Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mercedes-Benz Group AG (MBGAF, Financial) reported robust sales figures and solid financial results despite a challenging macroeconomic environment.
- The company successfully launched new products, including the electric G-Class and upgraded EQS flagship limousine.
- Mercedes-Benz Group AG (MBGAF) achieved double-digit profitability for cars and exceptionally strong performance in the vans segment.
- The company opened a new eCampus in Stuttgart for powertrain development, showcasing its commitment to innovation.
- Mercedes-Benz Group AG (MBGAF) returned EUR8.6 billion to shareholders through dividends and share buybacks, demonstrating strong shareholder returns.
Negative Points
- The mobility division faced challenges due to a tough market environment, impacting overall performance.
- The company experienced a slowdown in BEV sales in 2024 compared to previous years, indicating market challenges.
- Mercedes-Benz Group AG (MBGAF) held higher inventory levels at the end of Q2, which could pose risks if sales do not meet expectations in the second half of the year.
- The Chinese market showed subdued consumer sentiment, affecting sales and pricing stability, particularly in the luxury segment.
- The company faces ongoing pressure from increased competition and price sensitivity in the Chinese market, impacting overall profitability.
Q & A Highlights
Q: What has changed at Mercedes to ensure that returns stay higher than they were previously? Is it new models and cost control?
A: Ola Kaellenius, Chairman of the Management Board, emphasized that the current period is different due to significant changes such as the transformation from ICE to BEV and increased competition in the Chinese market. Despite these challenges, Mercedes has delivered solid results in recent years. The strategy includes continuous training, efficiency improvements, and delivering new technology and products. The goal is to sell more top-end vehicles in the second half of the year, driven by new launches, while carefully managing the price versus volume equation.
Q: Are premium German manufacturers stepping back from discount activity in China?
A: Ola Kaellenius noted that the Chinese market has experienced increased price pressure across all segments in the first half of the year. Mercedes has managed to maintain relative price stability better than its competitors. If other market participants move towards more price stability, it could reduce pressure, but Mercedes will continue to follow its game plan.
Q: How should we think about Mercedes' way forward in the China business, especially in the entry segment?
A: Ola Kaellenius highlighted three key points: the technology race for the future, the subdued macroeconomic environment in China, and the increased competition with over 100 BEV players. Mercedes is investing in new e-drive trains and digital experiences while maintaining its strengths. The company is cautious about the Chinese market's recovery and is focusing on cost reduction and product attractiveness. It's too early to make definitive decisions about stepping out of segments.
Q: What are the financial implications of advanced ADAS features for Mercedes?
A: Ola Kaellenius explained that Mercedes has been working on assisted and autonomous driving since the 1990s, with a focus on safety and convenience. Starting with the CLA next year, every new vehicle will have a supercomputer and comprehensive sensor set. This will enhance user experience and can be monetized. Mercedes expects to make more money with these systems but does not believe it will surpass the earnings from their cars.
Q: What is Mercedes' plan to meet CO2 emission targets in Europe if BEV demand doesn't pick up?
A: Ola Kaellenius stated that Mercedes is gradually ramping up its xEV share and will take a step up in Europe by 2025. If necessary, pooling solutions will be considered. The company is launching new products like the MMA in 2025 and the electric C-Class and GLC in 2026 to increase BEV offerings.
Q: What is the impact of the agency business model on Mercedes' margins?
A: Ola Kaellenius mentioned that the agency model has led to higher customer satisfaction and better data collection for managing market regions. It eliminates intra-brand competition and anxiety over price negotiations. While there have been some growing pains, the overall impact on margins is positive, and the decision to implement the model is reaffirmed.
Q: What are the assumptions for deliveries and powertrain mix in China for the second half of the year?
A: Harald Wilhelm, Head of Finance, Controlling, and Mercedes-Benz Mobility, stated that the dynamics in the second half of the year are expected to be similar to the first half. The powertrain mix will remain unchanged, with significant changes expected with the launch of new products in 2025 and 2026.
Q: What is Mercedes' position on dealer inventory in the US, and what are the plans for the Daimler truck stake?
A: Harald Wilhelm noted that Mercedes monitors dealer inventory closely and adjusts supply to demand. The recent service supplier issue caused a temporary spike in inventory, but no commercial action is justified. Regarding the Daimler truck stake, the soft lockup period ends in six months, and no decision has been made yet on whether to stay or monetize the stake.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
