Mercedes-Benz Group AG has warned that profit margins will remain under pressure this year as tariffs and intense competition in China continue to weigh on its luxury vehicle business. The German automaker's China sales have dropped, contributing to the company's cautious outlook for 2024.

China represents Mercedes' largest single market, accounting for roughly 37% of global deliveries in 2023. The company faces mounting challenges from both domestic rivals like BYD and BMW, which have gained ground with aggressive pricing and new electric vehicle offerings. Recent tariff disputes between the EU and China have further complicated the operating environment for European luxury brands.

Mercedes joins other premium automakers in navigating a tougher Chinese market where demand growth has slowed and price competition has intensified. The company's warning signals potential margin compression across the luxury segment as manufacturers balance investment in electrification against pricing pressures. This development comes as Mercedes-Benz works to maintain its premium positioning while expanding its electric vehicle lineup to compete with local challengers.