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Status: July 26, 2018 – Interim Report Q2 2018

On the basis of these effects as well as expected market developments and the current assessments of the divisions, Daimler now assumes that Group EBIT in 2018 will be slightly lower than in the previous year.

Based on the generally positive development of unit sales, Daimler assumes that Group revenue will increase slightly in the year 2018. Significant revenue growth is anticipated in the Mercedes-Benz Vans, Daimler Trucks and Daimler Financial Services divisions. At Mercedes-Benz Cars, the expected exchange-rate developments and lifecycle effects will dampen the development of revenue, so the division is expected to post full-year revenue at the high level of 2017. Revenue in the magnitude of the previous year is now anticipated also for the Daimler Buses division.

In late March 2018, Daimler and the BMW Group announced their intention, subject to review and approval by the relevant competition authorities, to combine and strategically expand their existing services for on-demand mobility in the areas of car sharing, ride hailing, parking, charging and multimodality. To those ends, the two companies signed an agreement on the merger of their business units for mobility services. Each company will hold 50% of the shares in the planned joint ventures for the mobility services of both companies. The establishment of the joint ventures will lead to significant positive changes to net assets and earnings at Daimler Financial Services, which are taken into consideration in the following EBIT outlook.

As reported in the ad-hoc announcement of June 20, current developments have caused Daimler to reassess its earnings potential for financial year 2018. This was mainly because increased import tariffs for US vehicles exported to the Chinese market mean that Mercedes-Benz Cars anticipates lower SUV sales as well as higher costs (which cannot be fully passed on to customers) than previously expected. This effect cannot be fully offset by the reallocation of vehicles to other markets. It is also important to note that the certification process according to the new WLTP (Worldwide Harmonized Light Vehicles Test Procedure) standard is expected to cause expenses in the second half of the year. Furthermore, Mercedes-Benz Vans’ earnings will be reduced as a result of the recall of diesel vehicles. In addition, the earnings of the Daimler Buses division will be negatively impacted by weaker demand than expected in Latin America.

Due to several factors, some temporary restrictions in the availability of vehicles of Mercedes-Benz Cars will occur as the year progresses. This also means that some of Daimler’s customers have to switch to vehicles with lower margins. Among others, these factors include the known delivery hold for some diesel models and challenges in the supply chain. Furthermore, certification of vehicles in some international markets currently require longer preparation than usual. For a longer time period, Daimler has been working intensively on software updates, the changeover to the new European test standard WLTP, as well as technical and legal clarification of open questions. Therefore, the certification of new models has, in part, not yet advanced as expected. From today’s perspective, Daimler therefore assumes that Mercedes-Benz Cars’ third-quarter EBIT will be significantly below the level of Q2 2018 and Q3 2017, and that inventories will increase temporarily. Based on unchanged high demand for Mercedes-Benz vehicles, Daimler expects however, that the situation will return to normal in the fourth quarter and that inventories could be reduced again by the end of the year. Correspondingly, the described factors, also apply for Mercedes-Benz Vans. Therefore, the company has to assume that the business of Mercedes-Benz Vans will be affected.

On the basis of these effects as well as expected market developments and the current assessments of the divisions, Daimler now assumes that Group EBIT in 2018 will be slightly lower than in the previous year.

The individual divisions have the following expectations for EBIT in the year 2018:

  • Mercedes-Benz Cars: slightly below the prior-year level,
  • Daimler Trucks: significantly above the prior-year level,
  • Mercedes-Benz Vans: significantly below the prior-year level,
  • Daimler Buses: in the prior-year magnitude and
  • Daimler Financial Services: in the prior-year magnitude.

Despite a further increase in advance expenditure for new products and technologies, the free cash flow of the industrial business should be significantly higher than in 2017 and also higher than the dividend distribution in 2018. It must be taken into consideration, however, that the free cash flow of the industrial business in 2017 was reduced by an extraordinary contribution of €3 billion to the German pension plan assets of Daimler AG.

In order to achieve the ambitious growth targets, the already very high investment in property, plant and equipment will be slightly increased in the year 2018 (2017: €6.7 billion). Capital expenditure in 2018 at both Mercedes-Benz Cars and Daimler Trucks will be primarily for successor generations for existing products, new products, global component projects, the expansion of production capacities and the optimization of the international production network, as well as for the worldwide production network for electric mobility.

With research and development activities, a total volume slightly above last year’s spending of €8.7 billion is anticipated. Key projects at Mercedes-Benz Cars include successor models for the current S-Class and C-Class. In addition, the Group is investing in new, more efficient engines, alternative drive systems and vehicles, autonomous driving and connectivity. At Daimler Trucks, the main areas of investment are for improved fuel efficiency and emission reductions, as well as for tailored products and technologies for important growth markets. In addition, the future technologies of electric mobility, connectivity and automated driving continue to gain importance.

Against the backdrop of further efficiency improvements in the context of the medium- and long-term programs for the structural improvement of business processes, the Daimler Group assumes that its ambitious growth targets can be achieved with only a slight increase in the size of the workforce.

More detailed information can be found in the extensive Annual and Interim Reports as well as in additional data files and reporting formats.

Forward-looking statements:

This Digital Offering 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 deterioration of our refinancing possibilities on the credit and financial markets; events of force majeure including natural disasters, acts of terrorism, political unrest, armed conflicts, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates and tariff regulations; 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 or of investigations requested by governments 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.

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