Mercedes-Benz AG reported better-than-expected preliminary earnings in the first quarter as the automaker’s push further upmarket helped it overcome higher raw-material costs.
(Bloomberg) — Mercedes-Benz AG reported better-than-expected preliminary earnings in the first quarter as the automaker’s push further upmarket helped it overcome higher raw-material costs.
Mercedes’s adjusted return on sales came in at 14.8% on healthy net pricing and robust demand for its vans and luxury cars, topping analyst estimates. The shares gained in Frankfurt.
“The company beat across key segments,” Bernstein analysts led by Daniel Roeska said in a note. “Mercedes is fast-approaching a position to revise guidance upward later in the year.”
Read More: Mercedes Cars Become More Elusive After 43% Jump in Prices
The German manufacturer is trying to sell more top-end models like its S-Class sedan to bolster profit and help fund a costly shift to electric vehicles. Economic uncertainty and inflation have compounded the challenges for an industry dealing with persistent supply issues and profitability concerns sparked by Tesla Inc.’s recent price cuts.
“In a challenging market environment, we have once again demonstrated resilience,” Chief Financial Officer Harald Wilhelm said in a statement late Thursday. “Strong pricing significantly outweighed headwinds from material costs and led to another quarter of solid financial results.”
Mercedes rose as much as 2.9%. The stock is up around 14% this year.
While years of supply-chain bottlenecks have left automakers with full order books, the recent moves by Tesla — whose Model Y was the top-selling vehicle in Europe last quarter — have fueled worries that EV sticker prices will increasingly come under pressure as competition intensifies. Renault SA slumped on Thursday over the pricing concerns.
What Bloomberg Intelligence Says:
Mercedes Cars’ strong 14.8% Ebit margin on price and mix strength via its order backlog don’t assuage concern that price discipline on new orders may wane as production normalizes and Tesla’s recent price cuts impact the wider market. We believe it’s too early to see 2023 Cars Ebit margin guidance of 12-14% being raised given a lack of visibility over 2H.
— Michael Dean, BI automotive analyst
List prices in Europe are ticking down this year, with premium-brand discounts rising fastest, Bloomberg Intelligence analysts Michael Dean and Gillian Davis said Friday, citing JATO data.
Mercedes late last year discounted prices for its flagship electric vehicles in China amid intensifying competition in the biggest auto market. Still, the automaker has successfully increased sales of high-margin vehicles such as the S-Class and G-Wagon offroader.
Mercedes has forecast an automaking margin of between 12% and 14% this year, down from 14.6% in 2022. It plans to publish full results on April 28.
Read More: Renault Sinks as Tesla Price Cuts Raise EV Margin Concerns
(Updates with analyst quote in third paragraph.)
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