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A Mercedes-Benz E400e 4Matic on display. Picture: REUTERS/LEONHARD SIMON
A Mercedes-Benz E400e 4Matic on display. Picture: REUTERS/LEONHARD SIMON

Stuttgart — Mercedes-Benz expects lower returns on sales across its cars and vans division in 2024, it said on Thursday, flagging “exceptional” uncertainty caused by conflict in the Middle East and Ukraine, and tension between China and the US

Supply chain bottlenecks for critical components remained “a significant risk factor”, while the potential for an “even more pronounced” slowdown in economic growth could also affect automotive markets, the group said in a statement.

First-quarter sales were likely to be below the previous year’s level, it said.

Electric vehicle (EV) sales, including hybrids, were expected to remain at about 19%-21% of sales, Mercedes-Benz said, in line with reports across the industry of slower growth in EV demand.

Mercedes-Benz said it now expects up to 50% of sales by the end of the decade to come from EVs.

The carmaker has long said it was preparing for all-electric sales by 2030, but CEO Ola Kaellenius cautioned towards the end of 2023 that even Europe was unlikely to be ready by then.

“We think plug-in hybrids will stay relevant for many years,” Kaellenius said on Thursday.

While carmakers and suppliers are betting big on future demand for EVs, investment in capacity and technology development has outrun actual EV demand, boosting pressure on companies to cut costs.

The luxury carmaker reported an adjusted return on sales in its car division of 12.6% for 2023, in line with its forecast, as inflation and supply-chain-related costs as well as component shortages ate into its profits.

For 2024, it said it expected a lower adjusted return of 10%-12% for cars and 12%-14% for vans, down from 15.1% in 2023.

Over the course of 2023, the carmaker warned of supply snags and inflation weighing on sales, with price wars particularly in the EV segment placing pressure on margins.

Still, Mercedes-Benz, the first of Germany’s three-top carmakers to report 2023 results, was expected to have the highest returns margin among the three, in part due to its strategy of passing higher costs to customers.

The luxury carmaker raised its average price by 2% to €74,200, and increased spending on research & development for future technologies such as its MB.OS platform.

Group earnings before interest and taxes fell to €19.7bn from €20.5bn in2023 despite a 2% rise in revenue.

Reuters

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