Revenue and earnings
We assume that the revenue of the Daimler Group will also increase slightly in 2017, as a result of the overall positive development of unit sales in the automotive divisions.
Our divisions currently have very attractive and competitive product ranges, which have been expanded and systematically renewed in recent years. We therefore assume that Daimler will profit to an above-average extent from the slight growth in global demand for motor vehicles that we expect also in the year 2017, and will be able to strengthen its position in important markets. At Mercedes-Benz Cars, additional growth this year will be driven above all by the new E-Class models, the successful SUVs and the new convertible models. The other automotive divisions are also well positioned with their products, and Daimler Financial Services’ new business will profit from further growth in unit sales. Against this backdrop, we expect revenue growth for Mercedes-Benz Cars, Daimler Buses and Daimler Financial Services. Revenue at Daimler Trucks in 2017 should be of the magnitude of the previous year. Unlike the slightly positive development of unit sales expected at Mercedes-Benz Vans, the division’s revenue is likely to be at the prior-year level, as contract manufacturing of vans for Volkswagen was discontinued in the fourth quarter of 2016.
In regional terms, we expect the highest growth rates in Asia and Europe, but our business volumes should expand also in the other regions. In particular in China, we have created the right conditions for further growth with new sales outlets, additional production capacities and a broad product range. But the growth in unit sales in China will have a disproportionately low impact on revenue growth, as the share of local production will continue to increase. Our Chinese associated company Beijing Benz Automotive China (BBAC) is included in our consolidated financial statements using the equity method of accounting.
The growth in unit sales and revenue that we anticipate will have a positive impact on earnings in 2017. We have laid the foundations for a lasting high level of earnings with various programs for improved profitability, which we implemented in the years 2013 to 2015. We are currently taking further measures in all divisions for the long-term and structural optimization of our business system. We are standardizing and modularizing our production processes throughout the Group. In this context, we are making intelligent use of vehicle platforms, allowing us to achieve further cost advantages. In parallel, we are pushing forward with digital connectivity: in all divisions and at all stages of the value chain – from development to production to sales and service. In this way, we are opening up additional scope to become even faster, more flexible and more efficient - to the benefit of our customers.
There will be opposing effects, however, from the ongoing high expenditure for our model offensive, for innovative technologies, for the digitization of our products and processes, and for the expansion and modernization of our worldwide production facilities. As a result, our advance expenditure aimed at securing a successful future will once again be higher in 2017 than in the previous year. (See Dividend)
On the basis of the market developments we expect, the aforementioned factors and the planning of our divisions, we assume that Group EBIT will increase again slightly in 2017.
- The individual divisions have the following expectations for EBIT in the year 2017:
- Mercedes-Benz Cars: significantly above the prior-year level,
- Daimler Trucks: slightly below the prior-year level,
- Mercedes-Benz Vans: significantly below the prior-year level,
- Daimler Buses: slightly above the prior-year level
- Daimler Financial Services: in the magnitude of the prior year.
The decrease in earnings we anticipate at Daimler Trucks primarily reflects expenditure incurred in connection with the further optimization of fixed costs. We expect this to result in a total expense in the magnitude of up to €500 million, mainly in the year 2017. This will be partially offset by income of approximately €250 million that we expect from the sale of real estate at the Kawasaki site in Japan. The Mercedes-Benz Vans division achieved very high EBIT and a high return on sales in 2016. Compared with the long-term average, we anticipate a very high level of earnings also in 2017. The main cause of the significant decrease compared with 2016 will be high advance expenditure for the renewal and expansion of the product portfolio.