Outlook

 

At the beginning of the second quarter, there are still good prospects that the world economy will continue its expansion and gain some dynamism in the coming quarters. This applies above all to the industrialized countries, and especially to the United States and Western Europe. In the USA, domestic demand should profit from solid employment gains, income growth, rising utilization of production capacities and an upturn in credit volumes. Therefore, the general consensus of expectations for economic growth has meanwhile stabilized at just less than 3%. Consumer and business confidence and production output have developed so positively in large parts of the euro zone this year that slight upward corrections of growth expectations for individual economies have already occurred. For the euro zone as a whole, a forecast for the full year of about 1% growth seems to have emerged, following negative growth in 2013. In Japan, due to the recent increase in value-added tax, growth is expected to weaken slightly in the coming quarters. Despite concern about the stability of the financial market and a visible weakening of business sentiment, the Chinese economy should be able to achieve the growth of 7.5% targeted for 2014. The economic situation is certainly the most difficult in some emerging markets, especially in those countries with substantial current account deficits. The forecasts for such major emerging economies as Brazil, Turkey, South Africa and India are still clearly below their long-term potential. Significant downward corrections have already been made for the Russian economy, whereby even recessive developments can no longer be ruled out. From today’s perspective, however, the world economy is still expected to grow by more than 3% this year. But in view of the existing risks, the development of the global economy remains fragile and susceptible to external disturbances.

According to current assessments, worldwide demand for cars is likely to grow by a magnitude of 4-5% this year, whereby we currently see the markets developing at the lower end of this bandwidth. Once again, China is expected to deliver the biggest contribution to global growth; further expansion of the country’s car market of approximately 10% should be possible. The US market is also likely to continue its growth; although only at a relatively moderate rate, the market volume will probably increase to approximately 16 million cars and light trucks. We continue to anticipate a rather hesitant recovery of the Western European market. The region’s recent quite significant growth rates were primarily a reflection of the weak prior-year level and are likely to decrease perceptibly as the year progresses. Nonetheless, increased demand can generally be expected in most of the core markets thanks to the improved economic outlook. A market correction is anticipated for Japan in full-year 2014, despite the dynamic start to the year. The increase in value-added tax that took place at the beginning of April will probably have a significant negative impact on demand in the coming months. In the large emerging markets (excluding China), it must be assumed that demand for cars will not be immune to the recent economic difficulties. In India, we anticipate a moderate recovery of demand for automobiles, but some risks are also visible. From today’s perspective, the Russian car market is likely to reach the prior-year level at best; due to the current difficult situation, market contraction can no longer be ruled out.

From today’s perspective, global demand for medium- and heavy-duty trucks in the year 2014 can only be expected at around the level of the previous year. With the exception of the North American market, no significant dynamism is to be expected in most of the core markets. On the contrary, downward risks exist in some emerging markets due to the current turbulences. In the NAFTA region, we anticipate market growth of around 10% thanks to the increasing economic momentum. In the European market, the positive effect of purchases brought forward is now likely to come to an end. Developments during the rest of 2014 will mainly depend on the extent to which the economic recovery can offset this negative element. From today’s perspective, we anticipate a market volume for the full year of slightly lower than the level of 2013. The Japanese market for light-, medium- and heavy-duty trucks will probably slow down significantly due to the recent increase in value-added tax. Nonetheless, demand in the full year should grow slightly. However, the Brazilian market for medium- and heavy-duty trucks is likely to be smaller than last year due to the country’s weak economic development; demand is likely to decrease by around 10%. Further market contraction is meanwhile to be assumed for Russia and India due to those countries’ weak economies. From today’s perspective, the Chinese market should achieve moderate growth. But because new emission standards were introduced there in 2013, the outlook for 2014 is still connected with significant uncertainty.

We assume that overall demand in Europe for medium-sized and large vans will recover slightly in 2014, although market developments are likely to differ greatly in the various countries. For small vans, we anticipate a market volume in Europe in the magnitude of the previous year. In the United States, we expect demand for large vans to increase significantly in the year 2014, and we anticipate a further revival of demand also in China. In Latin America, we assume that the market for large vans will contract in the full year.

We anticipate a market volume for buses in Western Europe in 2014 that is slightly above the level of the previous year. Due to the difficult economic situation in Argentina and growing market uncertainties in Brazil, we assume that demand for buses will decrease in Latin America.

On the basis of the divisions’ planning, Daimler expects its total unit sales to increase significantly in the year 2014.

After its record year in 2013, Mercedes-Benz Cars has started another growth year in which we intend to significantly increase our unit sales with attractive new products. The two most important new Mercedes-Benz models of the year were launched in Europe in March: the new C-Class sedan and the GLA compact SUV. The C-Class station wagon will be available to customers in the first half of this year and will create further sales stimulus. Shortly after the model changeover last year, the new S-Class had already reached the top position for worldwide sales in its segment. This spring, Mercedes-Benz added attractive versions to the S-Class model series. And a new dream car will be launched in September: the new S-Class Coupé. Further growth in the luxury segment is to be expected from the model upgrade of the CLS-Class in June. The smart fortwo and smart forfour will be presented in July and will become available to customers towards the end of the year.

The best knows no alternative. The new C-Class.
GLA - the new compact SUV of Mercedes-Benz

Daimler Trucks anticipates a significant increase in overall unit sales in the year 2014. In Western Europe, we expect the aftereffects of the introduction of Euro VI emission standards to counteract the assumed improvement in the general economic situation and to have a negative impact on the development of unit sales. But with the new Mercedes-Benz model range, we intend to further strengthen our very good market position. After the Brazilian market had largely recovered from the low of 2012 last year, we now expect demand to decrease significantly. The extensive measures we are taking to optimize our production, products and sales, for which we will invest approximately €300 million by the end of 2015, should further strengthen our market position. However, there are risks from the current political and economic situation in some Latin American countries and in Turkey and Russia. We anticipate significant growth in unit sales in the NAFTA region and Asia. In the NAFTA region, our unit sales should benefit from the expected market expansion and should significantly surpass the level of the year 2013. In Asia, the availability of additional BharatBenz models in the Indian market should make an important contribution to growth in unit sales. We are also generating synergy potential and further growth possibilities in the context of our integrated “Asia Business Model”, with the new FUSO models from Chennai for example. In Japan, we will participate in the anticipated slight market growth.

Mercedes-Benz Vans assumes that its unit sales will increase significantly in full-year 2014. We expect significant growth in unit sales of mid-sized and large vans in Europe; the new Sprinter as well as the new Vito and the V-Class will stimulate additional demand. We also anticipate a further increase in unit sales of the Citan.

Daimler Buses expects slight growth in its total unit sales in the year 2014, whereby the proportion of complete buses should develop positively. In Western Europe, Daimler Buses anticipates significant expansion of its business with complete buses this year. Due to the currently difficult economic situation in Argentina and growing market uncertainty in Brazil, weaker unit sales of bus chassis are anticipated in Latin America.

Daimler Financial Services anticipates significant growth in new business and contract volume in 2014. The key growth drivers are the product offensives and market developments in the automotive divisions, effective marketing directed at younger target groups, the expansion of business especially in Asia, the further development of our online sales channels, and the expansion of innovative mobility services.

We assume that the Daimler Group’s revenue will increase significantly in the year 2014. In regional terms, we anticipate above-average growth rates in North America and China.

On the basis of the anticipated market development, the aforementioned factors and the planning of our divisions, we assume that Group EBIT from the ongoing business will increase significantly in the year 2014.

For the individual divisions, we aim to achieve the following EBIT targets from the ongoing business in full-year 2014: 
– Mercedes-Benz Cars: significantly above the prior-year level,
– Daimler Trucks: significantly above the prior-year level, 
– Mercedes-Benz Vans: at the prior-year level, 
– Daimler Buses: slightly above the prior-year level and 
– Daimler Financial Services: slightly above the prior-year level.

In addition, the sale of our shares in Rolls-Royce Power Systems Holding GmbH and the changeover from the equity-method measurement of our shares in Tesla Motors to first-time fair-value measurement will lead to significant contributions to earnings.

The anticipated development of earnings in the automotive divisions will also have a positive impact on the free cash flow of the industrial business in 2014. When comparing with the prior-year figure, however, it is necessary to consider the fact that the free cash flow of €4.8 billion in the year 2013 included a cash inflow of €2.2 billion from the successful EADS transaction and a cash outflow of €0.6 billion for the acquisition of a 12% equity interest in BAIC Motor. Furthermore, reporting-date effects positively affected the free cash flow in 2013; these will be partially offset during the rest of 2014. In combination with ongoing high investment and research and development spending, we expect the free cash flow of the industrial business adjusted for the effects of acquisitions and disposals of equity interests to be significantly lower in 2014 than in 2013. Subject to the approval of the relevant authorities, we anticipate a cash inflow of €2.43 billion from the sale of our shares in Rolls-Royce Power Systems Holding GmbH in 2014.

From today’s perspective, we assume that the number of employees worldwide will remain stable compared with the end of 2013.

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