Daimler: Priorities are to invest in electrification, curb total investment, and preserve cash

Sharp drop in 2019-20 profit due to investment in next-gen technology and suspension of operations

2020/05/27

Summary

Daimler
Daimler resumed production incrementally from April 20, 2020
(Source: Daimler, for all other photos in this report)

  In reporting its financial results for the first quarter (Q1) of 2020, Daimler AG announced that it has entered into a cost management and cash preservation mode. Although no new restructuring measures were announced, as covered at the Daimler Capital Markets Days in November 2019 and in its Annual Report 2019 in February 2020, material costs and personnel expenses already had been announced in response to the deterioration in profitability that surfaced in 2019. The company also announced that it will curb capital investment and R&D expenses. However, Daimler will continue to prioritize investment in future key technologies, including electrification and digitalization.

  Daimler’s strategy positions CO2 reduction as one of the most important issues to limit the impact of climate change. For passenger cars, the all-electric ratio of its vehicle portfolio will be increased to 25% by 2025, and Mercedes-Benz Cars aims to have plug-in hybrids (PHEV) or all-electric (EV/BEV) to make up more than 50% of its car sales by 2030. Daimler is also aiming to make all of its passenger cars sold worldwide CO2-neutral over their entire life cycle by 2039.

  In Daimler’s passenger car division, Mercedes-Benz Cars, China is the largest market by country and has been driving the company’s growth for the past few years. Although sales in China fell by more than 20% in Q1 of 2020, it is showing signs of an early recovery in demand compared to other regions. All Mercedes-Benz dealerships were closed at the end of January, but in March 99% and in April 100% reopened for business.

  Regarding the outlook for the full year 2020, the effects of the new coronavirus pandemic likely will continue throughout the year and it is difficult to quantify the impact, but Daimler is forecasting that its business will shrink in all of the markets in which it does business. All of the company's key performance indicators are expected to fall below 2019 levels. However, Daimler says it has sufficient liquidity and is working to reduce costs, and that it is well positioned to manage the business, both during and after the pandemic.

 

Related reports:
German OEM Electrification Strategies, Including EV Product Timelines(Oct. 2019)
Frankfurt Motor Show 2019: European OEMs(Sep. 2019)
Daimler’s CASE Strategy: Partnering with BMW for Mobility Services and Autonomous Driving(Apr. 2019)