Mercedes to Begin Direct-Sales Model in Germany

In light of the uncertainty surrounding the economy, Mercedes-Benz Group issued a warning about lower earnings this year and said it would try to sell more cars directly in major markets like Britain and Germany while maintaining its goal of high margins on flat volume.

Despite the fact that sales at the Mercedes-Benz Cars business are anticipated to remain at the same level, the premium automaker anticipates a lower adjusted return of 12 to 14 percent on sales for its car’s division in 2023 and group earnings that are slightly below 2022.

In addition to stating that prospects were better in the United States, it cited sluggish demand in Europe, a sluggish recovery from coronavirus restrictions in China, high energy and raw material costs, inflation for supporting the forecast.

It is still anticipated that sales of high-end vehicles, whose high margins have allowed the manufacturer to maintain profits despite rising costs, will slightly increase compared to last year.

The German company’s forecast coincides with warnings from across the industry about a challenging year ahead. Germany’s auto association predicts that global car sales will reach 74 million this year, up 4 percent from last year but still 8 percent below levels before the pandemic.

According to Chief Financial Officer Harald Wilhelm, Mercedes-Benz’s top priority is to strike a balance between price and volume because the majority of the company’s earnings growth in the previous year was caused by net price increases. He also stated that the company remains prudent.

Wilhelm stated that Mercedes-Benz is still on track to meet its 2020 commitment to reduce fixed costs, capital expenditure, and research and development spending by more than 20% by 2025 compared to 2019 levels, despite inflation.

Ola Kaellenius, the company’s chief executive, stated that the company intends to implement a direct sales strategy in Germany as well as other European markets, including Britain, Kaellenius advised strategic patience and stated that the premium EV market in China was still in its infancy when asked how the company would defend its market share in the country during the transition to electric vehicles (EVs).

With a 14.6% margin for 2022 and a 28% increase in earnings across the group to $21.81 billion, Mercedes-Benz achieved its forecast of a 13%-15% adjusted return on sales in the cars division.