Mercedes-Benz is the latest automaker to give up on its business in Russia in the wake of the war on Ukraine.
Harald Wilhelm, member of the Board of Management of Mercedes-Benz Group AG and Finance & Controlling/Mercedes-Benz Mobility, revealed the news during a conference call with investors following the release of the company’s third-quarter earnings
The German automaker is in the process of selling the share of its Russian subsidiary to what he described as a “local investor.” Details of the deal of the pending deal were not disclosed.
But the Russian ministry of industry and trade said Mercedes-Benz will sell its Russian assets, including its manufacturing plant, to local car dealer chain, Avtodom.
Mercedes-Benz executives have long considered Russia, where its vehicles have been prized by affluent customers, as a strategically lucrative market and it has carefully built up its business in the country since the end of the Soviet Union in 1991. However, Russian invasion of Ukraine last winter, which has upended political and economic considerations across Europe.
Not the only one
Other carmakers are taking steps to dissolve their business ties in Russia.
Ford Motor Co. this week finalized the exit of its previously suspended operations in Russia through the sale of its 49% share in the Sollers Ford joint venture.
The sale follows the full suspension of all operations in Russia, including manufacturing, supply of parts, IT and engineering support, in March this year. Ford shares will be transferred to the joint venture for a nominal value. Ford retains the option to repurchase the shares within a 5-year period, should the global situation change.
Volkswagen Group, the world’s second-largest car manufacturer, has now reportedly preparing to sell its business in Russia, and is actively looking for a buyer. Renault and Stellantis are also ending business in Russia.
During the call, Wilhelm said the United States, where pent-up demand has been a large factor, and China remain the company’s key foreign markets and have been critical to the company’s strong financial performance this year.
Strong demand boosted profits
Mercedes-Benz Group AG reported robust demand and healthy pricing for cars and vans, as well as cost discipline, helped to lift Earnings Before Interest and Taxes, or EBIT, by 83% to $5.2 billion. Group revenue increased by 19% to $37.7 billion.
The German automaker also benefited from an increase in production and sales, which increased by 39% in the third quarter. Mercedes sales of battery-electric vehicles increased by 97 percent.
The adjusted return on sales at Mercedes-Benz Cars reached 14.5% and 12.7% at Mercedes-Benz Vans, compared with 8.8% in the third quarter of 2021.
”Mercedes-Benz once again delivered solid results thanks to the robust demand for our desirable products. In combination with our ongoing financial discipline, we are making the company more resilient and setting the pace for the months ahead, as we continue accelerating our transformation,” said Wilhelm.
Wilhelm noted the macroeconomic and geopolitical conditions continue to be characterized by an exceptional degree of uncertainty, an including the war in Ukraine, its effects on supply chains and on the availability and the development of prices for energy and raw materials.
Mercedes-Benz Cars expects sales slightly above last year and for demand to outstrip supply. Sales in the fourth quarter are seen above sales in Q4 last year. Mercedes-Benz Cars now expects the adjusted return on sales for the full year to be in the range of 13%-15%, rather than 12%-14% seen earlier, Wilhelm said.
Mercedes-Benz Vans expects sales to remain slightly above 2021 levels. The adjusted RoS at Mercedes-Benz Vans is now expected to be at 9%-11%, rather than 8%-10% previously.