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Mercedes says focus on high-end cars is starting to pay off

Published Jul 27, 2022

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Stuttgart - Mercedes-Benz has upped its forecast for full-year sales as its decision to focus on top-of-the-range models begins to pay off despite supply constraints in the industry.

The Stuttgart-based group said in a statement that its net profit inched forward to 3.2 billion euros (R55.3 billion) in the second quarter from 3.1 billion euros a year earlier on a seven-percent increase in revenues.

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Unit sales, however, declined by seven percent in the period from April to June, as a shortage of semiconductors put the brakes on production.

Mercedes says its resilient revenue figures resulted from its decision to focus on higher-end models with larger margins.

The carmaker announced in May that it would refocus its efforts on the higher end of the luxury car market. Essentially the future model range will be divided into three categories: Entry Luxury, Core Luxury and Top-End Luxury.

The carmaker said it was raising its revenue outlook for the full year to "significantly above" the 167.9 billion euros (R2.8tr) it booked last year. Mercedes also raised its forecast for underlying or operating profit.

Chief executive Ola Kallenius said the group had managed the bottlenecks in supply as well as "increasingly complex macroeconomic and geopolitical challenges."

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Russia's invasion of Ukraine has clouded the outlook for the economy in Europe and raised fears of a recession, as Moscow threatens to cut off gas supplies to the continent.

Mercedes, whose home market would be acutely affected by a shutdown in gas supplies, said it was looking at ways of "substituting the use of natural gas in vehicle production.

And the carmaker said it could reduce its usage by "around 50 percent".

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Mercedes was also steeling itself against a general economic downturn, but had "good reasons to remain confident, with ongoing strong demand", Kallenius said.

AFP

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