Outlook

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Status: February 01, 2018 – Annual Press Conference 2018

On the basis of the anticipated key parameters, Daimler assumes that Group EBIT in 2018 will be of the magnitude of the previous year.

Outlook: slight increase in unit sales and revenue expected, Group EBIT in the magnitude of the previous year

On the basis of the assumptions concerning the development of automotive markets and the divisions’ planning, the Daimler Group expects to slightly increase its total unit sales in 2018. The Group also anticipates slight revenue growth in 2018, as a result of the overall positive development of unit sales in the automotive divisions. Exchange-rate effects are likely to have a rather negative impact on the development of revenue in the year 2018. This applies above all to the business in the NAFTA region.

The divisions currently have very attractive product ranges, which have been expanded and systematically renewed in recent years. The Group therefore assumes that Daimler will profit from the slight growth in global demand for motor vehicles that is expected in the year 2018, and that it will be able to strengthen or defend its position in major markets.

At Mercedes-Benz Cars, additional growth this year will be primarily driven by the E-Class models, the GLC SUV, the new convertible models and the new A-Class. On the other hand, revenue growth will be dampened by the anticipated development of exchange rates and lifecycle effects from some car models, as well as by a changing sales structure. Mercedes-Benz Cars therefore anticipates revenue in 2018 only at the high prior-year level despite a slight increase in unit sales. Due to generally positive expectations for markets and unit sales, the Daimler Trucks division plans for slight revenue growth, while the Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services divisions anticipate significant increases in revenue.

In regional terms, Daimler expects further slight growth in revenue in Asia and Europe. In China, the right conditions have been created for further growth with new sales outlets, additional production capacities and a broad product range. However, growth in unit sales in China will have a disproportionately low impact on revenue growth, as the share of local production will continue to increase. Daimler’s Chinese associated company, Beijing Benz Automotive China (BBAC), is included in the consolidated financial statements using the at-equity method of accounting.

The anticipated growth in unit sales and revenue will have a generally positive impact on earnings in 2018. The foundations have been laid for a lasting high level of earnings with various programs for improved profitability, which were already implemented in the years 2013 to 2015. Since then, Daimler has continuously been taking further measures in all divisions for the long-term and structural optimization of its business system. At Mercedes-Benz Cars for example, further efficiency improvements are to be achieved in the context of the F4L (Fit for Leadership) program. Daimler Trucks is also working continuously on efficiency improvements with its optimization program. In combination with the cost optimizations so far planned and partially already implemented, Daimler Trucks aims to achieve profit-effective improvements in an amount of €1.4 billion by the end of 2018. The goal is for these measures to become fully effective in the year 2019.

Daimler is standardizing and modularizing its production processes throughout the Group. In this context, intelligent use is being made of vehicle platforms, allowing further cost advantages to be achieved. In parallel, Daimler is pushing forward with digital connectivity: in all divisions and at all stages of the value chain – from development to production to sales and service. This is opening up additional scope to become even faster, more flexible and more efficient - to the benefit of the customers. However, earnings will be reduced by the continuation of very high expenditure: for the model offensive, for innovative technologies (especially for reducing fuel consumption and for electrification), for the digitization of products and processes, and for the expansion and realignment of the worldwide production facilities. As a result, the advance expenditure aimed at securing a successful future will once again be substantially higher in 2018 than in the previous year.

On the basis of the anticipated market developments, the aforementioned factors and the planning of the divisions, Daimler assumes that Group EBIT in 2018 will be of the magnitude of the previous year.

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

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

At Mercedes-Benz Cars, positive effects will result from the anticipated growth in unit sales. They will be offset, however, by the significant increase in advance expenditure for new products and technologies, a less favorable sales structure and negative exchange-rate effects. Both Daimler Trucks and Daimler Buses should profit from rising unit sales and the efficiency-enhancing measures. Daimler Financial Services assumes a positive development of earnings due to its growing contract volume and the further optimization of business processes. Increased investments in new businesses and the advancement of digitization as well as increased interest rates and exchange-rate effects will have a dampening impact on earnings. Against the backdrop of high advance expenditure for the Sprinter model change and higher expenses for product ramp-ups as well as negative exchange-rate effects Mercedes-Benz Vans expects a slight earnings decrease. The anticipated growth in unit sales is unlikely to fully offset these negative effects.

Outlook: free cash flow of the industrial business expected to be significantly higher than in 2017

The anticipated development of earnings in the automotive divisions will have a positive impact on the free cash flow of the industrial business. There will be a negative effect, however, from the further increase in advance expenditure for new products and technologies. Under these conditions, Daimler assumes that the free cash flow of the industrial business should be significantly higher than in the previous year. 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 fund assets.

“We will profit from the Group’s financial strength once again this year. We expect the free cash flow from the industrial business to significantly surpass both the prior-year level and the dividend to be paid out in 2018,” said Uebber. “And that is our expectation although we will invest even more in new products and technologies.”

Outlook: investments

With its research and development activities, Daimler’s goal is to further strengthen its competitive position against the backdrop of upcoming technological challenges. The Group wants to create competitive advantages above all by means of innovative solutions for low emissions and safe mobility. In addition, the growth opportunities offered by worldwide automotive markets are to be utilized with new and attractive products. Daimler is increasingly focusing on the strategic areas for the future of connectivity, autonomous driving, flexible use and services, and electric drive. It aims to occupy a leading position in these areas, both individually and by linking them up intelligently. In order to achieve its goals, the Group will once again slightly increase its total expenditure for research and development in 2018. Furthermore, the product range will be systematically expanded in the coming years. At the same time, Daimler wants to be able to play a leading role in the far-reaching technological transformation of the automotive industry. This applies in particular to the increasing electrification of the product portfolio and to the digital connectivity of products and processes along the entire value chain. By intelligently connecting the constantly growing volumes of data, the Group will create efficiency advantages, improve its product quality and facilitate the ongoing flexibilization of the production process. Against this backdrop, investment in property, plant and equipment will once again be significantly increased in the year 2018.

Outlook: slight workforce growth

Due to the anticipated growth in unit sales and revenue, production volumes will continue rising in 2018. At the same time, the efficiency-enhancing measures implemented at all divisions in recent years are now taking effect. The medium- and long-term measures that have been taken for structural improvements in the business processes should facilitate further efficiency progress. Against this backdrop, Daimler assumes that it will be able to achieve its growth targets with only slight workforce growth. Additional jobs will be created in particular through the expansion of the international production network, as well as in the area of research and development for projects in the future areas of electric mobility and digitization. Companies that operate together with Chinese partners and whose employees are not included in the figures for the Daimler Group are also likely to recruit additional employees.

“In recent years, we have kept the promises we had previously made. We have delivered. In this context, three phases are apparent in the development of our company. The first phase was the restructuring, in which we focused on our core competence: the production of motor vehicles. In the second phase, we wanted to become the number one; we achieved that goal ahead of time,” summarized Zetsche. “Now, we are in the phase of shaping the future. And we are acting from a position of strength. Our ambition is unchanged: Daimler belongs at the top.”

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; 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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