Daimler, Volvo post surprise profits on shaky auto reprieve

After coronavirus lockdowns in the second quarter, European roads are filling up again with trucks, and cars are in demand as a safe mode of transport
...
File photo used for representational purpose. (REUTERS)
File photo used for representational purpose.

Daimler AG and Volvo Group posted unexpected profits, and European car sales rose for the first time this year, in a tentative sign that the pandemic gloom is lifting for the auto industry.

After coronavirus lockdowns in the second quarter, roads are filling up again with trucks, and cars are in demand as a safe mode of transport. While that’s fueling optimism, it will be a struggle to maintain the momentum as a record surge in infections increases the risk of tighter restrictions on movement.

Also check these Vehicles

Find more Cars
Volvo Ex90 (HT Auto photo)
UPCOMING
₹ 1.50 Cr
Alert Me When Launched
Volvo Xc90 (HT Auto photo)
Engine Icon1969 cc FuelType IconMultiple
₹ 1.01 Cr
Compare
Volvo Xc60 (HT Auto photo)
Engine Icon1969 cc FuelType IconMultiple
₹ 68.90 Lakhs
Compare
Volvo S90 (HT Auto photo)
Engine Icon1969.0 cc FuelType IconMultiple
₹ 61.90 Lakhs
Compare
View Offers
Volvo C40 Recharge (HT Auto photo)
BatteryCapacity Icon 78 kWh Range Icon 530 Km
₹ 61.25 Lakhs
Compare
Volvo Xc40 Recharge (HT Auto photo)
BatteryCapacity Icon78 kWh Range Icon592
₹ 54.95 - 57.90 Lakhs
Compare
View Offers

“The question is whether sales and higher margins can be sustained," Ben Uglow, an analyst with Morgan Stanley, said in a note. “We think positioning is a little optimistic on this."

Mercedes-Benz maker Daimler surprised investors with an unscheduled earnings beat late Thursday. The German automaker said earnings before interest and taxes surged to 3.07 billion euros ($3.6 billion) for the third quarter, almost double analyst estimates.

Swedish truckmaker Volvo -- Daimler’s main rival in heavy trucks -- followed suit on Friday with profit well ahead of expectations. Adjusted operating profit totaled 7.22 billion kronor ($813 million).

The profit gains were helped by deep cost-cutting. Both Daimler and Volvo benefited from a slew of job cuts as they brace for a challenging coming months as the pandemic crisis hits in the midst of the costly transition to electric vehicles.

“This could be the start of a great comeback, a real V-shaped recovery," said Juergen Pieper, an analyst at Bankhaus Metzler. “There’s some cautiousness on the fourth quarter and the obvious corona uncertainties."

Daimler shares climbed as much as 5.5%, leading a rally that lifted the Stoxx Europe 600 Automobiles & Parts Index by as much as 3.1%. Volvo rose as much as 4% before paring gains.

Struggling Revival

Adding to the good news for a sector still struggling to recover, European cars sales unexpectedly rose 1.1% in September, the region’s main car-lobby said Friday. Higher demand in Germany and Italy helped offset declines in France and Spain, according to the European Automobile Manufacturers’ Association.

That followed positive signs in other major markets. Car sales in China saw their third monthly increase in September, and U.S. vehicle demand bounced back last month, leading to analysts calling the result a “blowout."

Still, it will be tough to continue the gains in Europe as restrictions tighten across the continent, unsettling consumers. Starting this weekend, Londoners will be banned from mixing with other households, and residents of Paris and other major French cities will be confined to their homes at night for four weeks.

“We’d argue consumers don’t share automakers’ revival hopes," Michael Dean, a Bloomberg Intelligence analyst, said in a note ahead of the industry’s sales report. He expects annual deliveries to decline at least 20% and sees risk that the drop will be worse because of pandemic-related curbs on the economy.

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.

Get insights into Upcoming Cars In India, Electric Vehicles, Upcoming Bikes in India and cutting-edge technology transforming the automotive landscape.

First Published Date: 16 Oct 2020, 15:13 PM IST
NEXT ARTICLE BEGINS

Check Latest Offers

Please provide your details to get Personalized Offers

Choose city
+91 | Choose city
Choose city
Select a dealer

Want to get the best price for your existing car?

Powered by: Spinny Logo
By clicking "View Offers" you Agree to our Terms and Privacy Policy
Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.