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Daimler Report Suggests European Auto Recovery Has Started

Daimler Report Suggests European Auto Recovery Has Started.

“We are now seeing the first signs of a sales recovery – especially at Mercedes-Benz cars”

Mercedes parent company Daimler’s shares soared by more than 5%, after it, and to a lesser extent Volvo earlier, pointed to evidence the coronavirus slump had bottomed out and recovery in the auto industry had begun.

Daimler had released its second quarter financial report early because it was bad – it reported a 2nd quarter operating loss of 1.68 billion euros ($1.95 billion) – but it wasn’t as bad as had been feared and the shares then advanced by 4.2%. By midday German time, after a company results press conference, Daimler shares were up 5.4% to 41.40 euros, after hitting a low of 21.93 euros in mid-March.

After Daimler said its Mercedes division would report a rise in operating profit in 2020, chairman Ola Kaellenius pointed to an overall recovery starting in the industry.

“We are now seeing the first signs of a sales recovery – especially at Mercedes-Benz passenger cars, where we are experiencing strong demand for our top end models and our electrified vehicles. Going forward, we are firmly determined to continue to improve the cost base of our company. At the same time, we are committed to our key strategic objectives: to lead in electrification and digitalization,” Kaellenius said.

Volvo, owned by China’s Geely Automobile Holdings Ltd, reported an operating loss of close to $100 million in the first half, after a $5.5 billion profit in the same period of 2019. But Volvo said it saw an impressive return to growth in China during the second quarter, and expected a similar upturn in the U.S. and Europe.

“If the market recovers as we expect, we anticipate sales volume to return to the levels we saw in the 2nd half of 2019, and it is our ambition to return to similar profit levels and cash flow,” CEO Hakan Samuelsson said in a statement.

In a report earlier, Citi Research analyst Angus Tweedie said the auto industry recovery in Europe had been surprising.

“We have been surprised by the speed of the recovery in European auto volumes in June and we attribute this to primarily misunderstanding the supply shock we have encountered this year as well as a rapid government stimulus response to the crisis,” Tweedie said.

“While we have missed the initial move of this rebound, analyzing pent-up demand suggests there could be further upside to come. Essentially we believe the almost complete shut-down of European markets in April and May has resulted in unprecedented levels of deferred sales demand – we estimate about 1.4 million units in Europe or about 20% of 2nd half 2019 volumes – which even factoring in an underlying 2009 demand collapse scenario this year will likely result in positive volume trends through second half 2020 across Europe,” Tweedie said.


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