Daimler Profits will be hit by pollution compliance costs

Interesting story over at Automotive News this morning:

Mercedes-Benz parent Daimler has discreetly warned financial analysts that CO2 compliance costs and market headwinds for next year would be much larger than previously thought and asked them to reduce their earnings estimates for the automaker by billions of euros

Automotive News

“Hey guys we saw your estimates! Maybe uh… adjust earnings down a couple billion euros? lol”

They were told that the analysts’ 2020 consensus estimate of just over 10 billion euros for group operating profit was about a fifth too high because of added costs to electrify Mercedes’ passenger car fleet that cannot be passed on to customers and an accelerated slump in demand for heavy commercial vehicles.

“This wasn’t a little, this was really running through the forest with an axe in panic because the consensus estimates were too high,” said a London-based analyst. “BMW has their CO2 compliance costs absolutely under control, whereas at Daimler it’s a huge problem, so now they are trying to pull consensus down by 20 percent.”

Automotive News

Running through the forest with an axe? Wow, sounds like a pretty big problem.

“It’s quite unusual to call everyone on the street and guide down,” said a second analyst.

Automotive News

The electrification of the auto industry is going to be quite unusual. And don’t get me started about autonomy.

Consensus estimates of the entire investment community dropped by more than a fifth to below 9 billion euros in the following days as a consequence, the analysts said. “Basically, the management team wants to clear the decks ahead of the CMD (Capital Markets Day). They don’t want to deliver any incremental bad news on Thursday.”

Automotive News

They were worried about the stock tanking if they missed estimates, so they adjusted the estimates down.

In a statement the [Daimler] said: “The issue of CO2 compliance has been discussed within the industry and capital markets for a long time now. We have addressed this topic early and have a roadmap for CO2 compliance. As was the case before, this considerable effort requires investments in the future and leads to costs of which everyone is aware.”

Automotive News

Translation: Our core business is going the way of the dinosaurs we use to fuel our cars

Previously, we reported that Tesla is on the verge of overtaking Daimler as the third most profitable automaker in the world, behind Toyota and Volkswagen.

Read the full story at Automotive News

Leave a Reply