Daimler expects shift to EVs to cut into profit growth this year

As the shape of the new EV economy begins to come into focus, it doesn’t look that rosy for existing automakers, at least in the short term. The first public acknowledgment of this has come from Daimler, which recently said it expects profit growth to come to a sudden halt this year, partly due to its shift into a mode of intense investment in electric and autonomous technologies.

Along with most other global automakers, Daimler has had a record run over the past few years. In 2017, the company posted record sales, revenue and profits. This year however, Daimler expects the Mercedes-Benz and smart brands to post earnings equal to last year’s, a bit of a let-down after 2017’s 13 percent increase.

“The outlook is a disappointment,” Juergen Pieper, an analyst at Bankhaus Metzler, told Bloomberg. “The drop in earnings at the cars division shows the profit dynamic is lacking.”

The German giant’s 2018 forecast shows rising R&D budgets, as well as mounting materials costs and other negative financial factors. “Our outlook is dampened by currency exchange rates, as well as another expected rise of spending demands,” said CEO Dieter Zetsche at the company’s annual press conference in Stuttgart.

Daimler expects to increase development spending, already at record levels, for another two to three years. It plans to invest 10 billion euros to support the release of 10 new electrified models by 2022.

 

Source: Bloomberg

  • John Fleckenstein

    I applaud MB for taking this step and looking toward the future. Companies cannot make double digit profits year after year without investing into technology. It will cost them much less to do it now than having to do it in the future. To play catchup could cost 10 times as much in the future….not to mention losses to companies like Tesla and Beijing Electric Vehicle Co. in China.

  • Joe

    Not going into EVs would cut into profits in the future, when everyone else is into EVs.