Europe crisis, China slowdown ding Mercedes
The luxury car market has generally remained insulated from Europe's debt troubles, but that may be changing.
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.
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.
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?
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.
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