The German automaker issued a muted 2018 forecast with quarterly results yesterday, showing the strains of the spending demands at its Mercedes luxury car unit. While new technologies are inflating research and development budgets, the cost of materials is also mounting.
“The outlook is a disappoint- ment,” Juergen Pieper, an analyst at Bankhaus Metzler, said. “The drop in earnings at the cars division shows the profit dynamic is lacking.”
Daimler and its peers are feeling their way through a generational shift that’s exposing the industry to unprecedented demands while offering an uncertain pay-off. New regulations and competition from tech companies have spurred big bets on cars that consumers haven’t fully embraced.
The industry is grappling with decisions on how quickly to introduce new models, how to forecast demand, and how to organise their huge global factories and supply chains.
Daimler’s subdued outlook overshadows a record run, fuelled by demand for its overhauled E-Class and a number of new SUVs. The company sold more cars last year than ever before, and posted record revenue and profit as well.
For its vehicles division with the Mercedes-Benz and Smart city car brands, Daimler expects earnings in 2018 at the level of a year ago, compared with last year’s 13percent jump in profit.
“Our outlook is dampened by currency exchange rates and another expected rise of spending demands,” chief executive Dieter Zetsche said at their annual media briefing in Stuttgart. The two developments will combine for a 2billion (R29.5bn) headwind.
Daimler shares fell by 2.6percent in Frankfurt. The stock was down 1.3percent to 72.76 at 10.33am, giving the company a market value of 78bn.
Fourth-quarter earnings before interest and tax were 3.47bn, Daimler said, weighed down in part by a diesel recall that cost them 425million in 2017. Analysts had forecast 3.73bn on average. Revenue advanced to 43.6bn.
Earnings this year will be in the “magnitude of the previous year”. In addition to industry pressures, the drop in the dollar is emerging as a challenge this year for European companies like Daimler, that sell a lot to the US.
- Bloomberg/African News Agency (ANA)