Mercedes-Benz expects to face rather sluggish demand in Europe and slightly recovering in China and the US by not following the Musk doctrine on price cuts. The three-pointed star does not intend to undermine its image as a luxury brand, on the contrary it intends to strengthen it. In 2022 profits and margins were very sustained thanks to an increase in prices higher than costs: the final result is that with only +5% of sales, Ebit grew by 31%. This year, a filing to the price lists could only come from the introduction of a direct sales model: 80% of the European market will be migrated to the new system by 2025, said financial director Harald Wilhelm. The rest doesn’t change. And the results seem to prove her right. “Mercedes-Benz achieved excellent financial results in the first quarter thanks to the increase in sales of high-end vehicles and premium vans,” said the house presenting the results of the first three months of the year.
Ebit and revenues improved in the first quarter
The group led by CEO Ola Källenius closed the first quarter with an operating profit of 5.5 billion euros (5.2 billion a year ago and 4.7 in 2021) and an adjusted return on sales for the car division of the 14.8%, higher than expectations but lower than last year’s 16.4% margin. Revenues for the first quarter increased by 8% to 37.5 billion euros (34.9 billion in the first quarter of 2022). The vans division reported an adjusted margin of 15.6%, up from 12.6% last year, thanks to improved deliveries and pricing. The Stuttgart-based carmaker raised its van division’s 2023 operating margin forecast to 11%-13% from 9-11% and said it expects to reach the higher end of the forecast range of 12%-14 % for cars.
The bet on the high end
“Our focus on high-end cars and premium vans has made Mercedes-Benz more weatherproof – commented Wilhelm – allowing us to accelerate our digital and electric transformation, even in a period of economic uncertainty. Continued cost discipline, combined with further key product launches such as the all-electric Mercedes-Maybach EQS SUV, will keep us on track to continue delivering sustainable results.”
Overall, global growth is likely to remain subdued, but inflation is gradually easing, energy prices are expected to be less volatile and commodity prices are down from their historical highs in 2022. An encouraging picture for the Auto industry.
In China, internal combustion luxury still works
Finally, an interesting note on China. Mercedes-Benz claims it is still the go-to brand for high-end vehicles, where luxury buyers continue to favor internal combustion engine cars as sales of NEV, or plug-in hybrid, vehicles are taking off and on battery. “In China the top level of luxury is still a world of internal combustion engines and we are the undisputed leader,” Wilhelm commented in an interview with Bloomberg Television. Last year, the German group sold more than half of its 22,600 ultra-luxury Maybach models, which start at around 180,000 euros, to wealthy Chinese. The challenge is to be able to do the same with electric cars, which in 2022 represented 16% of the brand’s sales but in China they suffered from the very strong competition of local brands.