Daimler slashes car sales outlook as chips wipe out growth

Daimler AG said early-year growth for its main Mercedes-Benz division will be erased by the global semiconductor shortage that the luxury-car maker expects to put a damper on the second half.

By: Bloomberg
| Updated on: 21 Jul 2021, 13:49 PM
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Mercedes car sales are now expected to be roughly flat this year rather than up significantly from 2020. (HT Auto)
Mercedes car sales are now expected to be roughly flat this year rather than up significantly from 2020.

Mercedes car sales are now expected to be roughly flat this year rather than up significantly from 2020. The lack of chips will have an adverse impact on the business as the year progresses and visibility on how supply will develop is low, Daimler said Wednesday.

The automaker’s shares fell 1.4% as of 9:50 a.m. in Frankfurt, paring an earlier decline of a much as 4%. The stock is still up about 19% for the year.

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Rivals from Volkswagen AG to Jeep maker Stellantis NV have coped with the scarcity of chips better than initially feared, but also warned the issue will affect earnings later this year. Facing limitations on just how many assembly lines they can keep running, automakers are prioritizing output of their biggest money makers and abstaining from discounts customers are accustomed to even from luxury brands.

“The entire industry is currently struggling with longer delivery times, which unfortunately also affect our customers," Chief Executive Officer Ola Kallenius said. “We are doing what we can to minimize the impact."

BMW AG, which has said it expects a “solid" increase in deliveries to customers this year, outsold Mercedes by more than 26,000 units in worldwide second quarter sales and took over the pole position in the U.S. because of better access to chip supply.

Sales in the current quarter might be below the second quarter and could stabilize in the fourth quarter if no additional bottlenecks occur, Daimler’s Kallenius told analysts.

Revenue Surge

Despite the semiconductor shortage, Daimler’s second-quarter revenue came in better than analysts expected, climbing 44% to 43.5 billion euros ($51.2 billion). The manufacturer also slightly raised the outlook for margins at its trucks and buses unit and mobility division.

Earnings before interest and taxes surged to 5.19 billion euros, the company said, confirming preliminary numbers released last week. Profit margin at the cars and vans division reached double digits for a third straight quarter.

Daimler had forecast in April that Mercedes will be more profitable than it’s been in years, thanks to resurgent vehicle demand in the midst of the pandemic. At the time, the company raised its projection for annual return on sales for its cars and vans division to 10% to 12%, up from 8% to 10%.

Executives were more somber this quarter, warning headwinds from raw material prices are poised to intensify in the second half and the company might not be able to compensate for this with efficiency gains like in the first six months.

First Published Date: 21 Jul 2021, 13:48 PM IST
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