Revenue and earnings
We assume that the revenue of the Daimler Group will also increase slightly in 2018, as a result of the overall positive development of unit sales in the automotive divisions. Exchange-rate effects are likely to have a rather negative impact on the development of revenue in the year 2018. This applies above all to our business in the NAFTA region.
Our divisions currently have very attractive product ranges, which have been expanded and systematically renewed in recent years. We therefore assume that Daimler will profit to an above-average extent from the slight growth in global demand for motor vehicles that we expect in the year 2018, and will be able to strengthen or defend its position in major markets. At Mercedes-Benz Cars, additional growth this year will be primarily driven by the E-Class models, the GLC SUV, the new convertible models and the new A-Class. On the other hand, revenue growth will be dampened by the anticipated development of exchange rates and lifecycle effects from some car models, as well as by a changing sales structure. Mercedes-Benz Cars therefore anticipates revenue in 2018 only at the high prior-year level despite a slight increase in unit sales. Due to generally positive expectations for markets and unit sales, the Daimler Trucks division plans for slight revenue growth, while the Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services divisions anticipate significant increases in revenue.
In regional terms, we expect further slight growth in revenue in Asia and Europe. In China, we have created the right conditions for further growth with new sales outlets, additional production capacities and a broad product range. However, growth in unit sales in China will have a disproportionately low impact on revenue growth, as the share of local production will continue to increase. Our Chinese associated company, Beijing Benz Automotive China (BBAC), is included in our consolidated financial statements using the equity method of accounting.
The growth in unit sales and revenue that we anticipate will have a generally positive impact on earnings in 2018. We have laid the foundations for a lasting high level of earnings with various programs for improved profitability, which we already implemented in the years 2013 to 2015. Since then, we have continuously been taking further measures in all divisions for the long-term and structural optimization of our business system. At Mercedes-Benz Cars for example, we aim to achieve further efficiency improvements in the context of the F4L (Fit for Leadership) program. Daimler Trucks is also working continuously on efficiency improvements with its optimization program. In combination with the cost optimizations we have so far planned and partially already implemented, we aim to achieve profit-effective improvements for Daimler Trucks in an amount of €1.4 billion by the end of 2018. These programs are expected to become fully effective in the year 2019.
We are standardizing and modularizing our production processes throughout the Group. In this context, we are making intelligent use of vehicle platforms, allowing us to achieve further cost advantages. In parallel, we are pushing forward with digital connectivity: in all divisions and at all stages of the value chain – from development to production to sales and service. In this way, we are opening up additional scope to become even faster, more flexible and more efficient - to the benefit of our customers.
However, earnings will be reduced by the continuation of very high expenditure: for our model offensive, for innovative technologies (especially for reducing fuel consumption and for electrification), for the digitization of our products and processes, and for the expansion and modernization of the worldwide production capacities. As a result, our advance expenditure aimed at securing a successful future will once again be substantially higher in 2018 than in the previous year, see Investment and Research and development.
On the basis of the market developments we anticipate, the aforementioned factors and the planning of our divisions, we assume that Group EBIT in 2018 will be of the magnitude of the previous year.
The individual divisions have the following expectations for EBIT in the year 2018:
- Mercedes-Benz Cars: at the prior-year level,
- Daimler Trucks: significantly above the prior-year level,
- Mercedes-Benz Vans: slightly below the prior-year level,
- Daimler Buses: significantly above the prior-year level, and
- Daimler Financial Services: at the prior-year level.
At Mercedes-Benz Cars, positive effects will result from the anticipated growth in unit sales. They will be offset, however, by the significant increase in advance expenditure for new products and technologies, a less favorable sales structure and negative exchange-rate effects.
Both Daimler Trucks and Daimler Buses should profit from rising unit sales and the efficiency-enhancing measures.
Daimler Financial Services assumes that its earnings will develop positively as a result of further growth in contract volume and the optimization of business processes. Increased investment in new businesses and the advance of digitization, as well as higher interest rates and exchange-rate effects, will probably have a negative impact on earnings.
Against the backdrop of high advance expenditure for the Sprinter model change, higher costs from the production ramp-up of the new models and negative exchange-rate effects, Mercedes-Benz Vans anticipates a slight decrease in earnings. The expected growth in unit sales is unlikely to fully offset these negative effects.