Two of the leading German car makers, DaimlerAG and Volkswagen AG, have reported massive drops in profits in their most recent earnings releases. Daimler is the world’s third biggest luxury car-marker and the owner of the iconic Mercedes brand of cars and trucks. Volkswagen, the parent of Audi and the maker of the Beetle, has been eying global expansion, particularly in China, as it aims to compete with the big boys of the auto industry such as General Motors Company (NYSE:GM) and Toyota Motor Corporation (ADR) (NYSE:TM). While Mercedes barely managed to increase its total car sales, Audi posted rising unit sales in almost all of its markets as the latter widened its lead over the former from 7,802 cars in Q1 2012 to 27,090 cars in Q1 2013.
Daimler’s revenue fell by 3% to $34.05 billion from the first quarter of 2012, while net profit fell to $730 million from $1.8 billion. Volkswagen’s revenue dropped by 1.6% from $61.7 billion to $60.7 billion, while its profit after tax plummeted by 38.2% to $2.5 billion.
Overall, the number of vehicles sold by Daimler, including Mercedes cars, Mercedes vans, Daimler trucks and Daimler buses, remained fairly constant from last year at 501,600 units, while it reported just 1% increase in sales of Mercedes-Benz cars in first quarter of 2013. However, revenues in this unit fell by 6% to $18.59 billion from the year-ago-quarter. Daimler has attributed this decline to the changes made in the sales structure as it introduced new models of Mercedes cars. Overall, the company has put decent numbers in Asia, but continues to face challenges in the more mature markets of Western Europe and North America.
Mercedes-Benz Cars, Daimler’s biggest segment, accounts for 55% of the top-line revenues while Daimler trucks, the second largest segment, accounts for 27% of total sales.
Mercedes aims to surpass Audi by 2020 and wants to increase its deliveries by 4% in the current year. The business currently sells significantly less cars in China than Audi. Daimler is now planning to increase the Mercedes showroom count in China to 75 new outlets each year, as opposed to its previous target of 50. Currently, it has around 260 dealerships in the country, while its competitors have more than 300. China is the second biggest market for Mercedes, and it would be interesting to see how new generation S-Class models will do in the next quarter over there.