Mercedes-Benz eyes more direct sales amid earnings pressure
Send a link to a friend
[February 17, 2023] By
Victoria Waldersee
STUTTGART (Reuters) -Mercedes-Benz Group on Friday warned of lower
earnings this year amid economic uncertainty, and said it would look to
sell more vehicles directly in major markets such as Britain and Germany
as it continues to target high margins on flat volume.
The premium automaker expects a lower adjusted return of 12%-14% on
sales for its cars division in 2023 and group earnings slightly below
2022, even though sales at the Mercedes-Benz Cars business are expected
at the same level.
It pointed to sluggish demand in Europe, a slow rebound from coronavirus
restrictions in China, high energy and raw material costs and
inflationary pressures to justify the forecast, adding prospects were
better in the United States.
Sales of top-end vehicles, whose high margins have so far enabled the
carmaker to keep profits up despite rising costs, are still expected to
rise slightly on last year.
The German company's forecast chimes with warnings across the industry
of a challenging year ahead, with Germany's autos association predicting
car sales this year will hit around 74 million vehicles globally, up 4%
from last year but still 8% below pre-pandemic levels.
Mercedes-Benz's top priority is balancing price and volume after most
earnings growth last year came from net pricing increases, Chief
Financial Officer Harald Wilhelm said, adding: "We remain on the prudent
side."
Mercedes-Benz pledged in 2020 to cut fixed costs, capital expenditure
and research and development spending by more than 20% by 2025 from 2019
levels, a target it is still on track to meet despite inflation, Wilhelm
said.
The carmaker is "quietly" turning to a direct sales model in various
European markets including Britain and intended to do so in Germany as
well, Chief Executive Ola Kaellenius said, adding: "You turn yourself
from a wholesaler into a retailer. It changes your whole attitude in how
you run the business."
[to top of second column] |
The Mercedes-Benz logo is pictured at
the 2019 Frankfurt Motor Show (IAA) in Frankfurt, Germany, September
10, 2019. REUTERS/Ralph Orlowski
Selling directly saves costs for the company and removes concerns
for customers that they could get a better price at another dealer,
he added.
Asked how the company would defend its market share in China in the
transition to electric vehicles (EV), Kaellenius said the premium EV
market in the country was still in its infancy and advocated
"strategic patience".
Mercedes-Benz hit its forecast for a 13%-15% adjusted return on
sales in the cars division, reporting a 14.6% margin for 2022 and a
28% rise in earnings across the group to 20.5 billion euros ($21.81
billion).
"Given the rising input cost, we are encouraged Mercedes is putting
value over volume and planning with flat volumes in 2023 to protect
pricing," Bernstein Research analyst Daniel Roeska.
Shares were up 3.2% from Thursday's close at 74.92 euros at 1049
GMT.
The company committed on Thursday to buy back up to 4 billion euros
of shares by 2025 and will propose a dividend of 5.20 euros per
share, up from 5 euros last year, amounting to a total payout of 5.6
billion euros.
Fourth-quarter earnings came in at 5.4 billion euros, above
analysts' forecast of 5 billion euros in a Refinitiv poll.
($1 = 0.9398 euros)
(Reporting by Victoria Waldersee, Editing by and Jane Merriman and
Mark Potter)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|