latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/56735210 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

In This List

Daimler profit warning heralds glum FY'19 earnings for global automakers

S&P Global Market Intelligence

Cannabis: Hashing Out a Budding Industry


IFRS 9 Impairment How It Impacts Your Corporation And How We Can Help

The Market Intelligence Platform

Daimler profit warning heralds glum FY'19 earnings for global automakers

Daimler AG's warning on Jan. 22 that its operating profit for 2019 will halve year over year might be the most negative news any carmaker will report in the coming earnings season. Still, analysts expect its rivals to reveal their own struggles and predict that the malaise will persist into 2020.

As one of the world's most globalized automakers, the Mercedes-Benz owner has borne the brunt of what consultancy LMC Automotive calculated was 4.4% downturn in worldwide automobile sales. Some automakers with a heavier focus on Europe, where sales saw meager growth during the year, were shielded to a degree from the decline.

But worse is to come, Daimler warned. The Stuttgart, Germany-based company said it has yet to subtract a further €1.1 billion to €1.5 billion from its shrunken profits to cover the cost of fines relating to litigation over pollution levels from its diesel engines. This is an issue that continues to loom over its German peer Volkswagen AG, with Canada on Jan. 22 the latest to impose dieselgate-related fines.

An analysis of S&P Global Market Intelligence mean consensus estimates shows that analysts expect most major automakers to report year-over-year declines in operating profit for full year 2019.

SNL Image

"I think that the fourth quarter will be another very challenging one," analyst Tim Schuldt of Pareto Securities in an interview with Market Intelligence to discuss the earnings outlook for automakers globally.

"Volumes were not so bad, but that was on a weak comparative basis. There have been some markets where it is getting slightly better, like China," he said.

Schuldt said unit sales in the quarter would look rosier than the underlying market would suggest due to a surge in preregistrations by automakers in the European Union of their higher CO2-polluting models. This strategy aims to prevent those cars from elevating the average CO2 emissions of the vehicles they sell in 2020 as stricter rules enforced by fines come into place.

Sales figures for the period will also look more flattering year over year due to a dip in the EU market in late 2018 when a new emissions and fuel economy testing standard known as WLTP forced some automakers to suspend sales of certain models until they were properly certified.

Among U.S. automakers, Ford warned Jan. 22 that it expects to book a $2.2 billion pretax loss due to a one-off charge related to employee pension contributions. Its operating profit will not be affected, it added.

The full impact of a strike that persisted into the first few weeks of the fourth quarter at General Motors Co. will also become apparent in its earnings, which it will publish Feb. 5. The Detroit carmaker said the strike took $1 billion off its operating profit in the third quarter.

Tesla breathes easier amid EU emissions purge

LMC Automotive forecasts a slight dip in global car sales in 2020 of 0.3% to 90.0 million units, a smaller decline that it says reflects an improvement to the situation in China, helped by its trade negotiations with the United States.

"Elsewhere, some of the more heavily hit markets have not got a great deal further to fall. In the short-term, though, there is unlikely to be any real support to the global total from the mature markets like Western Europe and the U.S.," said Jonathon Poskitt, director for global sales forecasts at LMC.

One of the financial boons for automakers has been consumers' unrelenting appetite for SUV and SUV-like "crossover" cars, which yield higher profit margins.

It is one of the few means for carmakers to prop up income as the global auto market skids through a weak patch. The EU market will succumb to the downturn this year also, the European Automobile Manufacturers' Association said, forecasting a 2% drop in car sales following a 1.2% increase in 2019.

"Automakers have been pushing SUVs as much as they can because of profit and they are trying to make as much profit as they can before they have to make these less profitable [hybrid and electric] cars," said Berlin-based independent analyst Matthias Schmidt.

SNL Image

Manufacturers selling cars in the European Union from 2020 onward need to achieve 95 grams of carbon dioxide per kilometer driven as an average of all cars sold. While each manufacturer has an individual target based on the mass of the vehicles they produce, it still represents a roughly 20% year-over-year reduction in emissions of the greenhouse gas.

Carmakers have unveiled a long list of mild hybrid, hybrid and fully electric cars to help slash their CO2 averages, helped by the fact that they can overweight these cars in their CO2 calculations, but few will arrive before the middle of the year, limiting their effect on 2020 emissions figures.

The new rules, which are proving perhaps the biggest headache for traditional automakers with a presence in the European market this year, by contrast leave Tesla Inc. well-positioned. Its already-established battery-electric range adds to a number of positive factors feeding growing market optimism about its prospects. Tesla's shares closed at an all-time high of $569 on Jan. 22, breaking through the $100 billion market cap barrier and surpassing Volkswagen as the second most valuable carmaker, behind Toyota.