With new models like the Mercedes-Benz CLA drawing in a new generation of buyers, the brand’s German parent Daimler AG reported its net profit nearly doubled during the first quarter.
The German maker had struggled to overcome a series of problems in recent years, notably including a slide in demand in China, but Mercedes’ rebound in that booming market further lifted the maker’s earnings to 1.086 billion Euros for the January to March quarter, or $1.498 billion, up from 564 million Euros a year earlier.
“Our strategy is paying off,” said Daimler CEO Dieter Zetsche, “our investments are bearing fruit.”
In a statement accompanying its earnings, the maker predicted both revenues and earnings would “significantly increase” for all of 2014 as it gained ground in China while also boosting sales in more established markets like the U.S. and Europe.
Nonetheless, the German maker still faces a number of challenges, including the Chinese market. It was able to recapture the luxury sales crown in the U.S. market for 2013 from arch-rival BMW AG, but the Mercedes brand still is struggling to regain global leadership. And the future for its microcar brand Smart is yet up in the air as the brand prepares to launch critical new models to update an aging line-up.
(After missteps, has Mercedes finally turned things around in China? Click Here to find out.)
But Mercedes has shown that it can reconnect with old customers while drawing in new ones as it launches the most aggressive product offensive in its history. At a New York Auto Show news conference earlier this month, Mercedes-Benz USA CEO Steve Cannon revealed the maker will roll out 30 all-new or completely redesigned models before the end of the decade, “about one per quarter.”
Among those on tap is the GLA, a compact crossover that shares the same platform as the recently added CLA. The coupe-like sedan has become one of the maker’s biggest success stories ever, attracting a new generation of potential Mercedes loyalists with a U.S. starting price of just under $30,000. According to Cannon, about 80% of CLA customers are new to the brand.
But Mercedes has also scored around the world with the latest remakes of the mid-range E-Class and its flagship S-Class sedan. A new S-Class Coupe, as well as a complete remake of the smaller C-Class line, is on tap for 2015.
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While the U.S. market has long been Mercedes’ largest, China has become the hot growth prospect for competitors – it is now BMW’s largest outlet, for example. Mercedes suffered a series of setbacks in that country, forcing a major shake-up of management a year ago. But that effort appears to be paying off. Sales in China jumped a full 52% for the first quarter, to 70,300 vehicles.
That helped offset a 3% decline in the home German market. Mercedes gained 5% in Western Europe overall for the quarter.
All told, Daimler set a first-quarter record by selling 565,000 vehicles, helping revenues jump 13% through the end of March, to 29.5 billion Euros.
Another challenge for Daimler will be to maintain its traditional profit margins as it chases new buyers in the expanding entry-luxury segments. That may have been reflected in the fact that its first-quarter earnings actually fell short of the 1.173 billion Euros forecast by a consortium of analysts polled by financial data firm FactSet.
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