Daimler AG, producer of Mercedes-Benz cars and other vehicles, lowered earnings expectations for the financial year 2018 due to higher import taxes.
Daimler AG announced that expectations for earnings on most of its companies were lowered for 2018 as higher import tariffs will lower demand for SUVs and that the increased costs will not be passed on in full to customers. The company blames higher import tariffs for US-made SUVs into China for the lowering of expectations for Mercedes Benz Cars – the effect of threatened US importation taxes of 25% probably could have an even larger impact should they be implemented. New certification processes will also affect earnings. Mercedes-Benz is also hit by the costs of having to recall diesel vehicles in various countries.
Daimler AG Press Release on Lower Earnings Expectations 2018
From Daimler AG’s press release on lower earnings expectations in 2018:
Today (21 June 2018), due to current developments, Daimler AG has made a new assessment of the earnings potential for the year 2018. From today’s perspective, the decisive factor is that, at Mercedes-Benz Cars, fewer than expected SUV sales and higher than expected costs – not completely passed on to the customers – must be assumed because of increased import tariffs for US vehicles into the Chinese market. This effect cannot be fully compensated by the reallocation of vehicles to other markets. As another decisive factor, a negative effect on earnings is to be expected in the second half of the year in connection with the new certification process WLTP (Worldwide Harmonized Light Vehicles Test Procedure). Furthermore, earnings at Mercedes-Benz Vans are affected in connection with the recall of diesel vehicles. Additionally, earnings at Daimler Buses are negatively affected by the declining demand in Latin America.
Daimler AG New Earnings Expectations for 2018
As a result, Daimler has now the following expectations for EBIT in the year 2018:
- Mercedes-Benz Cars: slightly below the previous year,
- Mercedes-Benz Vans: significantly below the previous year’s level,
- Daimler Buses: in the magnitude of the previous year, and
- Daimler Group: slightly below the previous year’s level.
The operating result EBIT represents earnings before interest and taxes.
The announcement of lower expected earnings follows on record sales for Mercedes-Benz cars worldwide thus far in 2018. Other manufacturers, including BMW that claims to be largest exporter of cars made in the USA by value, are likely to be similarly affected.