SHOOTING STAR

Daimler Reports Four Billion Profit

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Mercedes is having a banner start to 2017. Picture source: Reuters

The newly introduced E-Class and a thriving China business are giving Daimler a strong start to the year. Sales in the first three months rose by 16 percent. That means Mercedes is growing three times faster than rival BMW.

Daimler hadn’t made it a secret that the company was doing well this year. But that the luxury automaker had doubled its pre-tax profit was a surprise. The company’s €4 billion ($4.2 billion) of earnings before interest and taxes was a feat made possible by the better valuation of its assets and the deft sale of properties (totaling almost €700 million). That doesn’t diminish the operating successes, however. The Mercedes car division is on a roll, which the company’s management is enjoying to the max.

Daimler could use the boost. The company needs to put the petal to the metal when it comes to ​​electric vehicles. While BMW is steadily increasing its sales of cars with electric motors, Mercedes is still all talk. The Stuttgart-based company is having to invest more and more money in the development of new powertrains. Earlier this month, the company announced it was accelerating the introduction of the electric brand “EQ.” Its 10 planned electric models are now slated to be released as soon as 2022, three years earlier than originally discussed. The rush is expected to cost Daimler at least an additional €10 billion. Investments in research are already up sharply in 2017 and 2018.

Daimler's 10 planned electric models are now slated to be released as soon as 2022, three years earlier than originally discussed. The rush is expected to cost them at least an additional €10 billion.

It’s risky, but there are no alternatives. Daimler must meet EU-imposed climate criteria by 2021. After early successes, things are now looking more problematic, because Mercedes is selling more gas guzzling SUVs. Meanwhile, comparatively efficient diesel fuel is quickly becoming a crutch that Mercedes cannot afford to lean on. The city of Stuttgart, where Daimler is based, has recently announced that it will periodically ban diesel vehicles due to high particulate emissions, unsettling customers across Germany.

What’s more, BMW’s CEO Harald Krüger has announced the “biggest model offensive in company history.” With its subsidiaries Mini and Rolls-Royce, BMW is planning to launch 40 new or revised models by the end of next year. Among them are the 3 and 5 series, which together make up almost half of BMW cars.

 

Markus Fasse covers the auto industry for Handelsblatt. To contact the author:fasse@handelsblatt.com

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