Daimler shakes off chip crunch, says on track to meet 2021 targets

By Nick Carey

LONDON (Reuters) – Daimler AG reported a higher quarterly profit on Friday despite a 30% drop in Mercedes-Benz unit sales due to a global semiconductor chip shortage, as it focused on more profitable cars and cut costs, and said it should meet its 2021 profit targets.

The German premium carmaker said it expects chip supplies to improve in the fourth quarter and that the “overriding structural shortage of semiconductors is expected to remain an issue in 2022 but should improve compared to 2021”.

But the company warned that “it remains difficult to deliver an accurate forecast on how the supply situation will continue to develop.”

The chip crunch has pummeled the auto industry for much of this year. Carmakers, which shuttered plants as the COVID-19 pandemic took hold last year, have found themselves competing against the sprawling consumer electronics industry for chip supplies.

Supply chain snarls from a fire at a chip-making plant in Japan to coronavirus lockdowns in Malaysia, central to global chip supplies, have only compounded the industry’s problems.

The shortage of chips, used in everything from brake sensors to power steering to entertainment systems, has led automakers around the world to cut or suspend production, pushing up both new and used vehicle prices amid robust demand from consumers.

Daimler said it had kept a “tight grip” on costs during the third quarter as it focused on more profitable models including in its Maybach and performance AMG brands.

Daimler said it now expects Mercedes-Benz to post slightly lower sales in 2021 versus 2020, but said its forecast of an adjusted margin of between 10% and 12% for the unit remained unchanged.

The company also maintained its forecast of a margin of 6% to 8% for its Daimler Trucks unit, which is due to be spun off in December.

The German carmaker posted a quarterly operating profit of 2.6 billion euros ($3 billion), up 18% from 2.2 billion euros for the same period in 2020. Analysts had expected a quarterly net profit of 2.3 billion euros, according to Refinitiv estimates.

The company’s revenue was almost flat at 40.1 billion euros versus 40.3 billion in the third quarter of 2020.

(Reporting By Nick Carey; Editing by Sam Holmes and Vinay Dwivedi)

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