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 2, 2012 2:22PM
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Did any of you read this article? MB is predicting a PROFIT of 3.3226 BILLION dollars US, not going broke. the stock is expected to go up 20% to $61. lol
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 2, 2012 12:43PM
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From the Volkswagon Group website. Volkswagon owns Porsche and Audi and many others!


from seven European countries: Volkswagen, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial VScania an.d MAN Vehicles,

 

 

For a good read, see how the 2 families who own controling interest of Volkswagon and Porsche

were able to transfer ownership of Posrche to Volkswagon and pay themselvesfor the sale  and yet retain ownership! , Wow, neat trick!

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 2, 2012 11:17AM
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I believe Porsche owns a controlling interest in VW which owns Audi. I don't think Audi owns Porsche
Oct 2, 2012 10:28AM
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I bought my wife a Mercedes to match her fine German made shotgun. Built like a Panzer tank  and made to last. Japanese guns are just OK while American made stuff is mostly scrap just like our autos. First foreign car ever and won't be the last Mercedes!
Oct 2, 2012 8:59AM
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This is my third Mercedes. I would not drive anything else. 179.00 for an oil change? where do you live? Mine are 111.00 and that is once a year!

Drive whatever you want but I want the best and that to me is Mercedes.

Oct 2, 2012 8:44AM
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The Nazi Boxes are not worth the money.
Oct 2, 2012 4:41AM
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ALL CARS ARE DESIGNED TO LAST FOR JUST SO LONG.. EVEN WITH REGULAR MAINTENANCE AND CARE, CRAP HAPPENS !!! ITS THE WAY THE WORLD WORKS FOR NOW. ULTIMATELY HERE'S MY VIEW FOR ALL. IT'S A REPOST OF MY EARLIER COMMENT:

FOR THE IGNORANT PEOPLE, OR THE MAJORITY OF THE POPULATION THAT WOULD READ THE FOLLOWING POSTS AND BELIEVE THAT THIS IS ALL THERE IS TO LIFE..WAKE THE HECK UP !!!!!!! WHAT THE HECK DOES THE CAR INDUSTRY HAVE TO DO WITH ANYTHING?? CENTRAL BANKS AND GOVERNMENTS ARE INCREASING IN POWER BY CONFUSING AND DUMPING DOWN THE MASSES FOR FINANCIAL GAIN CAUSING THESE IGNORANT STATEMENTS. THOSE WHOM LISTEN TO THIS MINDLESS RHETORIC AND REMAIN ARGUING OVER POINTLESS POINTS OF; WHO KNOWS MORE? OR WHO IS SMARTER ?AND WHOSE CAR IS COOLER LASTS LONGER GETS BETTER MILEAGE? IT IS YOU WHO ARE ULTIMATELY RESPONSIBLE FOR THE FAILING NATION WE ARE IN AND YOU Those whos FAIL TO LISTEN AND ACT IN PROPER RESPONSE AS YOU ALL KNOW YOU SHOULD DEEP DOWN INSIDE. . INSTEAD YOU GIVE IN TO THE STATUS QUO AND BECOME COMPLACENT, ALLOWING THE ABSOLUTE POWERS THAT BE... TO CONTINUE TO CORRUPT ABSOLUTELY. DEMISE WILL FALL UPON US ALL, EVEN THEM WHO THINK THEY ARE ABOVE THE COMING DECONSTRUCTION OR DEATH ITSELF. HOWEVER YOU SEE IT WHETHER IT BE "THE CIRCLE OF LIFE" OR " LAWS OF NATURE" NOT TO MENTION THOUSANDS OF YEARS OF HISTORY THAT DOCUMENT THE RISE AND FALL OF SEVERAL SOVEREIGN NATIONS THAT WERE SUPPOSED TO BE "TOO BIG TO FALL".. THE TERM "TOO BIG TO FALL" IS THE DUMBEST COINED PHRASE OF OUR TIME.."ROME WAS TOO BIG TO FALL" WHERE IS THAT GREAT ROMAN EMPIRE TODAY? NOTHING IS TOO BIG TO FALL. HELL, WASN'T THE TITANIC UNSINKABLE? JUST A FEW ERRORS IN THE COMMAND STRUCTURE AND YOU HAVE CATASTROPHE... IT DOES NOT HAPPEN SLOWLY AND GRADUALLY FOREVER. THERE ARE THOSE LAST CRUCIAL MOMENTS BEFORE A DAM BREAKS. UNSEATING SLOWLY, BUT WHEN IT BREAKS- THE DAMAGE IS DONE WITHIN SECONDS AND THERE IS NO WAY TO SHORE IT UP AGAIN FOR QUITE SOMETIME IF EVER. HISTORICALLY, MOST MAJOR DAMS THAT HAVE RUPTURED HAVE NEVER BEEN REBUILT. JAPAN JUST HAD THE NUCLEAR MELTDOWN OF SEVERAL PLANTS THAT HAD X AMOUNT OF FAIL SAFES THAT WERE RELIED UPON ONLY TO WATCH EACH ONE FAIL ONE AFTER THE OTHER. IF YOU THINK THAT THE RADIATION LEVELS EMITTED FROM THOSE CATASTROPHES WERE SMALL COMPARED TO THE TWO NUCLEAR WEAPONS THAT "WE THE PEOPLE OF THE UNITED STATES" DROPPED ON THAT COUNTRY SO MANY YEARS AGO.. YOU'RE IN FOR A RUDE AWAKENING AND SO ARE YOUR FUTURE GENERATIONS. AND THOSE PEOPLE THAT WILL EXPERIENCE THE SAME IF NOT WORSE MALADIES THAT EFFECT THOSE EXPOSED. CUT THE HEAD OFF OF THE BEAST THAT IS LEADING US INTO HELL...GREED, LUST, POWER, GLUTTONY, HARLOTRY ETC. ETC.

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 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 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 10:49PM
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Buy a BMW, free oil maint. for 50,000 miles
Oct 1, 2012 9:58PM
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LOve the peace sign car....myfrauline's have created nothing but pleasure for every mile we are privilaged to drive them!    Get a real car...not a toy.  Best thing I love, is when someone is tailgailing me, I put it to the floor and it is bounds out of sight....if you have had the fun of driving the autobahn, you will see how our drivers are inept on the US highway! For certain the truth!  I am American through and through, grew up in Wisconsin and ride Harley's and love our Mercedes....it would be hard pressed to give up my 12- point suspension and super performance, excellent safety and awesome daily driver.  It would be a tough sell for us to want anything else! YEah  MB!
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 7:36PM
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$179 to change the oil in a 'Benz. Mine charges less than half that including synthetic oil. Best to change garages.

 

Wife just put 30,000 miles on her used E350 4-Matic and never saw the inside of a garage yet. That doesn't include the $12,000 in damages it incurred when she was rear-ended by a Jeep Grand Cherokee going 45 mph. Thank God she wasn't driving a Suburu.

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 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 6:32PM
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 !
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