Revenue rose 7 percent to 46.6 billion euros and the company said demand for its products remained strong.
The company also cited spending on new technologies such as electric and autonomous vehicles. Among other things, tighter limits on carbon dioxide emissions in the European Union from 2021 mean carmakers must add electric cars to their sales mix and get customers to buy them.
"For Daimler, 2018 was a year of strong headwinds," said CEO Dieter Zetsche, presenting his last annual results before handing off to successor Ola Kallenius at the May 21 shareholder meeting.
He said that "we cannot and will not be satisfied" with lower profit margins. He added that the company was coming up with plans to increase profitability though declined to indicate what steps might be taken.
Zetsche said at the company's annual news conference that Daimler AG has "no concrete plans" to move production of GLE and GLS sport-utility vehicles to China from Tuscaloosa, Alabama, in order to avoid the import taxes.
Lower profits at the Mercedes-Benz division outweighed a strong performance from the trucks division, which includes the Freightliner brand. Truck division operating earnings rose 27 percent to 710 million euros.
For the full year, net profit fell to 7.6 billion euros from 10.6 billion in 2017, while revenues rose 2 percent to 167.4 billion euros.
The lower annual profit meant profit-sharing checks for 130,000 workers in Germany would fall to 4,965 euros from 5,700 euros paid out last year.