Mercedes-Benz Manufacturing Hungary reported a 40% drop in profit as production fell 20% at its Hungarian base, mirroring the slump in the automotive sector.

The company, which established its base in Kecskemet in central Hungary in 2012, saw its net profit plunge 40% to €57.6mn last year as revenues declined 21% to €4.17bn. The slump coincides with a major plant restructuring in preparation for a new generation of vehicles.

Last year, 146,000 vehicles rolled off the production lines, down 20% from 2023.

Mercedes makes CLA Coupé, CLA Shooting Brake, A-Class and their hybrid variants, as well as compact AMG models and the fully electric EQB at its Hungarian unit.

In October, the plant marked the production of its two-millionth vehicle, fittingly, a pure-electric EQB.

The premium carmaker is investing over €1bn to expand its Hungarian site on 400 hectares, doubling production capacity to 400,000 and adding 3,000 new jobs. Construction works are on schedule, it said in the press release on May 28.

The expansion will lift Hungary’s annual vehicle production capacity to over 1mn, Foreign Minister Peter Szijjarto said at a conference earlier this month.

Hungary’s automotive sector, accounting for a quarter of industrial output, has been hit hard by weak external demand, with key export destinations, especially Germany and other Western European countries, facing sluggish car sales and setbacks in the electric vehicle (EV) transition. Given that over 90% of domestic automotive output is export-oriented, the sector is particularly exposed to the deterioration of market conditions.

The country could be among the biggest losers in a transatlantic trade war, according to analysts. Sweeping tariffs by Washington could hurt Hungary's already deteriorating economic prospects, they added.

Mercedes will begin production of Mercedes-Benz Modular Architecture (MMA) vehicles in early 2026, followed by fully electric models based on the MB.EA (Mercedes-Benz Electric Architecture) platform. To accommodate this shift, operations were reorganised in 2024, with the site moving to a two-shift system and many employees undergoing upskilling programmes.

Mercedes said the share of materials and services purchased from local suppliers reached 44%.

Sustainability remains a focus of the company and the construction of a 40-MW solar park will start later this year. The Kecskemet factory has been carbon-neutral since 2022, and the share of renewable energy will cover 70% of the company’s energy needs by 2030.