Mercedes sells Russian business and raises profit forecast – Economy

The car manufacturer Mercedes-Benz is finally putting an end to its business in Russia. The company announced this on Wednesday. The Russian car dealer Avtodom is to become the new owner of the sales company and the car assembly plant with more than a thousand employees. According to Mercedes CFO Harald Wilhelm, the relevant authorities in Russia have not yet approved the deal, but this should probably only be a matter of form.

The German automaker will not receive any money from Avtodom for its Russian business. According to Mercedes, one does not expect any income from the sale. Mercedes follows the example of other car manufacturers. Renault also recently sold its Russian business for one ruble. His partner Nissan from Japan gave the Russian activities to a Russian state company for one euro and had to write off the equivalent of around 685 million euros. Nissan and Renault negotiated a buyback clause within six years. The Russian newspaper Vedomosti reported with reference to insiders that Mercedes-Benz could also agree on such a clause. The company did not comment on this.

However, the deal should not have any additional financial consequences for Mercedes. In other words, there will be no new depreciation. However, the car manufacturer had already written off around 700 million euros in the first half of the year when the Russian business was stopped as a result of the war in Ukraine.

From January to September in Russia, according to data from the European Business Association AEB delivered around 9,500 new cars from the brand with the star. According to the company, these are mainly vehicles from dealer stocks, since Mercedes had already stopped its own sales in March.

The high-priced models are particularly in demand

That business in the other world markets is going well for Mercedes despite all the crises. So good that the carmaker has once again raised its earnings forecast for the full year. Now at the end of the year there should be a profit margin of up to 15 percent. Consolidated profit doubled in the third quarter compared to the same period last year to almost four billion euros. Demand has “remained robust,” said CFO Wilhelm. Mercedes-Benz increased group sales from continuing operations in the third quarter by 19 percent to 37.7 billion euros. Earnings before interest and taxes adjusted for special effects increased by almost three quarters to 5.3 billion euros.

The company’s strategy of focusing mainly on luxury cars has worked so far. Although Mercedes sold more cars overall – sales increased by 38 percent to 530,414 cars in the third quarter compared to the previous year – the carmaker is growing particularly strongly in the high-priced segments, i.e. the S-Class and the electric EQS, Maybach or the AMG models. The manufacturer also more than doubled sales of electric cars to 96,000 in the first three quarters. According to the company, demand continues to outstrip supply. So Mercedes has to give few discounts with long waiting times. “We have no intention of lowering list prices and no intention of increasing incentives,” said CFO Wilhelm. Unlike Audi boss Markus Duesmann, for example, the Swabians see no signs that people are becoming more cautious about buying a car due to inflation and higher energy prices.

After nine months, the adjusted operating margin in the Mercedes passenger car business is 15 percent, which is already the upper end of the now increased forecast. In the third quarter, Mercedes achieved 14.5 percent here. That’s a level typically only achieved by pure luxury automakers, who sell cars at a significantly higher average price. The margin also benefits the savings program of Ola Källenius, the CEO of Mercedes-Benz, which is intended to significantly reduce the car manufacturer’s structural costs by cutting thousands of jobs. According to analysts, the third quarter went well. There is still optimism for the current final quarter. But skepticism about the prospects for 2023 is growing amid the energy crisis, high inflation and rising interest rates, and only slowly abating disruptions in supply chains.

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