Daimler edges up profit forecast as luxury cars offset spending

Frankfurt

DAIMLER AG struck a more upbeat tone, calling for "slightly" higher 2018 earnings, as sales growth of its higher-priced Mercedes-Benz luxury cars like the S-Class coupe helps offset record spending to develop electric vehicles.

The change from a flat forecast issued two months ago shows the strategy of pushing powerful and lucrative gas-guzzlers to finance the electric car revolution is paying off. The return-on-sales in the Mercedes unit rose slightly to 9 per cent, even as spending on new technology jumped 9.5 per cent during the first quarter.

"We are sustainably continuing along our profitable growth course," chief executive officer Dieter Zetsche of the Stuttgart, Germany-based company said on Friday in a statement. "We aim to continue building on this and will systematically implement our strategy" to boost sales while adapting to industrywide technology shifts.

Mercedes, the world's best-selling luxury-car brand, posted its best quarterly sales ever, with deliveries of the GLC crossover increasing 33 per cent and the revised flagship S-Class posting a 29 per cent gain. Mr Zetsche predicted in February that investment costs and currency shifts would hold back profit by as much as 2 billion euros (S$3.21 billion) this year.

Daimler is developing a line of 10 fully battery-powered models under the EQ sub-brand to go on sale within five years, as well as hybrid variants of Mercedes's existing vehicle range. Spending on new technology and models during the first three months of the year rose to 2.3 billion euros.

The company is also initiating a corporate overhaul, a task potentially complicated by Chinese automotive billionaire Li Shufu's purchase of a 9.7 per cent stake early this year to become Daimler's largest shareholder.

Daimler rose as much as 1.4 per cent to 65.96 euros, paring its loss for the year to 6.9 per cent. The shares stood at 65.93 euros at 9.12 am in Frankfurt trading. BLOOMBERG