Mercedes-Benz Group AG

The positive outlook reflects the possibility of an upgrade in the next 12–24 months if continued disciplined management of pricing, model mix, and costs enables Mercedes to avert a material deterioration in profitability and cash flow amid an impending economic and industry slowdown. We would also expect the company to continue to solidify its BEV market position, particularly in China, through an expanding and competitive model lineup. We could raise the ratings if successful management of pricing, model mix, costs, and investments allows Mercedes to avert a material deterioration in profitability and cash flow amid an impending economic slowdown, weakening consumer demand, and continued volatile supply chains. This would translate into an adjusted EBITDA margin above 13% and FOCF to

...Benign pricing conditions and focus on high-margin models continue to boost Mercedes' profitability. Like other carmakers, Mercedes is benefiting from favorable new and used car pricing which has increased at an accelerated pace from 2021 (see chart 1 for Europe). However, Mercedes has also been successful at prioritizing larger, high-margin models during recent periods when production was hampered by shortages of components, as evidenced by a strong increase in weighted average retail price (see chart 1), and the company is proactively re-aligning its product portfolio and pricing strategy toward higher-value models and optimization of pricing and discounts. Thanks to these factors, we project that our 2022 adjusted EBITDA margin for Mercedes will slightly exceed the 2021 high of 15.6%, despite low wholesale volumes at about 15% below 2019 levels this year. The margin is then likely to decline to 13%-15% in...

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