February 22, 2024 – Group Revenue expected at prior-year level, Group EBIT seen slightly below 2023 level, Free Cash Flow of the Industrial Business expected slightly below prior-year level, Mercedes-Benz Cars adjusted RoS seen in the range of 10% - 12%, Mercedes-Benz Vans adjusted RoS seen at 12% - 14% and Mercedes-Benz Mobility adjusted RoE at 10% - 12%.
The economic situation and automotive markets continue to be characterised by an exceptional degree of uncertainty. Unexpected developments may arise in particular from geopolitical events and trade policy. Among them are the current Middle East conflict, the Russia-Ukraine war and other regional crises. Other potential uncertainties include the exacerbation of tensions between China the United States and a further deterioration of political relations between the European Union and China. Further supply chain disruptions and in particular, availability bottlenecks for critical components, remain a significant risk factor. These may impact supply chains and the development of prices for raw materials and energy. In addition, higher-than-expected inflation and interest rates, potential financial market disruptions and an even more pronounced slowdown in economic growth, may have an impact on the world economy and automotive markets.
From 2024 onwards, Mercedes-Benz will introduce a new guidance KPI: An xEV share for sales of new Cars and Vans. This will replace the current CO₂ emissions KPI for the new car fleet in Europe and reflects the global activities of the Mercedes-Benz Group.
Sales guidance: The company sees unit sales of Mercedes-Benz Cars at the prior-year level, even as current supply bottlenecks are easing. However, some topics remain and will impact sales in 2024. This will last probably throughout the first half of 2024 and in particular affect sales in the first quarter, which is expected below prior-year level. The xEV share is expected to remain at approximately 19% - 21% of new car sales.
The adjusted Return on Sales (RoS) is expected in the range of a solid 10% - 12% in a demanding environment on flat volumes and a continued high share of Top-End Vehicle sales. Mercedes-Benz Cars will seek to defend and hold pricing at 2023 levels. The used vehicle business is expected to be on a healthy positive level in absolute terms, however, slightly below 2023. The company expects smaller headwinds on foreign exchange rates and Research & Development spending is expected to be flat. Investments in property plant & equipment are seen significantly higher, mainly due to the MMA platform. Some material tailwinds on raw material costs are seen and further headwinds on supply-chain related costs are expected. Overall, on material costs, a slight tailwind is expected in 2024. The mid-term target to reduce investments (R&D and PP&E) by 20% versus 2019 levels is expected to be met in the second half of the decade due to an accelerated BEV product plan with MB.EA. The adjusted cash conversion rate (CCR) corridor for Mercedes-Benz Cars remains at 0.8 to 1.0.
Total Mercedes-Benz Vans sales are expected to soften in H2 2024 and be slightly lower in 2024 with a strong first quarter. The xEV share is expected between 6% to 8% with the new eSprinter available for sale in the beginning of 2024. Investment in property, plants & equipment and research & development spending are seen significantly above the prior-year level due to investments into the purpose-built electric architecture called VAN.EA. The adjusted RoS is seen in the range of 12% - 14%. Net pricing and mix are expected to develop solidly and the adjusted CCR for Mercedes-Benz Vans is seen at 0.6 to 0.8.
The portfolio volume of Mercedes-Benz Mobility is seen on the same level as 2023 with slightly positive new business development. The adjusted Return on Equity is seen in the range of 10% - 12%. The interest margin remains under pressure in the first half of 2024. The deteriorating acquisition margin has started to improve, although it takes time for this to feed through to the portfolio. For Q1 Mercedes-Benz Mobility expects a margin below the full year guidance corridor.
The Mercedes-Benz Group expects Group revenue in 2024 to remain at the prior-year level. In a market environment that remains challenging, Group EBIT is expected to be slightly below the previous year's level resulting out of divisional guidances. Group Free Cash Flow of the Industrial Business is seen slightly below the very strong levels from 2023, due to lower EBIT at Cars and Vans and lower CCR at Vans.
Strategic priorities
Mercedes-Benz will continue to focus on its brand promise: to build the world’s most desirable cars. Mercedes-Benz will remain strategically focused and tactically flexible and is taking the necessary steps to go all electric. Customers and market conditions will set the pace of the transformation. The company plans to be in a position to cater to different customer needs, whether it’s an all-electric drivetrain or an electrified combustion engine, until well into the 2030s.
The company expects xEV sales to reach up to 50% of overall sales in the second half of the decade. Factories are retooled to follow demand to capture the tipping point into an all-electric era. Mercedes-Benz has set the course with the development of several new vehicle platforms. The starting point will be next year with the all-new electric CLA. While the upcoming models will set standards in improving efficiency and charging time, the company believes that the battery costs per kilowatt hour can be reduced by more than 30% in the next few years, thanks to optimised cell and module design, improved vehicle integration, further development of cell chemistries (e.g. NMC, next generation LFP), cell updates during the lifecycle and continuous improvement agreements with suppliers.
On the digital side, the company-owned operating system MB.OS is expected to mark an important milestone in the field of car software. Moreover, Mercedes-Benz will continue to pioneer advancements in automated driving. Mercedes-Benz will continue to optimize its industrial footprint and cost base, for example by working on structurally lower material costs in close collaboration with its suppliers. By implementing this strategy, Mercedes-Benz expects to deliver on the essence of the brand: a unique combination of iconic luxury and leading technology.
This page was revised based on the Annual Results Concerence 2023 and contains forward-looking statements.