Business

Mercedes-Benz posts profit rise but warns on ‘sluggish’ demand in Europe

German carmaker says rapid spread of Covid-19 in China is also affecting sentiment

Mercedes-Benz warned that demand in Europe was 'sluggish' and that the market in China was feeling the effects of the rapid spread of coronavirus. Photograph: Daniel Roland/AFP via Getty Images

Patricia Nilsson
Fri Feb 17 2023 - 15:27

Profits at Mercedes-Benz rose by more than a quarter last year thanks to a focus on more profitable models but it warned that demand in Europe was “sluggish” and that the market in China was feeling the effects of the rapid spread of coronavirus.

The Stuttgart-based group said on Friday that group earnings before interest and taxes increased 28 per cent to €20.5 billion in 2022, beating analyst expectations, while revenues rose 12 per cent to €150 billion.

But it warned that the outlook remained uncertain. Orders of new cars in Europe have slowed, while the spread of Covid-19 in China since lockdowns ended has had a “spill-over impact on sentiment in the first quarter”.

Chief executive Ola Källenius believed it was still possible that the market in China could rebound this year “but it’s still early days so that’s why we’ve decided to guide around the same levels as 2022″.

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Citing exceptional uncertainty caused by the war in Ukraine, along with tensions between China and the West, the company said it expected sales in 2023 to remain at last year’s level and that pretax earnings would be “slightly below” 2022.

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Mr Källenius added that central banks’ efforts to cool inflation by raising interest rates were a threat “that should not be forgotten in our industry, our any industry for that matter”. “The whole point of that policy is obviously to cool down demand,” he said.

While the global chip shortage has started to ease, Mercedes said that supply chains were not back to their pre-pandemic normal. Last year, the group experienced a “significant” increase in the price of some raw materials, particularly steel. It was able to partly offset the effects of the shortage by prioritising its most expensive models – unit sales in this category grew 8 per cent last year.

On Thursday evening, Mercedes announced that it would start a two-year €4bn share buyback programme in March. — Copyright The Financial Times Limited 2023

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