Carmakers are facing new difficulties as plants processing semiconductors in Malaysia have been forced to shutter recently, the Daimler AG’s CEO told analysts during the company’s quarterly earnings call when asked when the chip shortages might finally end.
Daimler CEO Ola Källenius said the original shortage from the beginning of the year continues to haunt carmakers.
“You have an underlying issue coming out of last year. Sometimes I describe it as a traffic jam on the auto band, everybody stops, and then it takes a while before everybody drives again. That is what led to the original shortage at the end of last year, beginning of this year,” he said.
“But then you had some compounding effects that really probably had nothing to do with that. The winter storm in Texas put down factories for four weeks, sometimes more. The fire at the plant in Japan, which is one of the most crucial plans for automotive chips for some chips.”
Chip problem beginning to ease
Daimler saw some light at the end of the tunnel in Q2, he added. “I felt more optimistic only to see in the month of June, Malaysia go down, which has several of the factories that actually process the wafers.
“The technology content in cars is rising. So even if the production volume of cars would stay the same, but you have more content in the cars. So in the midterm, even though I realize that probably in 2022, we’re going to talk about this as well. In the midterm, I’m a little bit more optimistic,” Källenius said.
“So you have to bear with us here with a level of uncertainty that we have to live with,” he added. “Improving the supply stability, needless to say, is a top priority for us.”
Daimler reported the group’s total unit sales increased by 36% to 736,400 passenger cars and commercial vehicles compared to the second quarter of 2020 when restrictions linked to the pandemic prevailed.
Profits on the rise despite the semiconductor issue
Revenue grew by 44% to 43.5 billion euros, or $51.5 billion, for the second quarter. Earnings before interest and taxes or EBIT more than tripled to 5.1 billion euros compared to 1.6 billion euros in the same period last year. Net profit was 3.7 billion euros, or $4.36 billion, compared to a net loss of 1.9 billion euros, or $2.24 billion, for the second quarter of 2020.
The strong results were led by Mercedes-Benz Cars and Vans, which posted double-digit margins for the third quarter in a row — despite the semiconductor issue.
“The entire industry is currently struggling with longer delivery times, which unfortunately also affect our customers. We are doing what we can to minimize the impact. Given the high demand for our vehicles, delivery to our customers has top priority,” Källenius said in a statement.
He added Daimler’s EBIT and free cash flow is significantly above expectations. The high profitability is courtesy of a very healthy topline development and also strict cost discipline across all divisions.
The net industrial liquidity is on a healthy level. And as I said, it’s been a quarter of strategy acceleration with a focus on electric vehicles and digitization. But also an important quarter on the path to what we call project focus, splitting Daimler into two pure-play industrial units, which should be complete by the end of the year, he said.
