Mercedes raises outlook despite inflation, supply-chain woes

MERCEDES- BENZ AG raised its outlook on resilient sales of new, high-priced models that are helping the luxury-car maker overcome economic turbulence including Europe’s worsening energy crisis and high inflation.

The world’s biggest luxury-car maker now expects group profit to be slightly higher than last year, rather than unchanged, while returns from carmaking are seen at between 12% to 14%, slightly higher than before, the company said Wednesday. Mercedes also reported second-quarter results that beat expectations.

“We are enhancing our vigilance and resilience to manage increasingly complex macroeconomic and geopolitical challenges,” CEO Ola Kallenius said in a statement. “At the same time, we have good reasons to remain confident, with ongoing strong demand, a fresh vehicle portfolio and further key product launches this year.”

A worsening economic climate weighing on consumers is combined with the ongoing struggles to procure enough semiconductors for automakers. Ongoing pandemic lockdowns in China preventing people from buying cars are another threat. Even so, Mercedes predicted healthy demand for its models during the second half of the year with solid order books indicating demand continues to outstrip available cars.

Like other carmakers, Mercedes is prioritising the production of their most lucrative models as chip supply remains a headache. While availability continues to be tight, automakers are seeing signs of the jam easing. Volvo Cars this month said improvements late in the second quarter were helping production resume.

At Mercedes, deliveries fell 7% during the second quarter because of a lack of chips and logistical challenges.

Mercedes also has taken further steps to keep its operations running due to the threat of gas rationing in Germany after Russia’s decision to cut supplies through a key Baltic sea pipeline has raised fears of an abrupt halt of deliveries during winter. The Sindelfingen plant, where the company makes the high-end electric EQS, S-Class and Maybach, can now function without natural gas, a fuel typically used in automaker’s paint operations. — Bloomberg