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Rebound in US and China boosts sales at Mercedes Benz-owner Daimler

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Suban Abdulla
·3-min read
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BERLIN, GERMANY - MAY 05: Cars stand on display for sale at a Mercedes-Benz dealership during the coronavirus crisis on May 05, 2020 in Berlin, Germany. German Chancellor Angela Merkel is video conferencing with representatives of Germany's auto industry today to discuss ways the government might help to get car companies through the current economic pit created by the virus. The auto industry is Germany's biggest employer and a cornerstone of the German economy. (Photo by Sean Gallup/Getty Images)
Daimler now expects a 10% to 12% annual return on sales for its cars and vans business — up from its previous forecast of 8% to 10%. Photo: Sean Gallup/Getty Images

German car and truck maker Daimler AG (DAI.DE) reported a strong rebound in net profits to €4.4bn ($5.3bn, £3.8bn) in the first quarter of 2021, after a year that buckled the global sector to its knees. 

The Mercedes Benz owner was lifted by Chinese and US taste for luxury cars as economies worldwide slowly recovered following the coronavirus pandemic. 

Sales in China, which reached its low point in February last year after the onset of COVID, grew by around 75% in the first quarter.

In America, the market for cars and light trucks rose over 60% above its levels of March 2020 and expanded by more than 10% in Q1.

The European market, which was still dealing with ongoing pandemic-related measures, was only slightly above its low level in the same quarter 2020, despite a significant growth in March 2021. 

Demand for vans in the EU30 region (European Union, United Kingdom, Norway and Switzerland) in the market segment of mid-size and large vans grew over 25%.

Overall it sold 728,600 cars and commercial vehicles worldwide in Q1 of 2021, compared with 644,300 in the same time period a year ago.

READ MORE: FirstGroup surges as it offloads US school bus business in £3.3bn deal

The world's largest luxury carmaker raised its outlook on Friday as a result of its profitability this year.

It said that its Mercedes-Benz business will be more profitable than it’s been in years thanks to a recovery in car demand amid the pandemic crisis.

Daimler now expects a 10% to 12% annual return on sales for its cars and vans business — up from its previous forecast of 8% to 10%.

This would be a record for the company as the car operation has failed to reach double digits margins every year since Daimler sold Chrysler in 2007.

"We are very confident that we can keep up the pace to improve our margins on a sustainable basis and at the same time expand our electric-vehicle lineup," said chief financial officer Harald Wilhelm. 

Plans to spin off and list the Daimler truck unit before year-end were also "well on track."

Daimler shares rose 1.2% on Friday morning in Germany. 

Chart: Yahoo Finance
Chart: Yahoo Finance

The results come after global car firms have been struggling with semiconductor shortages as the COVID pandemic led to increased demand in other markets such as smartphones and other consumer electronics. 

The computer chips, also known as semiconductors, are used by companies such as Microsoft (MSFT) and Sony (SONY), the makers of the Xbox and PlayStation games consoles, as well as phone manufacturer Samsung (005930.KS).

Last year Apple (AAPL), the world’s biggest buyer of semiconductors, was forced to delay the launch of the much-hyped iPhone 12 by two months due to the shortage.

Several companies have moved to halt production at manufacturing sites. 

On Thursday, the UK’s largest car manufacturer, Jaguar Land Rover announced it would temporarily shut down production at two of its main plants.

Nissan (7201.T) will furlough around 10% or 800 employees at its UK plant in Sunderland as the shortage of semiconductor chips slows production.

Other carmakers have made similar moves. Earlier this week, US car company Ford (F) announced that it will cut car production due to the global chip shortage.

Renault (RNO.PA) and Honda (HMC) also flagged similar plans.

WATCH: Mercedes-maker raises outlook, warns on chips