Mercedes-Benz AG raised its expectations for a second time this year with demand still outrunning supply even as economic gloom spreads.
(Bloomberg) — Mercedes-Benz AG raised its expectations for a second time this year with demand still outrunning supply even as economic gloom spreads.
Robust sales especially for high-end models and healthy pricing are underpinning the outlook in the face of surging energy costs and persistent supply-chain problems, it said Wednesday. Mercedes also reported a third-quarter jump in earnings before interest and tax to €5.2 billion ($5.2 billion).
The German company now sees group profit significantly higher than a year ago, up from a projection of a “slight” gain. For the core car division, the adjusted return on sales is expected to rise to as much as 15%, up from as much as 14%. Mercedes also raised the outlook for its vans division.
The maker of the EQS sedan is working through pent-up demand after severe shortages of semiconductors restricted production for months. With some of the supply-chain pressure now easing, attention has shifted to how resilient automakers will be in the face of a jump in interest rates, ongoing covid restrictions in China and the energy crisis in Europe. General Motors Co. on Tuesday reported strong results thanks to brisk sales of luxury Cadillac SUVs and its largest trucks.
At Mercedes’s main car division, returns climbed to 14.5% in the three months through September following a jump in deliveries.
Regional Weakness
While Mercedes raised its guidance, record inflation and surging interest rates are hitting its business in the US and Europe, where the company downgraded sales expectations. The carmaker now sees deliveries in the US “significantly” lower than the prior year, compared with a slight decrease previously. In Europe, sales will decline further from an already-low level, a downgrade from an unchanged forecast.
Weaker US and European markets are expected to be offset by significantly higher sales in China, where tax breaks for car purchases are set to boost demand after a series of stringent pandemic lockdowns. Overall, Mercedes stuck to a projection for a slight rise in global deliveries for the year.
Earlier this month, the luxury-car maker pledged to deliver solid returns next year even as the global outlook is set to take a turn for the worse, as part of a plan to shift its model portfolio upmarket where buyers are less affected by economic cycles. By 2025, Mercedes is targeting an operating margin goal of 14% in a favorable environment and no lower than 8% in poor conditions.
(Updates with carmaking returns in fifth; US, Europe market downgrade in sixth paragraphs)
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