Daimler AG (owner of Mercedes Benz) and Porsche AG confirm that the worst crisis in the European car market in the past 17 years has started to spread to the luxury brands, mirroring a broader recession that has expanded from southern Europe to Germany. Daimler said yesterday that operating profit at Mercedes-Benz Cars will fall this year, lowering a previous target of matching the 2011 figure, while Porsche plans to build fewer than the 155,000 cars and sport-utility vehicles originally planned for next year.
“If a downturn lasts for longer, which this one is, premium is not immune from pricing trends,” said Arndt Ellinghorst, a London-based analyst at Credit Suisse Group AG with an outperform recommendation on BMW, Porsche and VW, and a neutral on Daimler. “The pricing environment in Europe is the biggest problem,” with incentives spreading from Italy, Spain and France to Germany.
European car sales dropped 8.5 percent in August, the steepest decline since February, the Brussels-based ACEA industry association said on Sept. 18. The group forecasts that European deliveries will hit a 17-year low in 2012. German car registrations fell 4.7 percent in August, pushing the eight-month sales figure to a 0.6 percent decline.
Dealers in Germany, Europe’s biggest economy, offered discounts on average of 12.1 percent off the sticker price last month, the highest rate in more than a year, according to industry publication Autohaus PulsSchlag. Price cuts by Daimler’s Mercedes-Benz brand in August jumped to 11.7 percent from 9.2 percent a year earlier. Incentives at Audi widened to 9.7 percent from 9.2 percent.
The increased incentives helped Audi and Mercedes, the world’s second- and third-biggest luxury-car producers, post sales gains last month in Europe, according to ACEA figures. Registrations at top-ranked BMW fell in the region.
Porsche, the Stuttgart-based maker of the 911 sports car and Cayenne SUV, will still increase production next year, though less than planned, spokesman Hans-Gerd Bode said by phone yesterday. The VW unit is scheduled this year to build 140,000 vehicles. The slower growth rate “is due to the difficult economic environment, especially in Europe,” said Lukas Kunze, another Porsche spokesman.
Mercedes-Benz, which also includes the Smart city-car brand, has already been taking efficiency measures in response to the market decline and is setting up a savings project to be called “Fit for Leadership,” Chief Executive Officer Dieter Zetsche said at a Stuttgart press conference. Ebit last year at Mercedes-Benz Cars totaled 5.2 billion euros ($6.7 billion). The unit’s first-half operating profit fell 10 percent to 2.57 billion euros. Zetsche said second-half earnings will decline from the first six months of 2012. “The overall environment in Europe is deteriorating, with more negative developments than expected,” Zetsche said.
BMW is sticking to a 2012 forecast for record pretax profit and deliveries, said Mathias Schmidt, a spokesman at the Munich-based carmaker. Pretax profit in 2011 was 7.38 billion euros. VW is also maintaining its forecast for operating profit to match last year’s 11.3 billion euros, said Marco Dalan, a spokesman of Volkswagen.
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