Daimler navigated its toughest quarter yet with regard to scarce semiconductor supply by prioritizing its most lucrative models, keeping earnings on track to grow this year even as vehicle sales slump.
Group earnings before interest and tax will be significantly higher compared to a year ago, the Mercedes-Benz maker reiterated Friday.
While vehicle sales plunged by roughly a third last quarter, the manufacturer expanded deliveries of the new S-Class sedan that starts at roughly 93,400 euros in Germany (R2,413,360 in South Arica).
“We remain on track to meet our full-year targets thanks to a more robust business,” Chief Financial Officer Harald Wilhelm said in a statement.
“At the same time, we made substantial progress with our strategic agenda.”
Daimler’s outlook for annual Mercedes sales rapidly deteriorated as the chip shortage went from bad to worse the last few months.
The carmaker now expects vehicle sales to be down for the year. Until late July, the company had been projecting a significant increase
The challenges have been little cause for concern among investors who have been encouraged by Chief Executive Officer Ola Kallenius’s emphasis on value over volume.
Daimler shares rose as much as 2.3% on Friday in Frankfurt and are up 48% this year.
The company has lowered fixed costs by about 15% compared with 2019 as part of a plan announced a year ago to pare back spending over the first half of the decade, Wilhelm said.
Mercedes also announced it will outsource development and production of transmissions for compact and mid-size models to parts supplier Magna International in a move that will further reduce costs.
Kallenius has been speeding up Daimler’s shift toward electric vehicles and made a splash early this year with a plan to spin off its sprawling trucks division.
After months of the chip-supply situation languishing, carmakers including General Motors and Volkswagen this week have voiced optimism that the peak of the crisis may be behind them.
Recovering global economies will help drive consumer demand for cars for the rest of the year, Daimler said.
Although sales remain constrained by the semiconductor shortage, the company expects improvement compared to the third quarter.
Wilhelm already flagged sales may stabilize in the fourth quarter after deliveries in the three months through September plunged about 30% for Mercedes-Benz cars.
The Mercedes unit is targeting an operating profit margin of between 10% and 12% this year, its highest in years.
Kallenius has been looking to boost Mercedes’s earnings multiples to levels more in line with those of luxury-goods and technology companies.
Keyword: Mercedes-Benz’s S-Class is pulling it through the chip shortage