Daimler boss issues Brexit warning after 2018 profit drop

Daimler boss Dieter Zetsche has said Brexit is “one of the most important and crucial factors” dictating the firm’s recovery in 2019 after a substantial fall in profits last year.

Despite revenues rising by 2 percent to £147 billion (Rs 13 lakh crore) in 2018, Mercedes-Benz's parent company reported net profits down 28 percent from £9.3bn (Rs 86,220 crore) to £6.7bn (Rs 62,119 crore) last year. Operating profit also dropped from £12.6bn (116,827 crore) to £9.8bn (Rs 90,865 crore), while operating margins fell by more than 23 percent by the fourth quarter.

Speaking at the firm's annual press conference, Zetsche cited “strong headwinds”, such as trade disputes harming Chinese imports from the US, supply chain issues, problems caused by the new WLTP emissions legislation and greater raw material costs.

He claimed the trading environment “remains extremely challenging”, with raw material costs and exchange rate issues causing further concern. 

When asked about the potential effects of the UK’s decision to leave the European Union, Zetsche said: “Of course, Brexit is one of the most important and crucial factors”.

“It could put the world economy into an uncertain situation”, he continued. “The UK is the world’s fourth biggest market for us, and if a no-deal Brexit became a reality, the market in Great Britain would be very much adversely affected. Foreign exchange relations would also become unfavourable. It’s a big part of our risk portfolio”. 

Earnings in 2019 will also be negatively impacted, Zetsche said, as Daimler invests heavily in its electrified model offensive. The firm plans to offer electrified variants of all of its cars (across Mercedes and Smart) by 2022, with 130 variants including everything from 48V mild hybrids to electric vehicles. It has also invested £17.6bn (Rs 163,129 crore) in battery cells to cover this expansion until 2030. 

However, the company still has a strong financial footing with large cash reserves, while both revenue and overall car sales increased slightly last year. The biggest positive was an 11 percent growth in its Chinese operation, despite a general market downturn in the country. 

Daimler is also continuing its transformation into a “provider of mobility services”. It has renamed its financial services operation Daimler Mobility, while last year it merged its urban mobility service offerings (including car sharing and ride-hailing) with BMW's.

This year, Daimler plans to trial fully autonomous shuttle services in San Jose and San Fransisco, US, and will invest £440m (Rs 4,075 crore) to get “highly automated” trucks on the road within the next 12 months. A series of autonomous and electric Mercedes vans is also on the cards.