China business brings Daimler billions in profits

The Stuttgart-based car company makes twice as much profit in the first quarter as it did before the Corona crisis. However, the shortage of semiconductors is now holding back sales.

A Mercedes star, the logo of the Mercedes-Benz car brand in the Daimler Group

DThanks to high demand in China and cost reductions in the first quarter, aimler increased its profit many times over against the very weak prior-year quarter. Thanks to tailwind from China, favorable price enforcement and cost discipline, consolidated profit rose to 4.4 billion euros, as Chief Financial Officer Harald Wilhelm said on Friday. In the first quarter of 2020, when the Corona crisis began to paralyze the automotive industry worldwide, the Dax group had only earned around 170 million euros.

The ongoing shortage of semiconductors meanwhile also leads to production losses in the second quarter and slows down sales. The car manufacturer therefore had to suspend production at the Mercedes plants in Bremen and Rastatt for the second time this year and put a large part of the total of 18,500 employees on short-time work.

Mangel an Computer chips

Daimler expects the situation in semiconductors to improve in the second half of the year. Due to a boom in demand during the Corona crisis and a fire at the Japanese chip manufacturer Renesas, there is currently a global shortage of computer chips in car manufacturing. This has caused car production to stall around the world since the beginning of the year. But according to analysts, this is currently more useful to manufacturers than it is to harm. Because the shortage of new cars is offset by high demand, especially in China and the United States. The car manufacturers can therefore achieve better prices with lower discounts.

Daimler’s net profit in the first three months of this year was more than twice as high as in the pre-crisis year 2019. “After this promising start, we are very confident that we will continue to make rapid progress in sustainably improving our returns, while at the same time continuing to expand our electric vehicle portfolio expand ”, explained Wilhelm.

On April 16, the Stuttgart-based company had already announced key data for January to March in advance, as these were well above market expectations. Sales increased by 10 percent to 41 billion euros. The main business, the passenger car subsidiary Mercedes-Benz Cars & Vans, achieved a record operating return of 14.3 percent (adjusted) with a sales increase of 15 percent, well above the self-set target of eight to ten percent for the year as a whole.

Wilhelm therefore now promised a higher return of ten to twelve percent. The outlook for the entire group is unchanged – sales, sales and operating profit should be significantly higher than the figures for the corona crisis year. Better operating business and strict cost controls have allowed the Group’s liquid assets to increase by a good two to 20.1 billion euros since the beginning of the year.