Daimler is expected to report its best profit margin since ending the merger with Chrysler five years ago.
An average estimate of 23 analysts surveyed by Bloomberg News suggested Daimler may post a 2011 operating margin of 8.3%, the highest since at least 2007, the year Daimler and Chrysler went separate ways. But it will still trail Audi and BMW which are both poised to pass 10%.
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Constant competition among the world’s three biggest makers of luxury vehicles, all based in Germany, has set them apart in industry profitability, Bloomberg noted.
“The gap in Europe will widen to the advantage of the Germans” this year, Stefan Bauknecht, a Frankfurt-based fund manager with Deutsche Bank’s DWS told Bloomberg. “Fiat and the French carmakers have the wrong products and the wrong market exposure and will be under pressure” from Asian manufacturers like Hyundai Motor and Toyota.
All three German carmakers sold a record number of vehicles last year, benefiting from expansion in China and a rebound in US spending. Even with the debt crisis projected to lead to a fifth straight decline in European car sales, BMW, VW and Daimler are all expecting to grow faster than the global market this year, helped by updated models like the BMW 3-series sedan, Audi A3 compact and Mercedes SL roadster, Bloomberg said.
“The German automakers have higher structural margins because they’re in the premium segment and so have more pricing power than mass-market carmakers,” Reto Hess, a Zurich- based analyst with Credit Suisse’s private banking unit, told Bloomberg. “That will remain the case this year.”
The analyst survey suggested Daimler will probably say earnings before interest and taxes in 2011 rose 24% to EUR8.8bn on revenue of EUR105bn. Vehicle deliveries rose 7.7% last year to a record 1.36m Mercedes-Benz and Smart vehicles boosted by the updated C-Class.
Volkswagen, which is expected to report earnings on 12 March, is projected to generate a margin of 7.4% as Ebit surges 75% to EUR11.5bn, according to analyst estimates cited by Bloomberg. The Audi brand had a nine-month margin of 12.2%.
Peugeot is forecast to report a margin of 2.2% for last year while Renault may have earned the equivalent of 2.6% of sales, according to Bloomberg analyst surveys.
“For Daimler, 2012 will be a transition year because of their new small cars,” DWS’s Bauknecht said. Daimler’s “headwinds will turn to tailwinds in 2013, while BMW’s growth momentum slows” as the 5- and 7-Series sedans age, he told Bloomberg.
However, the news agency uggested profitability at the German carmakers could take a knock this year as sales shift to lower-margin small cars. BMW introduced a new 1-series late last year while Mercedes has the overhauled A-Class and Audi revamps its A3.
“Even for the Germans, margins have peaked and are coming down,” said Credit Suisse’s Hess.
Daimler’s margins this year could narrow to 7.6%, while BMW’s and VW’s are forecast to slip to 10.2% and 6.7%, respectively, according to analysts estimates compiled by Bloomberg. Those compare to margins projections of 2.1% at Renault and 2% for Peugeot.
“All three German carmakers are operating from a position of strength” based on decades of delivering leading technology, said Juergen Meyer, a fund manager with SEB Asset Management in Frankfurt. “I don’t see anything changing this picture.”
