The maker of luxury limousines, off-roaders and hatchbacks is aiming
to raise the average return on sales at Mercedes-Benz Cars to 10
percent, from 6.5 percent in 2013 and 8 percent in the fourth
quarter, to close the profitability gap with rivals.
The launch of a rejuvenated range of models including a C-Class
sedan, the CLA compact coupe, the A and B-Class compact hatchbacks
and the top-of-the line S-Class limousine puts Daimler in a sweet
spot to raise profitability, Zetsche said.
"The overall target of 10 percent means more in good times, we are
well on our way to hitting these targets," Zetsche told analysts,
referring to a "medium-term" target.
BMW and Audi, both of which have yet to publish full-year results,
last reported a quarterly automotive operating margin of 9 and 9.4
Profits will rise with the rollout of new cars that use a high
proportion of common parts thanks to Daimler's modular front-wheel
drive architecture and its new its rear-wheel-drive architecture.
"The main thrust definitely is product," Zetsche said, noting that
Mercedes is about to launch the C-Class midsize premium car, its
biggest volume selling model, using the rear-wheel drive
This will allow Daimler to reduce production costs per model by a
double digit percentage amount, and to increase the speed of
production, Zetsche said.
Production of the C-Class has started at Daimler's plant in Bremen,
Germany and will be expanded to factories in China, South Africa,
and the United States in what amounts to the most ambitious product
rollout in Daimler's history.
Daimler also plans to add to its range of compact cars by
introducing the GLA compact off-roader, which uses the same
architecture as the A-Class and B-Class cars, and which will have
higher margins than previous models, Zetsche said.
Demand for new products including the CLA compact coupe is high
enough to allow Daimler to raise sales without any heavy
discounting, a tactic which tends to erode margins.
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Daimler will also seek to improve the profitability of its
subcompact SMART city car, which the German carmaker is developing
on a joint platform together with Renault's Twingo.
"SMART was a major source of losses in the beginning years. We
have made some significant adjustments," Zetsche said.
Daimler's next SMART is set to be launched this year but may not
achieve the return on sales of 10 percent like its premium-segment
sister brand Mercedes, he said.
He also highlighted signs that an overhaul of its China business was
"The biggest element of our profitability gap remains China, where
we were in a pretty poor condition in comparison to our peers,"
Daimler refocused its Chinese operations in March, merging its sales
activities for imported and locally made Mercedes-Benz cars into a
joint venture company in an effort to clamp down on discounting.
It used the introduction of a facelifted version of the new E-Class
sedan in China to cut the level of discounting in half while at the
same time almost tripling sales volumes.
"We see the next opportunity with the C-Class this year. It is
basically with the C and E-Class where we had the problem," Zetsche
Inventories of the old C-Class are low, he said, a factor which
should help create pent-up demand for the next version.
(Reporting by Edward Taylor; editing by
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