Mercedes pledges robust results regardless of gloomy conditions

MERCEDES-BENZ Group still has its sights set on delivering solid returns next year even if the global economy continues to take a turn for the worse.

“If we end up in an economically-challenged environment, our goal is to still, in that environment, produce robust financial results,” chief executive officer Ola Kaellenius said on Monday (Oct 17) in an interview at the Paris car show. “Whether it’s rain and thunder and a hailstorm at the same time.”

In May, the luxury car maker outlined operating margin goals of 14 per cent in a favourable environment by 2025 and no lower than 8 per cent in poor conditions. The push, which hinges on moving Mercedes’s portfolio upmarket, is meant to convince investors the company can whether economic cycles and lead to an improved valuation.

Carmakers have gone through a number of setbacks since the shock of the pandemic and the related supply-chain disruption that’s now easing. There’s a little reprieve as increasing economic upheaval, sky-high energy prices and China’s strict pandemic measures threaten to put off buyers. Still, many manufacturers including Mercedes are working down burgeoning order lists and haven’t so far seen much of a shift in demand.

Despite the push, which includes a focus on more performance cars, Mercedes shares have declined 18 per cent this year. Unlike German peers, Volkswagen and BMW, the maker of the EQS sedan has no dominant anchor investor that can fend off outside approaches.

“Our multiple is too low,” Kaellenius said. If “we can see the shore on the other side of the transformation, I’m convinced there’s a lot of value to unlock in our stock”.

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While Mercedes is seeking more luxury buyers, other carmakers are taking steps to separate out their EV business in a bid to ignite languishing shares. Ford Motor in March said it’s separating its fast-growing EV operations and software development from the rest of the business while Renault is set to detail plans for a carve-out of its EV assets in November.

The Mercedes CEO ruled out such moves.

“There’s only one Mercedes team,” Kaellenius said. “I don’t want to create the psychology of here’s the current team and here’s the future team. I think that’s the wrong psychology for how you play this ultimate team sport that is automotive.” BLOOMBERG