Outlook

Through up-to-date, well-balanced and open communication, Daimler wants to give its shareholders, analysts and the interested public the opportunity to receive important information about the Company.

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 significantly lower than in the previous year.

Status: October 25, 2018 – Interim Report Q3 2018 and update from December 6, 2018

Outlook for the Daimler Group

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 for the Daimler Trucks and Daimler Financial Services divisions, while only a slight increase is now expected at Mercedes-Benz Vans. At Mercedes-Benz Cars, the expected exchange-rate developments and lifecycle effects of some models will dampen the development of revenue, so the division is expected to post full-year revenue at the high level of 2017. Daimler now anticipates revenue in the magnitude of the previous year 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. Following the approval of the project by the EU Commission, the two partners are continuing talks with the US antitrust authorities. Completion of the transaction, which was originally planned for 2018 and continues to be pursued by both partners, can no longer be achieved in the remaining weeks of the year 2018.

In this context, the expected significant positive valuation and earnings effects at Daimler Financial Services will be realized in 2019. Accordingly, the earnings forecast for the Daimler Financial Services division has been reduced for 2018. The division now expects EBIT to be significantly lower than in the previous year. The forecast for the Daimler Group’s EBIT in the 2018 financial year remains unaffected and unchanged. As previously announced, the transaction will not have any cash-flow impact on the industrial business.

Due to several factors, some temporary restrictions occurred in the availability of Mercedes-Benz Cars vehicles in the third quarter and will also partially affect the fourth quarter. These factors include, among others, the previously announced suspension of delivery for some diesel models. Furthermore, the certification of vehicles in Europe and some international markets currently requires longer 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 the technical and legal clarification of open questions.

Inventories have increased temporarily. Based on high demand for Mercedes-Benz vehicles, Daimler continues to expect, however, that the situation will return to normal in the fourth quarter and that inventories can be reduced again by the end of this year.

The described factors apply in the same way to Mercedes-Benz Vans and thus also affect the business development of the van division.

On October 19, 2018, as a result of current developments, Daimler reassessed its earnings outlook for the year 2018 for the Mercedes-Benz Cars and Daimler Buses divisions and for the Daimler Group. The main factor is an increase in expected expenses in connection with ongoing governmental proceedings and measures taken in various regions with regard to Mercedes-Benz diesel vehicles. In addition, Mercedes-Benz Vans is posting lower unit sales due to delays in vehicle deliveries. Furthermore, against the backdrop of a recent ruling by the European Court of Justice, provisions have been recognized for the possible need to take action on certain vehicles still operating with the previously used refrigerant R134a. Additionally, Daimler Buses is facing decreasing demand in some markets.

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 significantly lower than in the previous year.

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

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

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 its ambitious growth targets, the Group will slightly increase its already very high investment in property, plant and equipment 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. Another focus at Mercedes-Benz Cars will be on the expansion of the worldwide production network for electric mobility.

With research and development activities, a total volume is anticipated slightly above last year’s spending of €8.7 billion. Key projects at Mercedes-Benz Cars include successor models for the current S-Class and C-Class. In addition, the division 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, Daimler assumes that its ambitious growth targets can be achieved with only a slight increase in the size of the workforce.

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 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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