(Bloomberg) — Mercedes-Benz AG expects healthy auto returns this year as the German luxury-car maker navigates persisting supply-chain snarls by raising prices for its top-end models.
Mercedes shipped fewer cars in the first quarter yet auto revenue climbed 8% — largely because of rising sticker prices and shifting output to higher-margin models including its flagship S-Class sedan and G-Class sport utility vehicle. The company now sees carmaking returns at the higher end of its guidance.
Shortages of semiconductors and other components are crimping auto output, allowing Mercedes to command higher prices. Still, sales remain under pressure because of the war in Ukraine and pandemic lockdowns in China, the company’s biggest market. Volkswagen AG earlier this month warned of more supply woes and unpredictable swings in commodity prices.
“In this challenging environment resilience and pricing power are crucial,” Mercedes Chief Financial Officer Harald Wilhelm said Wednesday in a statement.
Mercedes gained as much as 2.9% in Frankfurt. The shares are still down about 5% this year.
Mercedes management is intensifying efforts to transform one of the most storied names in automaking into an all-electric rival to Tesla Inc. The company aims to have battery-powered models in all its segments this year, a staging post for its ambition to only sell electric cars by 2030.
Adjusted group earnings before interest and tax rose to 5.3 billion euros ($5.64 billion) in the first quarter, the German company said, beating the average analyst estimate of 4.77 billion euros.
The manufacturer expects the return on sales at its cars division to come in at the higher end of its guidance of 11.5% to 13% for the year. The division’s margin climbed to 16.4% in the three months through March, the highest on record.
Russia Hit
Like other major manufacturers, Mercedes is facing more supply-chain challenges following Russia’s invasion of Ukraine, and warned that the war continues to pose a risk. The company has halted business activities in Russia, a move that cost the company 709 million euros in the quarter.
Russia accounts for 2% of the company’s sales, according to an estimate from Bloomberg Intelligence. Before the war, Mercedes operated a factory outside Moscow that opened in 2019 with Russian President Vladimir Putin in attendance. The firm last month warned it has around 2 billion euros of assets at risk if Moscow decides to expropriate the property of foreign companies.
(Updates with shares in fifth paragraph. A previous version of this story corrected a time reference in the second paragraph.)
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