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Status: April 28, 2015 – Interim Report Q1 2015
At the beginning of the second quarter, there are still good prospects that the world economy will continue its expansion. But in view of the substantial decrease in the price of crude oil, the ongoing supportive monetary-policy actions by major central banks and very low inflation rates, the momentum of the world economy remains rather moderate, with an expected growth rate of just under 3%. This has less to do with the industrialized countries, which should achieve growth in gross domestic product of just over 2% this year. The moderate speed of expansion of the world economy is primarily due to the weak development of the emerging markets, which are likely to lose another half a percentage point of growth this year compared with 2014. Within the industrialized countries, above all the US economy should continue to deliver important growth impetus. In view of solid improvements in the labor market and rising real incomes, significant growth in private consumption is to be expected.
Although a departure from the present zero-interest policy seems likely this summer, most analysts assume that it will take place rather smoothly with no perceptible impact on domestic demand. For the European Monetary Union, the available leading indicators suggest that lower energy prices, the weaker euro and the expansive measures taken by the European Central Bank will increasingly have positive effects. After growth of less than one percent in 2014, a rate of about 1.5% seems feasibly for the region in 2015. In Japan, the disappointing year 2014 should be followed this year by growth in gross domestic product of approximately 1%. The ongoing development in China is crucial for the world economy. But although we assume that the country’s overall growth rate will continue to fall, we also still expect the political decision makers to succeed in restructuring the economy without an excessive slowdown. The economic development of the South American economies will remain extremely difficult. After a disappointing start to the year, it must be assumed that gross domestic product will contract, especially in Brazil. But economic prospects are unfavorable for the coming quarters also in other South American countries. The economic downturn is likely to be the most severe this year in Russia, where a deep recession is now expected. Overall, we anticipate growth of the world economy in the magnitude of 3% this year. The biggest risks for the still rather fragile global economy come from the geopolitical side.
In line with the continuation of moderate economic dynamism, worldwide demand for cars is expected to increase by about 3% in 2015. Demand in China, the world’s biggest car market, should grow again significantly and make by far the biggest contribution to global growth. The US market should also show solid development. Although total unit sales have meanwhile returned to the pre-crisis level and are thus close to market saturation, slight growth is to be expected once again in 2015.
With a market volume of up to 17 million units, more cars and light trucks will probably be sold than since 2005. In Western Europe, an ongoing demand revival is to be expected, whereby the initial situation of the individual markets continues to differ significantly. The market of the United Kingdom should grow again significantly from its already high level, but growth in France is likely to be restrained in relation to the comparatively weak prior-year level. In the German car market, moderate expansion and total sales of just over three million units are anticipated. The Japanese market has been at an artificially high level for several years as a result of various special effects. For the year 2015, a correction is therefore expected with a lower level of demand. The picture for the major emerging markets excluding China remains varied in 2015. A recovery of demand for cars is anticipated in India. In Russia, however, a drastic fall in car sales must be assumed due to the country’s severe economic crisis. As there have been increasing signs of weaker demand also for premium automobiles, a substantial decrease in unit sales must be expected also in this segment.
In the worldwide market for medium- and heavy-duty trucks, another drop in demand is expected in 2015 following last year’s significant decrease. Furthermore, the situation will remain varied from one region to another. The NAFTA region once again promises to have the most positive development. The main economic indicators there suggest that the truck market will remain favorable with demand likely to increase by 10-15%. The economic prospects for the European market have brightened since the beginning of the year, so we now anticipate market growth of 5-10%. Market conditions in Brazil have deteriorated significantly once again. Starting from a low level, we must now assume that demand will fall again substantially by approximately 30%. The Japanese market for light-, medium and heavy-duty trucks appears to be relatively robust despite the sluggish economy, so we anticipate a market volume in 2015 in the magnitude of the previous year. But following a very weak start to the year in Indonesia, we must assume that demand there will be about 20% lower than in 2014. The deep recession in Russia will continue to affect the market, so demand is likely to strongly fall once again. But a significant market recovery is anticipated in India, thanks to the slightly improved economic prospects there. Demand for trucks in China is currently under pressure due to the introduction of the CN4 emissions standards (similar to Euro IV). We therefore expect the market to contract significantly compared with its prior-year level.
We assume that the market for medium-sized and large vans in Europe will grow slightly in 2015, as will the market for small vans. Significant growth is anticipated in the US market for large vans. In Latin America, we expect significant contraction in the market for large vans. In China, we foresee demand at the level of the previous year in the market we address there.
We anticipate a market volume for buses in Europe in 2015 that is slightly above the very low level of the previous year. In Brazil, demand for buses is likely to decrease again significantly this year.
On the basis of the divisions’ planning, Daimler, expects its total unit sales to increase significantly in 2015.
Mercedes-Benz Cars is continuing last year’s success in 2015 and is further strengthening its market position. After the bestever first quarter, we intend to achieve significant growth in unit sales once again in full-year 2015, thus setting a new record for unit sales. Major contributions will come from the C-Class sedan and wagon models. As the year progresses, we will continue our product offensive and thus create impetus for additional growth. A total of eight new or upgraded car models will be launched in 2015. This started with the Mercedes-Maybach S-Class in February, the first product of the new sub-brand. It was followed in March by the Mercedes-AMG GT and the CLA Shooting Brake, which complements the successful family of compact cars with its unique design. The focus in the second half of the year will be on the new SUV models as important growth drivers. In July, we will have the launch of the new GLE coupe, which already had its world premiere in Detroit this January. Four more models will come onto the market by the end of the year, including two SUVs. With these vehicles, Mercedes-Benz will meet the still-rising demand for premium SUVs, thus facilitating further growth. The two smart models will also contribute to a significant increase in unit sales; they will be available in all key markets this year and can also be ordered with the twinamic double-clutch transmission.
Daimler Trucks anticipates a significant increase in unit sales in the year 2015. In Western Europe, we expect growing investment activity, accompanied by rising demand for trucks to replace older models. Unit sales in this region should therefore be higher than in the previous year. In Turkey, we anticipate a significant number of purchases being brought forward to the year 2015 because of the coming introduction of Euro VI emission standards in 2016. The economic situation in Brazil has further exacerbated in recent months. The political situation and unfavorable financing conditions are crippling investment activity, so we have to anticipate significant falls in unit sales. For the NAFTA region, we assume that our unit sales will once again significantly surpass the prior-year figure, in line with the expected market development. The new and successful products should safeguard our market leadership in this region. In Asia, we anticipate unit sales at about the same level as in 2014. The further expansion of our dealer network should allow significant growth in unit sales in India. Furthermore, the expanded range of FUSO vehicles from Chennai should stimulate additional sales growth outside India. In Indonesia, demand for trucks in the first quarter was once again significantly below the prior-year level following last year’s decrease. We therefore do not yet expect a reversal of the weaker market trend in the full year. In Japan, we assume that unit sales will be of the same magnitude as the high prior-year level.
Mercedes-Benz Vans plans to achieve significant growth in unit sales in 2015. Above all in Europe, our core market, we anticipate significant increases in sales of medium-sized and large vans. This development is likely to be primarily driven by the new Vito for commercial use and the V-Class multipurpose vehicle for private use. Both those models are now fully available following their launch in 2014. In the context of our “Mercedes-Benz Vans goes global” strategy for the division, we will launch the Vito also in North and South America this year, stimulating additional demand there. We aim to achieve further growth in those markets also with the Sprinter, which we will produce also in North America in the future.
Daimler Buses assumes that it will be able to defend its market leadership in its core markets for buses above 8 tons with innovative and high-quality new products. For the year 2015, we now anticipate a significant decrease in total unit sales. We expect unit sales to fall significantly in Latin America, accompanied by a stable development in Europe and rising unit sales in Mexico.
Daimler Financial Services anticipates significant growth in both new business and contract volume in the year 2015. This will result from the growth offensives of the automotive divisions, the specific targeting of younger customers, the expansion of business especially in Asia, and the further development of our online sales channels. We will also systematically expand our range of mobility services.
We assume that the Daimler Group’s revenue will increase significantly in 2015. In regional terms, we anticipate the strongest growth in Asia and North America, but our business volumes should expand also in the other regions.
On the basis of the anticipated market development and the planning of our divisions, we assume that EBIT from the ongoing business will increase significantly in 2015.
For the individual divisions, we aim to achieve the following EBIT targets from the ongoing business in full-year 2015:
  • Mercedes-Benz Cars: significantly above the prior-year level,
  • Daimler Trucks: significantly above the prior-year level,
  • Mercedes-Benz Vans: significantly above the prior-year level,
  • Daimler Buses: significantly below the prior-year level, and
  • Daimler Financial Services: slightly above the prior-year level.
The anticipated development of earnings in the automotive divisions will have a positive impact on the free cash flow of the industrial business in 2015. When comparing with 2014, it is necessary to consider that the free cash flow from the industrial business in that year was influenced by the sale of our shares in Rolls-Royce Power Systems Holding GmbH and Tesla, as well as by the extraordinary contribution to the German pension plan assets and the settlement of a healthcare plan in North America. In the year 2015, we expect a free cash flow from the industrial business in a significantly higher amount than the dividend payment in 2015 of €2.6 billion. As we will slightly increase our investment in property, plant and equipment and significantly increase our research and development spending, we assume, however, that the free cash flow of the industrial business will be significantly lower than in 2014 (€5.5 billion). Against the backdrop of the development in the first quarter, from today’s perspective, we are aiming for the upper end of this bandwidth.
Due to the generally very favorable business development that we expect for 2015, production volumes will continue rising. At the same time, the efficiency-enhancing measures we have implemented at all divisions in recent years will now take full effect. The medium- and long-term programs for structural improvements of our business processes should facilitate further efficiency progress. We therefore assume that the number of employees worldwide will increase only slightly.
Forward-looking statements:
This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should” and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an adverse development of global economic conditions, in particular a decline of demand in our most important markets; a worsening of the sovereign-debt crisis in the euro zone; an increase in political tension in Eastern Europe; a deterioration of our refinancing possibilities on the credit and financial markets; events of force majeure including natural disasters, acts of terrorism, political unrest, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates; a shift in consumer preferences towards smaller, lower-margin vehicles; a possible lack of acceptance of our products or services which limits our ability to achieve prices and adequately utilize our production capacities; price increases for fuel or raw materials; disruption of production due to shortages of materials, labor strikes or supplier insolvencies; a decline in resale prices of used vehicles; the effective implementation of cost-reduction and efficiency-optimization measures; the business outlook for companies in which we hold a significant equity interest; the successful implementation of strategic cooperations and joint ventures; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; the resolution of pending government investigations and the conclusion of pending or threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading “Risk and Opportunity Report” in the current Annual Report. If any of these risks and uncertainties materializes or if the assumptions underlying any of our forward-looking statements prove to be incorrect, the actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements since they are based solely on the circumstances at the date of publication.
More detailed information can be found in the extensive Annual and Interim Reports as well as in additional data files and reporting formats more
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