Updated February 22nd, 2024 at 13:42 IST

Mercedes-Benz revises 2024 forecast amid inflation concerns, supply chain disruptions

Throughout 2023, Mercedes-Benz grappled with supply chain bottlenecks and inflationary pressures, leading to increased costs and reduced profitability.

Reported by: Business Desk
Mercedes-Benz 2024 outlook | Image: Mercedes Benz
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Mercedes-Benz 2024 outlook: Mercedes-Benz has revised its outlook for 2024, citing lower returns on sales across its cars and vans division amidst persistent supply chain challenges and geopolitical tensions. In its recently released report for 2023, the luxury car maker reported an adjusted return on sales in its car division of 12.6 per cent, aligning with its earlier forecast. However, the company anticipates a decline in adjusted returns for the upcoming year, projecting figures of 10-12 per cent for cars and 12-14 per cent for vans, down from the previous year's 15.1 per cent.

Throughout 2023, Mercedes-Benz grappled with supply chain bottlenecks and inflationary pressures, leading to increased costs and reduced profitability. The luxury automaker highlighted the impact of price wars, particularly in the electric vehicle segment, which exerted downward pressure on margins.

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Despite these challenges, Mercedes-Benz maintained a competitive edge, buoyed by its strategy of passing higher costs to customers. The company raised its average price by 2 per cent to 74,200 euros ($80,395.70) and augmented investments in research and development, focusing on future technologies such as its MB.OS platform.

However, the outlook for 2024 remains clouded by uncertainties stemming from geopolitical tensions and trade conflicts. Mercedes-Benz expressed concerns over the ‘exceptional’ uncertainty posed by conflicts in the Middle East and Russia, as well as escalating tensions between China and the US

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Supply chain disruptions for critical components continue to pose a significant risk factor, further exacerbated by the potential for a more pronounced slowdown in economic growth. These factors underscore the challenges faced by automotive markets globally and the need for adaptive strategies to navigate volatile conditions.

Despite these headwinds, Mercedes-Benz remains committed to driving innovation and maintaining its leadership position in the luxury automotive segment. The company's proactive approach to addressing challenges while investing in future technologies underscores its resilience in the face of adversity.

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The luxury automaker's group earnings before interest and taxes dipped to 19.7 billion euros from 20.5 billion euros in the previous year, despite a modest 2 per cent increase in revenue.

As Mercedes-Benz recalibrates its strategies to navigate the evolving landscape, industry observers will keenly monitor its performance and adaptation to prevailing market conditions.

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(With Reuters inputs.)

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Published February 22nd, 2024 at 13:42 IST