Value added

As described in the Performance Measurement System section of the Corporate Profile chapter in graphic B.03, the cost of capital is the result of net assets and cost of capital expressed as a percentage, which is subtracted from earnings in order to calculate value added. Tables B.20 and B.21 show value added and net assets for the Group and for the individual divisions. Table B.22 shows how net assets are derived from the consolidated statement of financial position.

Daimler AR2018 B.03 Calculation of value added

B.20 Value Added

  2018 2017 18/17
In millions of euros   % change
Daimler Group 3,658 7,004 -48
Mercedes-Benz Cars 4,062 5,998 -32
Daimler Trucks 1,765 1,373 +29
Mercedes-Benz Vans -91 864
Daimler Buses 117 149 -21
Daimler Financial Services -236 519

B.21 Net assets (average)

  2018 2017 18/17
In millions of euros   % change
Mercedes-Benz Cars 26,289 23,705 +11
Daimler Trucks 8,240 8,417 -2
Mercedes-Benz Vans 3,355 2,358 +42
Daimler Buses 1,233 1,105 +12
Daimler Financial Services 1 12,466 11,165 +12
Net assets of the divisions 51,583 46,750 +10
Equity method investments 2 1,066 941 +13
Assets and liabilities from income taxes 3 1,707 2,190 -22
Other reconciliation 3 -547 -1,435 +62
Daimler Group 53,809 48,446 +11

1 Total equity.

2 To the extent not allocated to the segments.

3 To the extent not allocated to Daimler Financial Services.

B.22 Net assets (average)

  2018 2017 18/17
In millions of euros   % change
Net assets 1      
Intangible assets 13,872 12,742 +9
Property, plant and equipment 30,859 27,914 +11
Leased assets 18,509 18,071 +2
Inventories 28,096 24,492 +15
Trade receivables 10,545 9,742 +8
Less provisions for other risks -14,604 -14,031 -4
Less trade payables -13,395 -11,632 -15
Less other assets and liabilities -31,832 -29,861 -7
Assets and liabilities from income taxes 1 1,671 1,766 -5
Total equity of Daimler Financial Services 12,810 12,379 +3
Daimler Group 56,531 51,582 +10

1 To the extent not allocated to Daimler Financial Services.

The Group’s value added decreased by €3.3 billion to €3.7 billion in 2018, representing a return on net assets of 14.8 % (2017: 22.5 %). This was once again higher than the minimum required rate of return of 8 %. The significant decrease in value added was mainly due to the development of the divisions’ EBIT. In addition, further negative effects resulted from the increase in average net assets, mainly attributable to higher investment in fixed assets and an increase in inventories.

Value added at Mercedes-Benz Cars of €4.1 billion was significantly below the prior-year amount of €6.0 billion. This was primarily due to the negative earnings development mainly resulting from expenses in connection with ongoing governmental proceedings and measures relating to diesel vehicles. In addition, EBIT was also reduced by advance expenditure for new technologies and vehicles, weaker pricing, unfavorable exchange-rate effects and higher expenses for raw materials. A positive effect resulted from the remeasurement at fair value of the investment in Aston Martin Lagonda Global Holdings plc. In the prior year, EBIT was reduced by expenses for voluntary service activities and expenses for a specific vehicle recall. On the other hand, income in connection with a new investor in HERE affected EBIT positively in the prior year. An additional negative impact on value added resulted from the increase in average net assets to €26.3 billion primarily caused by higher investments in fixed assets.

Daimler Trucks’ value added was significantly higher than in the previous year at €1.8 billion (2017: €1.4 billion). This increase was primarily the result of the positive development of earnings due to higher unit sales in the NAFTA region as well as further efficiency enhancements. Higher expenses for exchange-rate effects, higher expenses for raw materials as well as additional costs, mainly resulting from supply-chain constraints affected EBIT negatively. In the previous year, EBIT included income from the sale of real estate at Mitsubishi Fuso Truck and Bus Corporation in Japan as well as expenses related to fixed cost optimization. Average net assets level remains nearly unchanged.

At Mercedes-Benz Vans, value added significantly decreased by €1.0 billion to negative €0.1 billion. Despite a growth in unit sales, especially in the NAFTA region, in China and in Western Europe, EBIT was negatively impacted by advance expenditure for new technologies and future products, expenses for the Sprinter model change, costs in connection with ongoing governmental proceedings and measures taken for diesel vehicles, expenses due to delivery delays and for the remeasurement of assets in connection with production capacities. The increase in average net assets due to higher investments in fixed assets and higher inventories led to a further deterioration of value added.

The value added of the Daimler Buses division was lower than in the previous year at €117 million (2017: €149 million). This primarily reflects the development of earnings. The decrease in earnings due to the product mix and the inflation-related cost increase was partially offset by higher unit sales. The reduction in value added was also caused by the increase in average net assets.

Daimler Financial Services’ value added of minus €0.2 billion was significantly under the prior-year level of plus €0.5 billion. The division’s return on equity amounted to 11.1 % (2017: 17.6 %). The development of value added primarily reflects the decrease in earnings of €0.6 billion. Earnings were significantly reduced by the agreement reached to conclude the Toll Collect arbitration proceedings. The higher interest-rate level impacted EBIT negatively. Rising cost of credit risks in individual markets negatively impacted earnings in the still relatively stable risk environment. On the other hand, increasing contract volume had a positive impact on EBIT. The rise in average equity also led to a further negative effect on value added.

Liquidity and Capital Resources
Net operating profit