Daimler follows trend for growing confidence in car industry and doubles first-quarter profits as Chinese sales rise 82%
Booming demand for luxury cars in China has helped Daimler double its profits in the first quarter of the year and highlighted a wider turnaround in confidence for automobile makers.Sales of Mercedes-branded cars and sports utility vehicles (SUVs) increased by 82% in the world's most populous nation compared to 4% growth in western Europe and America.
The German-based carmaker reported earnings of €1.18bn (£1.05bn) compared with €612m in the same period of 2010, while revenues were up 15% at €24.7bn.
"We achieved excellent earnings in the first quarter. This puts us well ahead of our planning and confirms our positive outlook for the year 2011," said Dieter Zetsche, chairman of Daimler and head of the Mercedes division.
The strong performance confirms a trend highlighted by other companies recently, including Volkswagen, Volvo and particularly Ford, which had its best quarter for 13 years.
The industry has been in a parlous position since the banking crisis of 2008 triggered a global recession and a slump in car sales that led governments to introduce a "cash for clunkers" financial incentive scheme. Recent upsets have included the Japanese earthquake which has disrupted output among companies such as Toyota with major British production factories.
Daimler itself said it had been forced to write down €49m at its Daimler Truck division, which has a joint venture in Japan, and a further €29m at Daimler Financial Services. But the truck operation – the biggest in the world – generally performed very strongly, raising operating earnings from €130m in the first quarter of 2010 to €415m this year.
Overall, Daimler sold 15% more cars and commercial vehicles in the first three months of this year while Mercedes' operating profits rose 60% to €1.2bn.
Bodo Uebber, chief financial officer at Daimler, said there was no indication that demand in China for Mercedes would ease off in the near future and the group expected the marque to hit record sales of 1.2m cars this year helped by its top-of-the-range S-Class model. Similar trends – a burgeoning middle class seeking out luxury vehicles – can be seen in India.
However, the City was not impressed by Daimler's figures after far stronger than expected results from others. Daimler shares were trading down 2%.
Tim Schuldt, a car industry analyst at Equinet Bank, said: "While the first quarter was definitely a good quarter for Daimler, it also shows that it becomes more difficult for the company to surprise positively as expectations are high."
Volkswagen announced this week that it had tripled its profits in the first quarter, crediting mounting demand in China for its VW and Audi brands.
Volvo has also doubled its earnings and said its European orders were up by nearly 50% and its North American ones more than tripled, while Ford said US sales had risen by 16% as customers sought fuel-efficient vehicles such as the Escape. This helped Ford's total vehicle sales to reach 1.4m, up by 150,000 vehicles.
But some firms are still struggling. Spyker Cars – the owner of the Saab marque – has reported a net loss of €76.3m as it struggled to find cash to restart production at its factory in Sweden. Output has been at a standstill since earlier this month after Spyker ran out of money to pay Saab suppliers.
Spyker has been trying to interest a handful of Chinese carmakers to put up some cash for Saab, while China's state-owned SAIC now owns the MG brand and has just launched the new MG6 fastback.
The Society of Motor Manufacturers and Traders in Britain reported last week that 135,052 cars were produced in the UK last month – a 14.8% increase on the March 2010 figure.
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