Daimler's electric car push dents earnings

Tightening pollution regulation is putting car makers under strain to spend record amounts developing a fleet of electric vehicles

epa06489158 A concept Smart EQ electric car model is presented during the annual press conference of Daimler AG in Stuttgart, Germany, 01 February 2018. The automobile manufacturer Daimler AG reported on the 2017 financial year and gave an outlook on 2018.  EPA/RONALD WITTEK
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Daimler reported profit that missed estimates in the fourth quarter on rising costs at its Mercedes-Benz cars unit, and warned that higher expenses will continue to dampen earnings growth as the luxury car maker invests in a new line-up of electrified vehicles.

Earnings before interest and tax were €3.47 billion (Dh15.79bn), the German manufacturer said on Thursday. That was well below the average analyst estimate of €3.73bn. Revenue advanced to €43.6bn.

Earnings this year will be in the “magnitude of the previous year,” the company said.

Tightening pollution regulation is putting car makers under strain to spend record amounts developing a fleet of electric vehicles. Daimler plans to invest €10bn to release 10 new electric vehicles by 2022, even as demand for battery models remains low.

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The generational shift will increase development spending, already at a record, for another two to three years, the company has said.

To meet the challenges, and fend off new competitors like ride-hailing company Uber Technologies and Tesla, Daimler has started preparations for its biggest corporate overhaul in a decade.

The manufacturer plans a holding company with three legally separate units, Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and financial services. Shareholders, who favour a spin-off of trucks unit into a separately-listed company, have criticised Daimler’s opaque language about the process that has left vague the benefits the costly exercise.