Daimler cuts car-sales outlook on chip shortage

Automotive Industry

Source: Automotive News Europe, 2021-07-21

Daimler said early-year growth for its main Mercedes-Benz division will be wiped out by the global semiconductor shortage that the automaker expects to put a damper on the second half.

Mercedes car sales are now expected to be roughly flat this year rather than up significantly from 2020.

The lack of chips will have an adverse impact on the business as the year progresses and visibility on how supply will develop is low, Daimler said on 21 July in a statement.

"The entire industry is currently struggling with longer delivery times, which unfortunately also affect our customers," CEO Ola Kallenius said. "We are doing what we can to minimize the impact."

Chief Financial Officer Harald Wilhelm told investors that although the chip shortage would last into 2022, it would be less severe than this year.

Daimler also faces the challenge of high prices for steel, copper and aluminum in the second half.

Despite the chip shortage, Daimler's second-quarter revenue rose 44% to €43.5bn  ($51.2bn). Earnings before interest and taxes increased to €5.19bn, the company said, confirming preliminary numbers released last week.

Profit margin at the cars and vans division reached double digits for a third straight quarter.

Mercedes-Benz car sales in the second quarter rose 27%, with a 54% jump in Europe. After soaring in late 2020 and the first quarter, Mercedes sales in China, its largest market, gained just 5.8% in the second quarter.

Daimler had forecast in April that Mercedes will be more profitable than it has been in years, thanks to resurgent vehicle demand in the midst of the pandemic. At the time, the company raised its projection for annual return on sales for its cars and vans division to 10% to 12%, up from 8% to 10%.

The Stuttgart-based manufacturer said a plan to spin off its sprawling truck division is on track to be completed before the end of the year.

Mercedes will update investors on plans for battery technology and its growing lineup of electric vehicles on 22 July.

Mercedes this year revved up its EV rollout with the new EQS sedan, the battery-powered sibling to its flagship S-Class, as traditional automakers broaden their attack on Tesla. The company will be making eight full-electric cars on three continents next year. It flanked the EQS with the compact EQA and plans to unveil the electric version of its bestselling E-Class sedan later this year.

Daimler is among the major automakers that have had to cut back production this year because of the shortage spurred by the coronavirus pandemic.

BMW said on Tuesday nearly all its German plants were affected by the semiconductor shortages that are currently preventing the company from completing around 10,000 cars. Volkswagen and Stellantis have warned the issue may affect earnings later this year.

Facing limitations on just how many assembly lines they can keep running, automakers are prioritizing output of their biggest money makers and abstaining from discounts customers are accustomed to even from luxury brands.

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