Mercedes and Porsche hit the brakes: is the golden age of luxury cars coming to an end?

The icons of German automotive excellence seem to be losing their grip. The first half of 2025 marks a bitter turning point for two European industry giants: Mercedes-Benz and Porsche. The numbers speak for themselves, but behind the figures lies a deeper transformation. Is the age of unchecked luxury driving truly over?

Mercedes, long a symbol of premium engineering, saw its profits plunge by 55.8% compared to the same period in 2024, dropping to €2.68 billion from €6.08 billion. And this isn't just a temporary setback. The group has already revised its full-year outlook downward. The message is clear: the era of certainty is over, and 2025 is shaping up to be a tough test.

Porsche is faring no better. Known for blending performance and prestige, the brand suffered an even steeper decline: -67% in first-half profits, from €3.06 billion to €1.01 billion. Even more concerning is the drop in vehicle deliveries, down 6.1% to 146,391 units. A sign that even Porsche's brand power is no longer immune to market turbulence. CEO Oliver Blume was blunt: “This is not a storm that will simply pass,” he stated grimly.

Tariffs Take Their Toll

Among the primary culprits behind the slump is the rise in trade tariffs, particularly those triggered by increasing tensions between Europe, China, and the U.S. German exports, traditionally reliant on wealthy global markets, are now hindered by barriers that squeeze margins and stifle demand.

In a time when the shift to electric vehicles demands massive investment and emerging markets push for more affordable options, premium brands are caught in a paradox: retain exclusivity, yet seek new customers. Meanwhile, operating costs are rising.

A Crisis for Automotive Luxury?

The drop in profit margins—Porsche now expects as low as 5%, down from a previous floor of 6.5%—calls into question the very model that supported Germany's automotive dominance for decades: expensive cars, sold at high margins, in a globalized marketplace. That model is now under strain, squeezed by geopolitics, economic uncertainty, and increasing competition—especially from Asia—in both the luxury and performance segments.

What happens next will be crucial. Innovation, cost-cutting, and strategic repositioning are the new imperatives. But there's another question hanging in the air among analysts and investors: is the decline of Mercedes and Porsche just a phase—or the beginning of a fundamental redefinition of what a “luxury car” truly is?

One thing is certain: the road ahead won’t be smooth. And this time, not even the most prestigious badges can rely on their legacy alone to pull through.