Mercedes Outlook

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Status: Interim Report Q3 2011 - October 27, 2011

Development of the world economy 

At the beginning of the fourth quarter of 2011, the outlook for the world economy is distinctly less favorable than just a few months ago. Severe turbulence on financial markets is an indication that some investors anticipate a renewed economic slump. The longer investor and consumer uncertainty continues and the longer financial markets believe that politicians might not have a sustained solution for the problem of sovereign debt, the bigger the risk of a real economic downturn. This applies above all to the European Monetary Union and the United States. Meanwhile, key leading indicators such as business and consumer sentiment have fallen worldwide and are in some cases approaching recession levels again. The first signs of weakening are also apparent from volumes of worldwide trade. In the United States, economic growth is burdened by ongoing high unemployment, the continuation of an extremely weak real-estate market, and comparatively low levels of consumption. In the European Monetary Union, the economic situation is dominated by the sovereign-debt crisis. The probability of a substantial restructuring of Greece’s debt has increased distinctly in recent weeks. 

Concern about possible contagion to other peripheral countries and to the banking sector is feeding uncertainty and volatility in the financial markets. The German economy will hardly grow in the fourth quarter.

And for the euro zone as a whole, unfavorable developments in the last three months of the year could result in a decrease in economic output. The industrial countries will probably post only slight growth of approximately 1.5% for the full year. The outlook for the emerging economies continues to be more positive than for Western Europe, North America and Japan, due not least to their greater scope for fiscal and monetary policy. Although the economic dynamism of Asia, Latin America and Eastern Europe is decreasing, solid growth of approximately 6% is expected for 2011. So for the world economy as a whole, economic expansion of only about 3% is possible this year, which is distinctly lower than was projected at the beginning of the year.

Prospects for automotive markets

 

Despite the worsened economic situation, growth of worldwide automobile markets will continue this year, but at significantly lower rates than in 2010. From today’s perspective, global demand for cars is likely to increase by nearly 5%. The US market will continue its recovery and will probably expand by approximately 10%. In Western Europe, however, demand is expected to decrease slightly, whereby the development of individual markets remains disparate. Significant market growth of about 10% is expected in Germany, while demand will decrease in the other core markets of Western Europe, in some cases significantly. Although the Japanese market will probably start to grow again distinctly in the fourth quarter, demand over the year as a whole will decrease by a double-digit percentage. The car markets of the large Asian emerging markets of China and India will continue to grow, but at significantly lower rates than the double-digit expansion of recent years. The Brazilian market is likely to grow only slightly compared with 2010, while demand for cars in Russia should increase by at least 25% thanks to state incentive schemes.

The worldwide market for medium and heavy-duty trucks is likely to grow only moderately this year due to the expected market weakening in China. Daimler’s core markets in North America, Western Europe and Japan will recovery strongly, however. In both the European market and the NAFTA region, we expect demand to grow by approximately 35%. Thanks to quicker than expected market stabilization, demand for trucks in Japan in the full year is likely to be higher than in 2010. With the exception of China, demand for trucks in the major emerging markets will be generally favorable this year. Total sales in Brazil should increase again by approximately 10%. The dynamic recovery of the Russian market should continue with significant growth in demand. The Indian truck market may well grow at a double-digit rate once again, while demand for trucks in China, the world’s biggest market, is expected to decrease following the end of the state incentive program.

We anticipate a continuation of van markets’ recovery and assume that the positive development will continue in all of the regions relevant to us. We expect growth of more than 10% in the market segments relevant to Daimler in both Europe and the United States.

We expect the European bus markets to remain stable at a low level. Weak demand for city buses is having a negative impact on sales in this region. While the total market volume in Western Europe is likely to contract slightly, we continue to anticipate growth in demand in Latin America due to purchases being brought forward.

Expectations for the Daimler Group and its divisions

On the basis of the divisions’ planning, Daimler expects its total unit sales to increase significantly in the full year (2010: 1.9 million vehicles). We assume that unit sales in 2011 will be higher than in the prior year for all divisions.

In view of the continuation of generally good market prospects combined with numerous model changes and new products, Mercedes-Benz Cars assumes that the Mercedes-Benz brand will further increase its unit sales to a new record in 2011. Thanks to our up-to-date and competitive model range, we will profit also in the year 2011 from strong demand for our numerous new models in the C-Class segment and from the continuing market success of our SUVs.

In September, we started deliveries of the new M-Class in the United States. The roadster version of the Mercedes-Benz SLS AMG will follow in the fourth quarter. And in November, we will launch the new B-Class – the first of five new models in the compact- car segment. On the engines side, we are introducing our particularly fuel-efficient four, six and eight-cylinder engines and the eco-start-stop technology in additional models. We thus have a broad range of vehicles combining high performance and excellent drivability with low fuel consumption, which appeal in particular to our fleet customers. On this basis, we will put highly economical and environmentally friendly cars on the roads, allowing us to further reduce the CO2 emissions of our fleet. With the new generation of the C-Class, for example, the C 220 CDI is available with fuel consumption of just 4.4 liters per 100 kilometers and CO2 emissions of 117 grams per kilometer.

For the smart brand, we anticipate unit sales at roughly the same level as in 2010 due to the full availability of the new generation of the smart fortwo.

Daimler Trucks expects to post significant growth in unit sales in full-year 2011. The need to catch up in both the European market and the NAFTA region is the main reason for the strong revival of demand compared with last year. Reconstruction activities in Japan following the natural disaster this March are boosting the demand for transport in that country. This is supporting the trend of sales returning to their levels of before the disaster.

The so-called RIC markets are growing dynamically, and Daimler Trucks is expanding its production capacities accordingly: In India, BharatBenz will open its truck plant in April 2012; in Russia, Daimler Trucks is broadening its cooperation with Kamaz; and in China, Beijing Foton Daimler Automotive Co., Ltd. (BFDA) has obtained final approval from the authorities for the joint venture between Daimler and Foton.

The order situation confirms our expectations for this year: Orders received for 107,200 units in the third quarter remained at a high level, and the order backlog is significantly larger than a year ago. We anticipate unit sales in the fourth quarter at a higher level than in the prior-year period.

Due to the ongoing market recovery, Mercedes-Benz Vans also expects to achieve growth in unit sales in its key markets in fullyear 2011. In Western Europe, we will defend our leading market position for medium-sized and large vans and will participate in the market’s growth. We expect to see significant increases in unit sales particularly in the United States and Eastern Europe. Furthermore, increased production capacities in Argentina will additionally boost our growth in Latin America.

Daimler Buses assumes it will sell more than 40,000 complete buses and bus chassis in the year 2011. There will be a structural shift away from complete buses and towards bus chassis.

Daimler Financial Services anticipates growth in its worldwide new business in full-year 2011. After adjusting for exchange-rate effects, contract volume should increase again in the fourth quarter. Daimler Financial Services expects a decrease in worldwide credit-risk costs in the full year.

We assume that the Daimler Group will achieve another increase in revenue to significantly more than €100 billion in the year 2011. This growth will probably be driven by all of the automotive divisions.

On the basis of current estimates, we continue to assume that the Daimler Group will post EBIT from the ongoing business in 2011 that will be very significantly higher than the level of 2010. The course of business so far this year shows that we continue to make good progress towards achieving our targeted rates of return on a sustained basis as of the year 2013. Those targets are based on the assumption of a stable global economic and political environment and intact automotive markets.

Due to the strong demand for our products, we assume that our worldwide workforce will expand compared with the end of 2010.