedes-Benz Group's revenue will grow by 1.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.9% today to 5.8% in 3 years time.
Analysts expect earnings to reach €8.5 billion (and earnings per share of €10.19) by about September 2028, up from €6.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €9.8 billion in earnings, and the most bearish expecting €4.8 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.2x on those 2028 earnings, up from 7.5x today. This future PE is greater than the current PE for the GB Auto industry at 8.5x.
Analysts expect the number of shares outstanding to grow by 0.6% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.81%, as per the Simply Wall St company report.

Mercedes-Benz Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Mercedes-Benz is experiencing a challenging sales environment, particularly in China, with management explicitly guiding for significantly lower sales in 2025 versus 2024, driven mainly by China-a risk that could lead to revenue contraction and margin pressure if demand and pricing continue to deteriorate in the company's most important premium market.
The company is facing direct and ongoing headwinds from global tariffs and trade tensions, with a stated 150 basis point margin impact for the full year and continued uncertainty around future trade deals and localization efforts-this threatens both net margins and profitability due to higher costs and unstable market access.
Substantial and increasing investment in electrification, digitalization (MB.OS), and restructuring (NLP program) is inflating R&D and capex outlays, with these costs expected to peak in 2025 and only start declining in 2026, which could compress free cash flow and dampen net earnings for several years.
The ramp-up of electric vehicle (BEV) and electric van sales has not met some earlier regulatory or market expectations; light commercial vehicle BEV penetration remains lower than forecast, and management highlights the need for a "reality check" on the pace of decarbonization in Europe-hindering Mercedes' long-term transition and potentially exposing it to tightening emissions regulation and future compliance costs (impacting margins and capital efficiency).
The industry's margin structure is under pressure from persistent overcapacity, softening net pricing, lower used car values, high cost of CO₂ compliance, and intense competition from both traditional peers and new EV entrants, with management noting a need for brand integrity management to preserve pricing power amid volume pushes-putting long-term gross margins and earnings at risk.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €60.081 for Mercedes-Benz Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €83.0, and the most bearish reporting a price target of just €40.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €146.0 billion, earnings will come to €8.5 billion, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 9.8%.
Given the current share price of €53.15, the analyst price target of €60.08 is 11.5% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Mercedes-Benz Group?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

New EV Models And Digital Platforms Will Drive Electrification