Europe crisis, China slowdown ding Mercedes

The luxury car market has generally remained insulated from Europe's debt troubles, but that may be changing.

By Trefis Oct 1, 2012 1:47PM
Need for Speed copyright Mark Evans, The Agency Collection, Getty ImagesMercedes-Benz, owned by Daimler AG (DAI), has warned that adverse market conditions in Europe and a Chinese slowdown could dent its second-half profits. 

Chinese auto sales are up 4.1% only through August, while European sales have declined for 11 months in a row with August sales down 8.9%.


The luxury car market in Europe has generally remained insulated from the debt crisis but that might no longer remain true with automakers sounding gloomy about their forecasts. 


Even Porsche (owned by Audi), whose sales are up 15% in the first half of the year, recently announced that it is hesitant to increase production as it anticipates sales growth to slow down in 2013.



The Chinese auto slow down has resulted in car makers reducing prices and offering greater discounts in order to entice buyers. Moreover, Daimler's Chinese sales have only increased 6% through August compared to double-digit gains for BMW and Audi. Added expenses related to new launches such as the A-class will also impact the short term profitability. Mercedes-Benz reported an operating profit of €2.57 billion for the first six months of the year. Previously, the automaker had forecast the full year's profit to be similar to last year's €5.19billion.


Margins already under pressure

Daimler already has lower margins compared to BMW and Volkswagen. Daimler's operating margins in the second quarter were 8.6% compared to 11.6% for BMW and 11.5% for Audi. Shifting production to low cost hubs such as Hungary, where labor wages are one-fifth those in Germany should help widen margins.


Daimler has taken some other steps too, such as forming a partnership with Renault and Nissan, which could see the alliance manufacturing an off-road vehicle for Mercedes and cars for Nissan's luxury brand, Infiniti. Rising costs and a weak macro-economic environment have forced automakers to forge alliances in order to share costs and technologies. On the other hand, Daimler's truck business, has seen strong growth with performances in Japan, Russia and the U.S. leading the pack.


We have a price estimate of $61 for Daimler's stock, which is about 20% above the current market price.

Tags: DAI
61Comments
Oct 1, 2012 3:34PM
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I just sold a Mercedes (my dream car) that was nothing but repair trouble. Perhaps there is more than a market slowdown here. MB's frequency of repairs has been increasing for years.
Oct 1, 2012 6:36PM
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Mercedes uses synthetic oil. They require oil changes once a year or 12k miles. If you can't handle $179 a year, what are you doing with a Mercedes anyway? Have you made all your payments on time? 
Oct 1, 2012 6:59PM
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My wife's 2009 550SL had a $110,000 MSRP, car has 19,000 miles. We wanted to trade it in for another MB, dealer said it has a $45,000 trade in value.  So much for the resale hype.
Oct 1, 2012 3:52PM
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I could really give a rats **** about Mercedes. All they do is squash any repair shop from trying to fix their cars so if they aren't making money it's their own fault.
Oct 2, 2012 2:06AM
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My friend got C300 Mercedes, and it says Made in South Africa, the car was ok, nothing special. German cars are good, but once they have more than 30K miles - trouble may start. All European cars need very careful maintenance and care. They were exceptional good in eighties. Quality vise they can no be compare with Lexus or Hondas that made in Japan. Not Hondas that made here, or in Mexico.
All MB SUV's like ML or GL are build here. The only MB SUV made in Europe is G-class, or Galenwagen - it is hand build in Austria. This car has poor gas mileage, no aerodynamics, rear seats are very uncomfortable. It is just statement, that I can burn money. 
There in nothing better than Chevy Tahoe for big SUV. Maybe Toyota Land Cruiser(Lexus LX570) 
And about Audis quality? no conversation .... 
Audis, Beamers, and MB good to drive when they are less than 3 years old.
Bottom line is that if you want that opulence - then MB, BMW, and AUDI .... IF you are looking for good quality build car - Lexus, Toyota or Honda, make sure that they build in Japan (VIN should start with J, not 4-us build, or 2-hecho mexico)
Heard a lot good about new Huyndai Genesis, and Huyndai Equus .... Have to try them ....  

Oct 2, 2012 4:25AM
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85,000 Dollar lemon. Lots of  " Built to Fail" gimmics. Lucky car dealers, leave it up to them to capitalize on it. You, the customer do not matter anymore. Don't believe me ! Try registering a complaint with MB USA. See how far you get.
Oct 1, 2012 11:58PM
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Oh Lord, won't you buy me a....oh forget it!  Luxury cars are not interesting, anymore. 
Oct 1, 2012 8:04PM
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Ultra09, Deckie and the rest of the ignorant geeks need to get the facts straight before revealing their stupidity to the world.  Chevy has been building Corvettes in the USA sine 1953.  The Corvette plant moved to Bowling Green, KY from St. Louis, MS in 1973 or so.  I own 2 Corvettes and a Mercedes and you couldn't pay me to drive or own a rice burning piece of crap from Japan.  That being said, you buy and drive whatever you want and can afford.  Once purchased, if you don't like it anymore then you can  sell it, trade it, give it away or get something else.  Furthermore, nowadays almost all car manufacturers use synthetic oil in their vehicles, not just Mercedes.  I had a 1990 420 SEL for 25 years and put 300,000 miles on it before selling it in May.  And it was in perfect condition.  I bought a 2013 CLS 550 and intend to put a 300,000 miles on this one if I live long enough to do so.   You take proper care of any car and it will run and look great for years.  Take good care of yourself and your marriage, ditto. Years of happiness.  QYB!!!
Oct 1, 2012 4:53PM
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It s made in Hungary, with fine german engineering. Think of it as an investment: you buy it , and you keep investing in it. Untill you get smart and get rid of it. Fine german engineering means CAR WILL FALL APART as soon as the the warranty is over.
Oct 1, 2012 6:04PM
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elmo39, whose side are you on? Whatever you say about U.S.-made cars aside, we wouldn't be quite so free today if the Hitlermobile folks had won. Maybe YOUR parents or grandparents would have been gassed had they come ashore. Be careful what you ask for...

 

No Detroit = No freedom. Don't thank ANY foreign mfr. for your blessings as an American.

Oct 1, 2012 5:23PM
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The last Mercedes were built in Germany in the late eighties/early nineties.  They haven't built one since.
Oct 1, 2012 6:04PM
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no opinion on the merits of the arguments here, but as to  elmo 39, if you are going to spell neanderthal as "neandrathal", foresight as "forsight", manufacturers as "manufactures", necessary as "necesaary", according as "accoeding", then i'm not so sure i would criticize someone else's  spelling.  Or were you pulling everyone's leg?
Oct 1, 2012 6:10PM
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So the manufaturers plate on my new Mercedes indicating that it was built in Stuttgart, Germany is a lie???? I don't think so! How many of you really know what you're talking about? And almost every domestic auto manufacturer builds some of their models in Mexico and Canada. Other than Jeep, does any of them build exclusively in the USA?

Oct 2, 2012 8:44AM
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The Nazi Boxes are not worth the money.
Oct 1, 2012 4:38PM
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Ken Davis (2 perfect) is the idiot..can't spell or understand the market. The foreign market over the years crept into this country because US manufactures were making inferior cars and through their neandrathal management and lack of forsight didn't make the necesaary adjustments to quality before it was too late in the game. Their head was stuck in the sand and could not comprehend losing market share to foreign manufactures. They make some decent quality now, but well after the fact. As an example, look at Hyundia str=arted iwth low quality cars and in ten years have some of the best quality going accoeding to JD Powers and other auot watchdogs.
Oct 2, 2012 1:12PM
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Sorry, but I live in South Florida, where every other car is a Mercedes, or higher end luxury model of some other european brand. Big deal!

They look like a pair of health shoes - I don't get the appeal. Like most european cars, they are overpriced to buy, and maintain. From what I understand, and least down here in Florida, most of the Mercedes, and higher priced luxury cars, are leased, because its not what you can afford, it all about the look. This way, you can get into more car for less money. Also seem to me that because they own this type of vehicle, this somehow entitles them to own the road.

Guess I'm I little more secure in who I am that I don't feel the need, or care what people think of what I drive.
Oct 1, 2012 6:23PM
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I wonder if Deckie106 knows WTF he's  talkin' about ? Just sayin..........
Oct 2, 2012 12:07PM
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Not everyone should drive a Mercedes.  That's the point of them.

 

Newer cars all around are just not as well made.  But Mercedes are built to last.  Sure, there are maintenance costs, but there's the MB experience when you take it in for servicing.  It blows Chevy, Ford, etc out of the water, as well as it should for the price.

 

My husband had 2 early 80s deisels that were amazing and my 87 560sl is such a treat to drive.

Oct 1, 2012 6:26PM
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Bought my first new  2012 MB and it will be my last one ( Anyone looking to buy????). Going back to Lexus They want $179+ to change the oil????WTF.  Never again !
Oct 1, 2012 5:36PM
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i just hope Mercedes do not end up like volkswagen....right now the worst car in the european market....
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