Daimler is approaching cruising velocity. Fortunes have turned after a dismal first quarter that saw the company renounce its earnings targets three months after it had set them. But the German carmaker still hasn't fixed its China problem. Earnings before interest and taxes more than doubled to 5.2 billion euros between April and June, but the bulk of that was a one-off effect caused by the sale of a remaining stake in aerospace group EADS.
Still, Daimler's operating business is improving as well. Sales of Mercedes cars seemed to ignore the slump in Europe and reached an all-time high, reflecting a rejuvenated product range that should drive demand even further.
The operating margin of the passenger cars unit, which collapsed to 3.3 percent in the first quarter, improved to 6.4 percent. That is still half that at Audi and BMW , Daimler's big competitors. But more progress may follow in the second half of 2013, when Mercedes will start selling a new version of the S class, its best money-maker.
Worries remain nonetheless. The biggest one is China. Daimler has long been trailing Audi and BMW in the world's largest auto market. It started to address the issue only in December 2012, when Hubertus Troska became chief China officer. His most pressing task is restructuring Daimler's sub-par distribution network. Troska hasn't delivered quick wins. Daimler fell further behind its German rivals in the first half of 2013. Sales dropped by 1 percent, while competitors' grew by 15 to 18 percent.
This may confirm the concerns of Bernstein Research, which warned in June that Daimler's problems in China run deeper than just the distribution network and also include "serious quality problems, poor dealer service, expensive spare parts prices and poor marketing".
Daimler points to improvements in the second quarter, when sales in China increased by 10 percent, albeit from a low base. It also hopes that new models will help it catch up. The E class facelift, launched in Europe in April, was only made available to the Chinese this month, and the all-new S class won't be sold in Beijing showrooms before the end of the year. On the other hand, there is mounting evidence that the Chinese economy is cooling down. A slowdown won't make selling luxury cars easier, especially for a company that is coming from behind.
German premium carmaker Daimler saw revenue rise by 2.8 percent to 29.7 billion euros in the second quarter while unit sales increased by 6 percent. Before interest and tax, the company earned 5.2 billion euros, including 3.2 billion euros from the sale of Daimler's remaining shares in the aerospace group EADS. It expects further growth in sales and earnings in the second half of the year.
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