Mercedes-Benz to further cut costs, even as profit beats estimates image

Daimler AG announced a second-quarter profit that positively outpaced analyst forecasts, thanks to increased deliveries from the higher-margin Mercedes C, E and S Class cars.

On the other hand, the world’s third largest premium automaker said the finance sheets don’t look impeccable yet, as the company needs to address the rising demand for its compact, lower margin lineup. So, Mercedes intends to increase cost-cutting measures to raise profitability in the lower-end range.

“Growth in the compact segment will be higher than the average, therefore the portion of compact cars plus Smart will go to about 40 percent of the total,” said Chief Executive Dieter Zetsche. “We are continually looking at ways to improve our structural efficiency,” he added.

The Mercedes-Benz Cars division had core earnings that climbed 35% in the second-quarter, but so far (as the rivals have yet to announce their quarterly earnings) it lagged both Audi and BMW. For the first quarter, BMW posted a return of 9.5% and Audi 10.1%, while Mercedes in the second quarter was up from 2013’s 6.6% to 7.9%. That’s also not very close to the internal goal of 10% – as the division also includes the Smart brand. The automaker rides on price increases of new model introductions – like the revamped E Class and the new S Class to improve the profit margins.

Via Reuters