Mercedes-Benz actually wanted to only deliver electric cars in 2030 if possible. The Stuttgart-based group now expects a share of sales of a maximum of 50 percent by then.
Mercedes-Benz has scaled back expectations when switching to electric mobility. By 2030, the car manufacturer only expects electric cars and hybrids to account for up to 50 percent of sales. This year, one in five cars will have a battery drive, as the brand with the star announced today.
So far, the manufacturer has been prepared for up to 100 percent electric car sales – if there is enough demand. Two and a half years ago, CEO Ola Källenius announced the “Electric only” strategy, “wherever market conditions allow it.”
“The pace of transformation is determined by market conditions and the wishes of customers,” explained Mercedes. The company wants to meet different customer requirements, whether cars with fully electric drives or combustion engines – “if necessary into the 2030s.”
“Extraordinary uncertainties” are causing profits to crumble
After a decline in profits in 2023, Mercedes-Benz is now expecting another weak year. With sales at the previous year’s level, the operating result will decline slightly in 2024 and thus the return will fall, the group explained. “The economic situation and the automobile markets are still characterized by exceptional uncertainty.” In addition to wars and strains in the supply chain, tensions between China and the USA as well as Europe are among the risk factors.
During the years of the Corona pandemic, Mercedes-Benz benefited significantly from delivery bottlenecks disrupting production and driving up the sales prices of new and used cars from leasing returns due to high demand. Cost reductions, which CEO Ola Källenius had introduced early on, also took effect.
In 2023, however, delivery problems for important models and the difficult environment caused profits to shrink. In addition, high inflation had an impact despite relief from raw materials. The operating result (EBIT) fell by four percent to 19.7 billion euros with a slight increase in sales to 153.2 billion euros, the DAX group said. EBIT is also expected to decline slightly in the current year, which corresponds to a loss of between five and 15 percent.
Better result than expected
The return in the main passenger car division fell by two percentage points to 12.6 percent in 2023 as profits fell by 13 percent. The margin is expected to continue to crumble this year; Mercedes is predicting a range of ten to twelve percent. Production problems at supplier Bosch with 48-volt systems for combustion engines had slowed down the important GLC and E-Class models.
This is said to have affected around 100,000 vehicles, which will be postponed until this year. Delivery problems are expected to continue in the first half of the year, so car sales are expected to remain at the previous year’s level of around two million. The smaller van division, on the other hand, increased profits by almost two thirds to around three billion euros. The margin shot up from eleven to 15.5 percent.
Overall, Mercedes performed better than analysts predicted. Due to the weaker economic situation, industry observers had expected that the Swabians would not be able to maintain the excellent run from previous years. The bottom line is that the Stuttgart group earned 14.5 billion euros, which was two percent less than in 2022. Around 91,000 employees in Germany will also receive a bonus of up to 7,300 euros this year.
Billionaires Share buyback announced
Thanks to the continued good cash position, Källenius wants to keep investors happy with a new share buyback with a volume of three billion euros, the prospect of further such programs and the slightly higher dividend of 5.30 euros per share. The paper therefore rose significantly today. After the start of trading, it rose by 4.1 percent to 70.87 euros. The share price thus reached a high since August.
Investment bank analysts had already commented favorably on the possibility of repeated share buybacks, which the company had announced the evening before. Mercedes’ new guidelines for dividends and share buybacks are bold, but also in line with the group’s wooing of luxury-oriented investors, wrote Jefferies expert Philippe Houchois. It is underpinned by the stable cash inflow that Mercedes generates.
The company had already decided to buy back the company for up to four billion euros last year. Share buybacks are particularly popular for price maintenance: Shares are withdrawn through additional demand from the company, which mathematically increases the share of the remaining shares in the profit to be distributed. This usually results in a price increase when the announcement is made. Critics, however, accuse the company managers of apparently no longer finding profitable use for the money they generate.