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German Premium Manufacturers Clear Decks For Action

Short-Time Working Ending, Shutdowns Cancelled, Workers Recalled
Demand Increasing Thanks To China, U.S.; Profits Will Jump

While mass market car manufacturers’ sales hit a wall across Europe, the German premium makers are ratcheting up production and profit forecasts, boosted by demand in China and a resurgent U.S.

“Cash for clunkers” government subsidies, which boosted sales last year, have more or less run their course and smaller cheaper cars are getting harder to sell. But the German upmarket producers BMW, Mercedes, and Audi which languished during the depths of the recession without government assistance, are looking increasingly healthy as buyers in China like the look of new products like the Audi A8, BMW 5 Series and the Mercedes S class.

“German premium manufacturers have recovered strongly and are running close to or at pre-crisis production levels driven by the rising demand from the U.S. and China. All players have rehired temporary workers indicating the very fast recovery in demand,” Deutsche Bank said in a report.

Daimler chief financial officer Bodo Uebberr said 2010 earnings before interest and taxes for the Mercedes car division will be at the upper end of the predicted range of €2.5 billion to €3.0 billion. The same goes for truck earnings, which were estimated by Daimler to reach between €500 million and €700 million for the year.

Some analysts point to Daimler’s traditional conservatism and reckon these estimates will be on the low side.

BMW expects “strong single-digit” percentage sales rise this to year to more than one million, an improvement on the “solid single-digit” percentage increase previously expected, BMW head of sales and marketing Ian Robertson told Reuters at the Bilbao Automotive News Congress.

“The U.S. is coming back stronger than expected,” Robertson said.

Rapid recovery
According to German daily newspaper Handelsblatt, BMW is planning on extending working hours and curbing factory holiday shutdowns at its plants to meet a rapid recovery in demand. The company is likely to raise profit guidance for the year, which currently expects profit to exceed the previous year’s, the paper reported.

Not to be outdone, Audi said it aims to beat its 2008 sales record convincingly in 2010. At a Berlin launch of the new A1, Audi said it is well on track to sell more than one million cars this year, driven by the success of the A5, and SUVs, with growth primarily coming from China.

Deutsche Bank said Mercedes is also looking to skip the summer break at its European plants because of rising order levels, and the good times will continue at least until the end of the year.

“”We anticipate a good second quarter profit development across the board, and there are currently no signs that demand is slowing down in the second half for premium players,” Deutsche Bank said.


Neil Winton – July 1, 2010

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