The Zhitong Finance App learned that due to model changes and low demand for electric vehicles, Mercedes-Benz Group's profit plummeted 34% in the first quarter. According to data released on Tuesday, Mercedes' adjusted profit before interest and tax fell to 3.6 billion euros (3.9 billion US dollars). The company said that due to the high cost of model upgrades, its auto manufacturing profit margin was 9%, which is lower than the annual target.
After the financial report was announced, Mercedes' stock price fell by 3.5%, narrowing the increase over the past year to around 4.9%.
The German luxury car maker's strategy of boosting profits by increasing premium models met resistance, and sales of high-end models fell by more than a quarter. In the first three months of this year, consumers delayed purchasing G-Class SUVs and E-Class sedans as they waited for new or upgraded models to hit the market.
“We are not satisfied with the results of the first quarter,” Mercedes CFO Harald Wilhelm said in a conference call, and he expects sales to pick up during the year as supply improves.
Mercedes also expects the share of its most expensive models to rise in the second half of this year. Although the company expects the Chinese market to improve, the US is the only region with “strong sales and demand growth.”
Automakers such as VWAGY.US (VWAGY.US) and Stellantis NV (STLA.US) are also off to a tough start this year. As with Mercedes, model changes have affected sales of companies such as Volkswagen.
The general decline in demand for electric vehicles has also hit Mercedes, where orders for all-electric models have slowed. Supply bottlenecks have increased the challenge and affected production of its GLC and E-Class cars. Mercedes said the bottleneck is easing.
In February of this year, the company lowered its sales target for electric vehicles. It is expected that the share of all-electric and plug-in hybrid vehicles will remain flat this year, accounting for 19% to 21% of total sales.
However, Mercedes said that despite being pressured by the “price war” led by Tesla (TSLA.US), pricing remained at a high level in the first quarter. Mercedes added that it wants to “maintain and defend” the current level of pricing.