AutoBeta(AutoBeta.net)04/23 Report--

In the face of a sudden COVID-19 epidemic since 2020, it seems to have completely disrupted the rhythm of the global automobile industry. According to foreign media reports, Daimler said today that due to the spread of novel coronavirus, the market demand for Mercedes-Benz models has dropped sharply, and the group's first-quarter earnings are expected to fall by nearly 70 per cent.

According to Daimler, profit before interest and tax in the first quarter after preliminary adjustment was 719 million euros (about 5.51 billion yuan), down 68.9 percent from the same period last year. Of this total, the adjusted EBIT of Mercedes-Benz's car and truck division is 603 million euros; the group's adjusted free cash flow is negative 1.9 billion euros. To this end, the company said it expects total revenue in 2020 to be lower than last year, which will also affect the free cash flow of the auto sector.

Despite the overall decline in the automotive industry in 2019, Daimler still achieved a growth trend, with cumulative annual sales reaching 3.34 million vehicles, a slight increase of 3% over last year; and according to the group's 2019 financial report, annual revenue was 172.7 billion euros, up 3% from a year earlier, another record. But Daimler's net profit fell to 2.7 billion euros from 7.6 billion euros last year, a year-on-year drop of 64.5%, the biggest decline in nearly a decade, with net profits attributable to shareholders of 2.4 billion euros.

Clearly, Daimler's profits fell not because of sales, but because fines and compensation from diesel doors took up 4 billion euros, coupled with research and development spending also increased from 9.1 billion euros in 2018 to 9.7 billion euros. So Daimler Group's spending continues to rise.

However, when the COVID-19 epidemic swept the world in 2020, Mercedes-Benz's largest single market, China, was the first to be hit. After a cumulative year-on-year growth of 18.8 per cent in January, sales fell sharply in February and March, falling 65 per cent to 11300 and 34200 to 31.1 per cent respectively. Subsequently, the European local market and a number of overseas markets have suffered a shutdown, resulting in a significant decline in sales, and the group's operation has almost come to a standstill.

Mercedes-Benz delivered a total of 477400 new cars worldwide from January to March, down 14.9 per cent from a year earlier, according to data. Of these, sales in Europe were 189000, down 15.9% from the same period last year; Germany was 64000, down 8.8% from the same period last year; and sales in the Asia-Pacific region were 198800, down 17.1% from the same period last year. Among them, sales in China were 139000, down 20.3% from the same period last year.

However, Bessig, director of global sales and marketing for Mercedes-Benz, said: "our dealerships in China and South Korea have fully resumed business, we have seen an increase in demand for cars, and we are very confident." At the same time, Daimler said a few days ago that it would gradually start production at a parts factory in Germany from April 20.

The German government had also planned to spend 150 billion euros on a budget to prevent German carmakers from being acquired by foreign capital, but Ola Kallenius, Daimler's CEO, said that despite the suspension of production at its main European plants, Daimler had ample cash flow and did not need to apply for German government assistance.

However, there are also media reports that in order to alleviate the funding problems caused by the suspension of production and sales, Daimler Group recently signed a credit line agreement of 12 billion euros to enhance its financial flexibility in the current epidemic crisis, and the new loan line can be used within 12 months. At the same time, Daimler has also made layoffs and pay cuts as part of the group's efforts to increase revenue and cut expenditure, including plans to cut 15000 jobs and 10 per cent pay cuts for executives over the next three months.

In the face of the impact of the epidemic, no car company can escape this risk, although Daimler Group, which is in the forefront of global sales, also feels the crisis brought by the epidemic, so when the epidemic is not effectively controlled, Daimler Group's situation is only a microcosm of the automobile industry, and even car companies with fewer cash reserves are inevitably at risk of collapse.

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