Daimler Could Lose Billions In Profits Due In Part To CO2 Compliance Costs

Daimler has reportedly warned financial analysts that CO2 compliance costs for next year could cut into their earnings by billions of euros.

A total of four brokerage houses (two in Germany and two in the UK) confirmed that they were contacted in recent weeks by the Mercedes-Benz parent company, and told that analysts’ 2020 consensus estimate of just over 10 billion euros for group operating profit was roughly a fifth too high.

Part of the reason is due to added costs needed to electrify Mercedes‘ passenger car fleet, to go with a slump in demand for heavy commercial vehicles, reports Autonews Europe.

Related: Daimler Allegedly Faced With $1.1 Billion Fine For Diesel Emissions Cheating Software

“This wasn’t a little, this was really running through the forest with an ax in panic because the consensus estimates were too high,” said a London-based analyst. “BMW has their CO2 compliance costs absolutely under control, whereas at Daimler it’s a huge problem, so now they are trying to pull consensus down by 20 percent.”

According to Daimler investor relations representatives, the automaker was predicting that Mercedes would face between 1.2 billion ($1.3 billion) and 1.5 billion euros ($1.65 billion) in downturns, while Daimler Trucks would bring in 700 million ($770 million) to 800 million euros ($880 million) less.

“It’s quite unusual to call everyone on the street and guide down,” stated another analyst.

Meanwhile, Daimler’s new CEO, Ola Kallenius, who stepped in for Dieter Zetsche back in May, is still hoping to save billions in costs while navigating upcoming trade tensions, plateauing sales and a seemingly expensive electrification strategy.

Even though the German brand hasn’t issued a profit target for 2020, it is aiming to have its core Mercedes passenger car business returning to a target margin corridor of 8 to 10% by 2021.

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