Overall Assessment of the Economic Situation

In the opinion of the Board of Management, at the time of publication of this Annual Report, the Daimler Group is in a phase of transition, which brings great opportunities but also considerable risks:

  • We have presented a new sustainable business strategy, which is designed to lead us into a CO2-neutral future.
  • After receiving the approval of the Annual Shareholders’ Meeting, we launched a new corporate structure effective November 1, 2019, which makes us more flexible and focuses our businesses more closely on our customers.
  • We are on the threshold of a far-reaching transformation process that will change the Daimler Group and the automotive industry as a whole to an unprecedented extent in the coming years.
  • An additional factor is an environment featuring trade conflicts, extremely demanding targets for CO2 reductions, and economic and political uncertainties.

Against this backdrop, our divisions generally performed well in the market in 2019. In Interbrand’s current Best Global Brands 2019 ranking, the Mercedes-Benz brand is the world’s most successful and most valuable premium automotive brand. In 2019, the brand set a new record for unit sales for the ninth consecutive year, although growth was somewhat weaker than expected. We also increased our unit sales of vans and buses, and maintained or actually strengthened our position in key markets. Although our unit sales of trucks were lower than in the previous year, we continue to be the world’s largest manufacturer of trucks over 6 tons. At Daimler Mobility, new business and contract volume continued to develop positively in the year under review.

With a large number of new and innovative products and services, we have established a good starting position to meet the upcoming challenges. We are also very well positioned in the key technologies that are important for the future of mobility.

Daimler is pushing ahead with the electrification of the automobile. The entire Mercedes-Benz car portfolio is to be electrified by 2022. This means that various electrified alternatives will be offered in each segment – from compact cars to large SUVs. By 2025, we expect all-electric vehicles to account for up to 25 %. To this end, we plan to launch more than ten all-electric automobiles. Mercedes-Benz Vans already offers the eVito, the eSprinter and our battery-powered multipurpose vehicle is to follow in 2020. And Mercedes-Benz Vans has also announced an electric version of the successor model to the Citan. By 2022, Daimler Trucks will make electric vehicles ready for series production in all major regions and segments, with a focus on battery-powered trucks. The range will be supplemented in the second half of this decade by fuel-cell and hydrogen-based systems for trucks. Daimler Buses already presented the all-electric eCitaro in mid-2018. Buses equipped with fuel-cell systems are to supplement the product range.

In the field of automated driving, we launched a long-term development cooperation with BMW in the year under review. We intend to jointly develop the next generation of technology for driver assistance systems and automated driving on highways, as well as automated parking functions. As of 2024, such systems are to be available for private customers in passenger cars. Daimler Trucks will initially focus on Hub2Hub operations in SAE Level 4 automated driving mode on American highways. The potential elimination of the driver and the associated cost savings could result in a viable business model. All expertise and activities for trucks with automated driving functions have been brought together at the Daimler Trucks Autonomous Technology Group. Torc Robotics, in which we acquired a majority interest in 2019, is part of the Autonomous Technology Group.

In order to further improve our competitiveness and combine our strengths, we have entered into pioneering partnerships for mobility services, for the further development of the smart brand’s model portfolio, and for the establishment of a wide-ranging charging infrastructure for electric vehicles.

Numerous positive aspects of the Group’s current situation are of benefit to us with regard to the current transformation process. On the other hand, we have a generally unsatisfactory development of key financial performance indicators.

The operating profit (EBIT) of the Daimler Group of €4.3 billion was significantly lower than in the previous year (€11.1 billion). There were particularly significant decreases at the Mercedes-Benz Cars and Mercedes-Benz Vans divisions. In the automotive business as a whole, our return on sales of 1.5 % was significantly below our target, and the free cash flow of the industrial business of €1.4 billion was also significantly lower than in the previous year. Various special factors contributed to this development, such as expenses relating to regulatory proceedings for diesel vehicles. But even if we exclude these special items and also take into account the ongoing high level of expenditure for new products and technologies, we cannot be satisfied with our earnings in 2019.

This is true also because we plan to invest approximately €14 billion in property, plant and equipment and nearly €19 billion in research and development projects in 2020 and 2021. We are thus maintaining the high level of expenditure necessary to secure our future – despite the fact that we are applying funds much more efficiently, focusing even more on the most important projects and sharing costs in collaborative projects.

High expenses for the transition to a CO2-neutral future will continue to reduce our earnings in the coming years. It is therefore important that we now take the measures that will enable us to generate adequate returns and cash flows again in the medium term, even under less favorable conditions. For that reason, we are initiating comprehensive measures to increase profitability at all our divisions and at Daimler AG. They include personnel measures, material-cost savings, prioritization of investments, portfolio and model adjustments, the implementation of platform strategies and the thorough digitization of processes at Daimler Mobility.

In November 2019, we presented our sustainable business strategy with its focuses of MOVE, PERFORM and TRANSFORM, whose implementation will open up the way to a successful future. (See Objectives and Strategy)

We aim to offer sustainable solutions for the personal mobility and the goods transport of the future. We want to inspire emotionally and convince rationally. With our Mercedes-Benz automobiles, we take this path with sustainable, modern luxury. And with innovative and highly efficient commercial vehicles, we intend to make our customers successful in the transport and haulage business. Achieving our return targets and a solid cash flow are currently our top priorities. Because an appropriate rate of return is also the precondition for meeting the justified demands of our investors, our employees, our suppliers, and society as a whole.

In order to achieve our goals, we are systematically implementing our sustainable business strategy. Our starting position on the road to a profitable and at the same time CO2-neutral future is significantly better than current earnings figures suggest. There is still a lot to do, but we laid down the decisive markers in 2019. In doing so, we took into account that the transformation of the automotive industry not only involves risks, but also offers considerable opportunities, which we intend to utilize systematically. For example, the VISION EQS concept car, which we presented in September 2019, sets the direction: With such vehicles, we can completely redefine the automotive luxury segment. But CO2-neutral and automated driving opens up new market potential also for commercial vehicles, as the success of our eCitaro electric city bus shows.

All of this gives us great confidence for the coming years and the challenges that lie ahead.

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