On February 20, the Mercedes-Benz Group, widely recognized simply as Mercedes, unveiled its financial report for the year 2024, revealing some stark realities for the luxury automakerThe report highlighted a notable decline in the company's earnings before interest and taxes (EBIT), which fell to 13.6 billion euros, reflecting a substantial 31% decrease compared to the previous yearFurthermore, revenue slid to 145.6 billion euros, marking a 4% drop year-on-yearIn light of these financial hurdles, the Group has decided to lower its dividend to 4.30 euros per share, in contrast to last year’s dividend of 5.30 euros.
The financial report split the performance into different business segments, highlighting significant pressure on both passenger vehicle and light commercial vehicle operationsFor instance, the profits from their passenger car division adjusted for EBIT reached 8.7 billion euros, a staggering 40% decline from 14.3 billion euros in 2023. The drop is attributed to various factors, including a reduction in sales volumes, decreased net prices, and an unfavorable model mixThe adjusted sales profit margin for 2024 stands at 8.1%, down from 12.6% in 2023. Meanwhile, Mercedes is maintaining robust research and development expenditures, allocating 8.7 billion euros in 2024, primarily focusing on future platforms and technologies, particularly their innovative MB.OS.
The light commercial vehicle segment also saw a decline, with adjusted EBIT down to 2.8 billion euros from 3.1 billion eurosThe adjusted sales profit margin for this segment was recorded at 14.6%, slightly down from 15.1% the previous yearMercedes intends to invest approximately 1 billion euros in research and development for this segment, gearing towards the creation of flexible new platforms, including electric vehicles and fuel models under the VAN.EA and VAN.CA platforms.
Amid these financial revelations, Mercedes announced an ambitious plan to enhance its overall corporate operations, aimed particularly at returning its passenger car business to a double-digit sales profit margin
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A clear theme emerging from their operational strategies is cost reductionAccording to recent comments from executives during the earnings call, the company is targeting a 10% reduction in production costs by 2027. Building upon considerable progress achieved over the past four years, Mercedes will continue collaborating closely with suppliers to tackle issues related to material costsThe strategy for reducing fixed costs is also envisioned to stretch until 2027.
The latest capacity planning details revealed that over the next three years, Mercedes will maintain production levels between 2 to 2.5 million vehicles, with a specific reduction of 100,000 units in its home market of GermanyImportantly, management clarified that they will not close any factories in Germany; rather, they plan to limit production capacities at each site to about 300,000 unitsConcurrently, they will reduce the workforce through a natural transition strategy, which aims to adjust production levels while avoiding significant layoffs.
This trend towards workforce adjustment in the German market has generated considerable media attentionIn response to the concerns, Mercedes executives noted that their cost-cutting measures encompass all expense types, including personnel costsThey mentioned plans to implement measures not only in Europe but across various global marketsCiting the German example, they indicated that the company would target non-direct production sectors for workforce adjustments, emphasizing a responsible approach towards any necessary layoffs.
Mercedes is not alone in navigating through challenging transitions; the German automotive industry has also seen significant shifts recentlySeveral notable automotive manufacturers and suppliers are undergoing dramatic restructuring, with Continental Group planning to eliminate approximately 3,000 research and development positions by the end of 2026, primarily concentrated in Germany at locations like Babenhausen and Frankfurt
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Likewise, ZF Group has announced a potential reduction of 11,000 to 14,000 employees in Germany by the end of 2028, accounting for over 20% of its local workforce.
Statistics indicate that the automotive sector accounts for around 5% of Germany's economy and employs close to 780,000 individualsAs a cornerstone of modern automotive production and home to some of the oldest car manufacturing traditions, Germany holds a pivotal role in the global automotive narrativeHowever, the industry is currently facing a "winter" amid multiple challenges.
In earlier reports by Xinhua News Agency, it was highlighted that by 2025, the German automotive industry would confront critical crossroads; one path is fraught with bankrupt automotive component suppliers, widespread layoffs, and stagnant market demand, while the other faces impending regulatory challenges with the EU’s new carbon emission standards slated to take effect in 2025. Companies falling short of compliance may face hefty fines anticipated to reach up to 16 billion eurosSpecifically, this new EU regulation mandates that a significant portion of local carmakers must achieve that 20% of their total car sales come from electric vehicles to avert these severe penalties.
Of noteworthy interest is the growing emphasis on the Chinese market for many German automotive brands, including MercedesAccording to the latest figures, Mercedes anticipates a total global sales volume of 2.389 million vehicles for 2024, marking a year-on-year decline of 3%. Significantly, China remains Mercedes' largest individual market, contributing an impressive 714,500 unit sales to account for 30% of the company's global sales.
Recognizing the substantial potential in the Chinese market, Mercedes has reiterated its commitment to sustaining investment there to support what is described as the Group's most extensive product offensive in historyFrom 2025 through 2027, Mercedes is set to launch an ambitious lineup of new and refreshed products globally, with several exclusive offerings tailored for the Chinese market, spanning across various segments and propulsion types.
Ola Källenius, the chairman of the board at Mercedes, expressed, "To secure our competitiveness in an increasingly dynamic environment, we are taking steps to streamline and strengthen our organization, kickstarting with the introduction of our new CLA, which marks the beginning of a series of intensive new model rollouts." Looking ahead, the company revealed plans to introduce a brand-new electric long-wheelbase CLA model produced in Beijing by 2025, further expanding the line with new GLE SUV models by mid-2026. A new luxury electric MPV based on the VAN.EA platform is also slated for production at the Fujian plant.
Furthermore, Källenius underscored the significance of the advancements achieved in the domain of autonomous driving within China, admitting to being pleasantly surprised by the progress
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