Mercedes-Benz Q2 Performance Underpinned by Strong Sales of Top-End Cars and Premium Vans

• Solid profitability: Adjusted Return on Sales (RoS) reaches 13.5% (Q2 2022: 14.2%) at Mercedes-Benz Cars and 15.5% at Mercedes-Benz Vans (Q2 2022: 10.1%); adjusted Return on Equity (RoE) of 12.8% at Mercedes-Benz Mobility (Q2 2022: 17.1%)
• Top-End growth: Mercedes-AMG sales increased 19%, Mercedes-Maybach rose 39% and G-Class sales up 29% in the second quarter
• EV ramp-up: Charging options to be expanded in North America; Mercedes-Benz battery electric car sales more than doubled (+123%) in Q2; Mercedes-Benz Mobility tripled new EV business volume to €1.8 billion (Q2 2022: €0.6 billion)
• Technology highlights: E-Class to be launched with precursor of MB.OS and SAE-Level 2^[1] automated lane change functionality in Europe; ChatGPT integrated into MBUX in the United States; SAE-Level 3 certification in California
• Outlook: Group EBIT now seen “at” prior-year level; Free cash flow of the industrial business is now expected “slightly above” the prior-year level; Mercedes-Benz Vans sales now seen “significantly above” the prior-year level and adjusted Return on Sales (RoS) now expected in the range of 13%–15% up from 11%–13% previously

Mercedes-Benz Group’s (ticker symbol: MBG) sharpened focus on sustainable growth through sales of desirable cars and premium vans, combined with tight cost control, lifted second-quarter Earnings Before Interest and Taxes (EBIT) by 8% to €5.0 billion (Q2 2022: €4.6 billion) and revenue by 5% to €38.2 billion (Q2 2022: €36.4 billion).

At Mercedes-Benz Cars the adjusted Return on Sales (RoS) reached 13.5% in the quarter (Q2 2022: 14.2%) thanks to disciplined pricing and strong sales of Top-End vehicles, as well as Mercedes-Benz SUV models, including electric variants. At Mercedes-Benz Vans the Q2 adjusted RoS rose to 15.5% (Q2 2022: 10.1%) due to favorable pricing and higher sales.

“Our solid financial performance is the result of disciplined strategy execution in a dynamic environment. For this I would like to thank the entire Mercedes team. We expect the pace of sales from the first half of 2023 to continue for the remainder of the year, given the strength of our pipeline of desirable products: Customers will be able to choose from additional models when the new E-Class, the CLE Coupe and GLC Coupe hit showrooms later this year. And at the upcoming IAA we will give a preview of how Mercedes-Benz will elevate and electrify the entry segment based on our MMA architecture.”

Ola Kaellenius, Chief Executive Officer of Mercedes-Benz Group AG

Transformation

In the second quarter, the company continued its transformation with several technological innovations. Mercedes-Benz launched a beta program for the integration of ChatGPT into Mercedes-Benz passenger cars in North America. Users of MBUX^[2] can use ChatGPT to enhance the voice assistant to not only accept natural voice commands, but also to conduct conversations with comprehensive answers. The data shows that participants are twice as likely to interact with MBUX when using the ChatGPT functionality.

The new E-Class, which comes equipped with a precursor of the MB.OS operating system, received excellent feedback and will hit showrooms in the second half of the year. Mercedes-Benz will offer “Automatic Lane Change” function in Europe, an intelligent driving assistance systems in the SAE-Level 2 in time for delivery of the first units of the new E-Class.

The company continues to expand charging options for its customers. In addition to advancing plans for its own Mercedes-Benz High-Power Charging Network, it will adopt the North American Charging Standard (NACS) giving customers access to the Tesla supercharger network in North America in 2024 and this week unveiled plans to develop a new a high-powered charging network across North America together with Hyundai, Honda, Kia, General Motors, BMW and Stellantis.

In September, Mercedes-Benz will showcase its MMA platform (Mercedes Modular Architecture), designed to redefine the entry segment with MB.OS and other features to elevate the product substance.

Investments, free cash flow and liquidity

The free cash flow of the industrial business increased to €3.4 billion (Q2 2022: €1.4 billion). The positive development of working capital was mainly due to lower inventory build-up compared to the previous year. The inventory build-up is a result of the introduction of the direct sales model in additional markets, ramp-ups in production due to new model years and high levels of vehicles in the process of delivery. The net liquidity of the industrial business rose to €25.8 billion (end of 2022: €26.6 billion). The Group’s investments in property, plant and equipment in the second quarter totaled €0.8 billion (Q2 2022: €0.8 billion). Research and development expenditure amounted to €2.4 billion (Q2 2022: €2.2 billion) due to higher investments for future platforms and technologies, including MB.OS. Mercedes-Benz announced its third Green Bond after two years in Europe.

Divisional results

Demand for battery electric and Top-End segment vehicles lifted sales of Mercedes-Benz Cars by 6%, to 515,700 units in the second quarter, and by 5% to 1,019,200 units in the first half of 2023. Sales were boosted by solid demand in Germany and the United States in particular and growth across all regions and segments. Mercedes-Benz continues to remain disciplined with a focus on sustainable growth, even in a dynamic market environment. BEV sales of Mercedes-Benz Cars almost doubled to 61,200 units (+96%) in Q2. Excluding smart, BEV sales even surged by 123%. Sales in the Top-End segment rose by 12% to 84,800 units in Q2 and 15% to 176,600 vehicles in the first six months of 2023. In the Core segment, sales were up 2% to 276,800 units in the second quarter impacted by a model changeover for the GLC and E-Class. Sales in the Entry segment increased by 11% to 154,100 units in Q2 and even grew 19% in the first half of 2023, reaching 317,500 vehicles.

Mercedes-Benz Vans significantly increased its global sales in the second quarter of 2023 to 119,500 units (+19%) due to the particularly strong contribution from commercial vans. Global sales of all-electric vans increased notably in the second quarter of 2023 to 5,100 units (Q2 2022: 4,300). Thus, the share of all-electric models accounted for 4.2% of total sales. With the recent start of sales of the EQT and eCitan, the product portfolio now offers an electric variant in each segment. Solid net pricing and higher unit sales helped to outweigh cost increases and inflation while the fixed cost base saw a strong improvement. Overall, the adjusted Return on Sales (RoS) for Mercedes-Benz Vans rose to 15.5% (Q2 2022: 10.1%). In May, the division presented its Strategy Update for strengthening its position as a leading manufacturer of light commercial vehicles and received favorable feedback from capital market representatives and media. The midsized Van segment will receive a facelift to give private segment vehicles a more luxurious design and to sharpen the premium appeal in the commercial segment.

Compared to the second quarter of the previous year, Mercedes-Benz Mobility tripled its new business volume for battery electric vehicles to €1.8 billion (Q2 2022: €0.6 billion). Overall, with €15.4 billion, the new business of Mercedes-Benz Mobility increased compared to the previous year’s quarter (Q2 2022: €14.1 billion). In a challenging market environment, especially in China, the contract volume of Mercedes-Benz Mobility amounted to €131.4 billion (FY 2022: €132.4 billion). The adjusted EBIT of €448 million (Q2 2022: €624 million) was mainly driven by a declining interest margin, which was partially offset by a normalized cost of credit risk. Profitability was impacted by lower margins due to higher refinancing rates and intensified competition in the financial services sector, as well as from higher investments in charging. As a result, the adjusted Return on Equity (RoE) decreased to 12.8% (Q2 2022: 17.1%).

Outlook

With regional differences, the overall growth momentum of the world economy is likely to remain rather subdued in the second half of the year. Despite an ongoing monthly decrease in the rate of inflation, inflation is expected to remain above average in many places, which is likely to result in continued restrictive monetary policies by major central banks. These developments are likely to continue to weigh on consumers, companies and weaken economic growth accordingly. In addition, geopolitical imponderables remain another uncertainty factor. By contrast, energy prices are expected to remain at a significantly lower level than in the previous year for the rest of 2023 and also on average for the year as a whole. The noticeably improved supply chain situation should continue to benefit the development of automotive markets in the second half of the year, although market demand is expected to remain subdued in important markets.

Sales Guidance Mercedes-Benz Cars: Order intake is stabilizing with a strong product substance in the market and also considering the product launches to come in 2023 and in 2024. The rate of sales from first-half 2023 is seen remaining at approximately the same level, and full-year sales are thus seen at prior-year level.

Unit sales and revenue at Mercedes-Benz Cars are seen at the prior-year level. The adjusted RoS is seen at 12%–14% and the adjusted Cash Conversion Rate at 0.8–1.0. Investments in property, plant and equipment and into research and development are seen significantly above the prior-year level.

At Mercedes-Benz Vans, unit sales are now seen at “significantly above” the prior-year's level, up from the previous expectation of a slight rise in sales. The adjusted RoS is now expected in the range of 13%–15% up from 11%–13% previously. The adjusted Cash Conversion Rate is now expected at 0.7–0.9, up from 0.6–0.8 previously. Investments in property, plant and equipment and into research and development are still seen significantly above the prior-year level.

At Mercedes-Benz Mobility the adjusted RoE remains unchanged at 12%–14%.

The Mercedes-Benz Group expects revenue at the prior-year level. Group EBIT is now seen “at prior-year level,” up from “slightly below” resulting from the adjusted Van guidance. Free cash flow of the industrial business is now expected “slightly above” the prior-year level.

Link to press information “Sales figures Q2 2023”:

Mercedes-Benz Cars: group-media.mercedes-benz.com/Sales-Q2/cars

Mercedes-Benz Vans: group-media.mercedes-benz.com/Sales-Q2/vans

Link to capital market presentation Q2 2023: group.mercedes-benz.com/q2-2023/en

^[1] The Mercedes-Benz driving assistance and safety systems are aids, and do not relieve the driver of their responsibility. Please note the information in the Owner's Manual and the system limits which are described therein.

^[2] All vehicles with MBUX of model series A 238, C 118, C 167, C 238, C 253, C 254, C 257, H 247, N 293, R 232, S 213, V 167, V 177, V 295, V 297, W 206, W 213, WV 223, X 167, X 243, X 247, X 253, X 254, X 294, X 296, Z 223 and Z 296.

Further information on Mercedes-Benz Group AG is available at:

media.mercedes-benz.com and group.mercedes-benz.com

Forward-looking statements:

This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should” and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an adverse development of global economic conditions, in particular a decline of demand in our most important markets; a deterioration of our refinancing possibilities on the credit and financial markets; events of force majeure including natural disasters, pandemics, acts of terrorism, political unrest, armed conflicts, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates, customs and foreign trade provisions; a shift in consumer preferences towards smaller, lower-margin vehicles; a possible lack of acceptance of our products or services which limits our ability to achieve prices and adequately utilize our production capacities; price increases for fuel, raw materials or energy; disruption of production due to shortages of materials or energy, labor strikes or supplier insolvencies; a decline in resale prices of used vehicles; the effective implementation of cost-reduction and efficiency-optimization measures; the business outlook for companies in which we hold a significant equity interest; the successful implementation of strategic cooperations and joint ventures; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; the resolution of pending governmental investigations or of investigations requested by governments and the outcome of pending or threatened future legal proceedings; and other risks and uncertainties, some of which are described under the heading “Risk and Opportunity Report” in this Annual Report. If any of these risks and uncertainties materializes or if the assumptions underlying any of our forward-looking statements prove to be incorrect, the actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements since they are based solely on the circumstances at the date of publication.

Mercedes-Benz Group at a glance

Mercedes-Benz Group AG is one of the world's most successful automotive companies. With Mercedes-Benz AG, the Group is one of the leading global suppliers of high-end passenger cars and premium vans. Mercedes-Benz Mobility AG offers financing, leasing, car subscription and car rental, fleet management, digital services for charging and payment, insurance brokerage, as well as innovative mobility services. The company founders, Gottlieb Daimler and Carl Benz, made history by inventing the automobile in 1886. As a pioneer of automotive engineering, Mercedes-Benz sees shaping the future of mobility in a safe and sustainable way as both a motivation and obligation. The company's focus therefore remains on innovative and green technologies as well as on safe and superior vehicles that both captivate and inspire. Mercedes-Benz continues to invest systematically in the development of efficient powertrains and sets the course for an all-electric future: The brand with the three-pointed star pursues the goal to go all-electric by 2030, where market conditions allow. Shifting from electric-first to electric-only, the world’s pre-eminent car company is accelerating toward a fully electric and software-driven future. The company's efforts are also focused on the intelligent connectivity of its vehicles, autonomous driving and new mobility concepts as Mercedes-Benz regards it as its aspiration and obligation to live up to its responsibility to society and the environment. Mercedes-Benz sells its vehicles and services in nearly every country of the world and has production facilities in Europe, North and Latin America, Asia and Africa. In addition to Mercedes-Benz, the world's most valuable luxury automotive brand (source: Interbrand study, 03 Nov. 2022), Mercedes-AMG, Mercedes-Maybach, Mercedes-EQ and Mercedes me as well as the brands of Mercedes-Benz Mobility: Mercedes-Benz Bank, Mercedes-Benz Financial Services and Athlon. The company is listed on the Frankfurt and Stuttgart stock exchanges (ticker symbol MBG). In 2022, the Group had a workforce of around 170,000 and sold around 2.5 million vehicles. Group revenues amounted to €150.0 billion and Group EBIT to €20.5 billion.

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