BERLIN: Mercedes-Benz on Thursday launched a fresh cost-cutting plan to revive sales and margins and battle stiff competition as the German carmaker forecast a big drop in earnings in 2025.
Its car division reported a 40% slump in 2024 earnings as sales in the key Chinese and German markets took a battering. Demand in Europe remained below pre-pandemic levels and Chinese consumers opted for more affordable domestic electric models amid an uncertain economy.
Mercedes-Benz said it was targeting a double-digit return on sales but expected a rate of just 6-8% in its car division this year.
The goals, which Chief Executive Ola Kaellenius said come as the carmaker faces “an increasingly uncertain world”, are a sobering reassessment of the more optimistic vision it outlined in 2022 of an adjusted return on sales of up to 14% in good times and no less than 8% in difficult ones.
BLEAK OUTLOOK
Europe’s carmakers face a swathe of challenges this year, from tightening carbon emissions targets in Europe to rising trade tensions with the United States and fierce competition from Chinese EV startups.
Carmakers including Volkswagen and a range of suppliers have announced deep cuts as executives warn that the region’s energy and labour costs have become uncompetitive.
Renault, however, struck a more upbeat note, reporting a record operating profit for 2024 on Thursday, beating expectations, as lower costs and a string of new launches boosted margins.
Mercedes-Benz said on Thursday it plans to reduce production costs by 10% by 2027, with further details to come later in the day at its earnings conference.
The cuts will go beyond an ongoing plan launched in 2020 to reduce costs by 20% between 2019 and 2025, 15-16% of which was already achieved, according to the finance chief.
The company forecast a bleak outlook for 2025, with group-level earnings significantly below figures from last year.
Unit sales are projected to be lower than the 1.98 million vehicles sold in 2024, a prediction likely to disappoint investors and labour representatives, who had called for a minimum sales target of 2 million cars to fully utilize production capacity.
“To ensure the company’s future competitiveness in an uncertain world, we are taking steps to make the company faster, leaner, and stronger,“ CEO Kaellenius said in a statement.
The company’s board will propose a dividend of 4.30 euros per share, down from 5.30 in 2023.
