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Status: July 23, 2015 – Interim Report Q2 2015
At the beginning of the third quarter, there are still good prospects that the
world economy
will continue its expansion. But global indicators of business sentiment suggest that the currently rather moderate growth rate will hardly change. Although there is likely to be ongoing support from most central banks and from raw-material prices during the rest of the year, there are currently no major economies that seem likely to expand at a rate significantly above their trend growth rates. This has less to do with the industrialized countries, which should achieve growth in gross domestic product (GDP) of 2% this year. The moderate rate of expansion of the world economy is primarily due to the weak development of the emerging markets, which will probably lose another half a percentage point of their growth this year and thus drop below 4% for the first time since the financial crisis of 2008/2009. Amongst the industrialized countries, above all the US economy should continue to deliver important growth impetus. Most analysts continue to assume that the US Federal Reserve will increase the federal funds rate once again in the second half of the year. But in view of the economically weak start to the year in the United States and the fragile world economy, the timing of the interest-rate rise is likely to be later rather than earlier. The possible impact on domestic demand should therefore remain limited, allowing an increase in GDP of between 2 and 2.5%. From today’s perspective, the economic outlook for the euro zone seems to be for a continuous upward trend, mainly driven by private consumption. The uncertainty in connection with the Greece crisis is having a negative impact at the beginning of the third quarter – especially on investment – and are thus preventing any stronger acceleration. But in general, it can be assumed that the euro zone will probably achieve GDP growth in the full year of approximately 1.5%. The Japanese economy should grow faster than last year, but its expansion will continue to be very moderate at a rate of about 1.0%,. The ongoing development in China remains 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 by timely countermeasures and fine tuning, thus avoiding an excessive slowdown. The economic development of the South American economies will remain extremely difficult. In Brazil, Argentina and Venezuela, GDP will probably even contract. The most negative factor in 2015 is likely to be the development of the Russian economy, for which we continue to expect a pronounced recession. Overall, we anticipate moderate growth of the world economy in the magnitude of 2.7%.
Due to the continuation of rather moderate global growth rates and the pronounced market weakness of some major emerging economies, worldwide demand for cars is likely to rise by only about 2% according to current estimates. 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 to up to 17 million units is to be expected once again in 2015. This means that as many cars and light trucks will probably be sold as in 2005. In Western Europe, an ongoing demand revival is to C | Interim Management Report 19 be expected, taking place on an increasingly broad base. The market of the United Kingdom should grow again significantly from its already high level. In Germany and France, growth is likely to be moderate in relation to the comparatively weak prioryear level. 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 expected due to the country’s severe economic crisis. As demand has continued to weaken also for premium automobiles, a substantial decrease in total sales must be expected also in that 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. Market prospects are the most promising in the NAFTA region and Europe. In North America, the main economic indicators suggest that demand for trucks will remain favorable despite a slight cooling off, so the market should expand by between 10 and 15%. Thanks to the increasingly robust economic recovery in Europe, we meanwhile anticipate market growth of between 10 and 15% also in this region. Market conditions in Brazil are extremely unfavorably, however. Starting from a low level, we must now assume that demand will fall again severely by about 40%. The Japanese market for light-, medium- and heavy-duty trucks appears to be relatively robust despite the country’s 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 fall sharply 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 now assume that the market for medium-sized and large vans in Europe will grow significantly in 2015, as will the market for small vans. We anticipate significant growth in the US market for large vans, while in China, we foresee demand at the level of the previous year in the market we address there. In Latin America, we expect significant contraction in the market for large vans.
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 by at least 25% this year.
On the basis of the divisions’ planning, Daimler expects its total unit sales to increase significantly in 2015.
After the best-ever first half of a year for Mercedes-Benz Cars, we intend to achieve significant growth in unit sales also in fullyear 2015. This will be driven in part by the new member of the compact-car family, the new generation of the A-Class. It can be ordered as of July and will be in the showrooms as of September. Another highlight in the third quarter will be the world premiere of the new C-Class Coupe in August. As part of the SUV offensive, the GLE Coupe will be followed in September by another two models: the new generation of the GLE and the GLC. 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 doubleclutch transmission.
Daimler Trucks anticipates a significant increase in unit sales in full-year 2015. In Western Europe, we expect further growth in investment activity, accompanied by rising demand for trucks to replace older models. We therefore anticipate a significant positive development of unit sales in this region. Because of the coming introduction of Euro VI emission standards in Turkey in 2016, we anticipate a significant number of purchases being brought forward to the year 2015. However, the general economic situation and unfavorable financing conditions in Brazil are still depressing investment activity, so we expect a significant decrease in unit sales also in the coming months. On the other hand, along with a positive development of the overall market in the NAFTA region, our unit sales there should be significantly higher than in 2014. Our successful products should also continue to ensure our market leadership in the region. In Asia, we anticipate overall unit sales at about the same level as last year. We expect unit sales in Japan to increase slightly. In India, due to the steadily growing BharatBenz model range and the further expansion of our dealer network, we anticipate significant growth in our unit sales. Furthermore, the expanded range of FUSO vehicles from Chennai should stimulate additional sales growth outside India. In Indonesia, weak demand in the market as a whole is also reflected in our unit sales, which we therefore expect to continue decreasing in the full year.
Mercedes-Benz Vans plans to achieve significant growth in unit sales in 2015. 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. We anticipate a significant increase in unit sales also in the NAFTA region. In the context of our “Mercedes- Benz Vans goes global” strategy for the division, we will launch the Vito 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. For the year 2015, we anticipate a significant decrease in total unit sales for market-related reasons. We expect unit sales to fall significantly in Latin America, while we anticipate a stable development in Europe.
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.
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 expect to achieve the following EBIT 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: significantly 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. Although we will continue our product and growth offensive with high expenditure for property, plant and equipment and technical development, we now assume that the free cash flow of the industrial business will be in the magnitude of 2014 and thus significantly higher than the dividend payment in 2015.
In order to achieve our ambitious growth targets, we will once again slightly increase our already very high investment in property, plant and equipment in the year 2015 (2014: €4.8 billion). In addition to capital expenditure, we are developing our position in the emerging markets by means of targeted financial investments in joint ventures and equity interests.
With our research and development activities, we anticipate a total volume significantly above the previous year’s spending of €5.7 billion. Key projects include the successor models of the E-Class and the GL and GLE SUVs. In addition, we are investing in all automotive divisions in new, low-emission and fuel-efficient engines, alternative drive systems, innovative safety technologies, autonomous driving and digital connectivity.
From today’s perspective, we assume that the number of employees worldwide will increase slightly compared with year-end 2014.
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 and increasing uncertainty 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 cooperation 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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