Daimler sees emerging market car demand cooling

FRANKFURT Wed Jul 27, 2011 10:20am EDT

People look at historic and future Daimler cars at a Daimler annual shareholder meeting in Berlin, April 13, 2011. REUTERS/Thomas Peter

People look at historic and future Daimler cars at a Daimler annual shareholder meeting in Berlin, April 13, 2011.

Credit: Reuters/Thomas Peter

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FRANKFURT (Reuters) - German car and truck maker Daimler missed quarterly revenue forecasts and warned strong demand for cars in the key emerging markets of China and India was likely to slow sharply.

Premium and mass-market carmakers have looked to fast-growing markets such as China to make up for sluggish sales growth in Europe, though China's car market, the world's biggest, is seen cooling this year due to rising fuel prices and tighter rules on car registration.

Year-on-year wholesale vehicle sales growth at Daimler's luxury Mercedes-Benz cars in China tumbled to 8 percent in the second quarter from 82 percent in the first.

"Demand for cars in the major emerging markets of China, India, Brazil and Russia will probably continue to grow. But rates of growth in China and India are likely to be distinctly lower than last year," Daimler said on Wednesday.

It also warned that the global truck market would probably grow only moderately this year, hit by slumping sales in China and the aftermath of the March 11 earthquake in Japan.

Daimler, which also makes Smart cars, reported stronger-than-expected operating results for the second quarter, partly thanks to strong sales of vans and buses.

It gave an upbeat outlook for its business for the full year but warned that the overall economy may slow.

"At the beginning of the second half of 2011, although the world economic upswing still seems to be intact, the outlook has distinctly worsened," Daimler said.

It warned that prospects of moderate economic growth in the United States could be dashed if politicians failed to reach an agreement on raising the federal debt ceiling.

Daimler Chief Executive Dieter Zetsche in an interview with Reuters Insider TV downplayed the risks to the company.

"There are some clouds on the sky that we cannot just close our eyes to, but we are confident that our business will continue to develop positively," he said.

UPBEAT OUTLOOK

Emerging markets have generated almost three-quarters of world growth over the past two years, but there is concern that inflation in China, the world's second-largest economy, could prompt a slowdown in emerging markets across the board.

Daimler's comments on emerging markets chimed with those of French carmaker PSA Peugeot Citroen, which earlier cut its forecast for Chinese growth to around 7 from 10 percent.

Peugeot boosted its forecast for the Latin American market and said the Russian market would grow by about 30 percent, more than twice as fast as it had previously expected.

Daimler's second-quarter earnings before interest and tax (EBIT) rose 23 percent to 2.58 billion euros ($3.73 billion), which beat an average estimate of 2.49 billion euros in a Reuters poll.

Revenue rose about 5 percent to 26.34 billion euros, missing an average estimate of 27.99 billion in a Reuters poll. Still, analysts believed the second half of this year could bring fresh growth for Daimler.

"We're optimistic. Mercedes has some important model launches during 2011 and should see capacity utilization benefits from new SUVs and new small cars heading into 2012," Bernstein analyst Max Warburton said.

Daimler said it now expected 2011 EBIT to very significantly exceed the year-earlier level. Analysts on average see that figure at 9.15 billion euros, up almost 26 percent from 2010.

(Reporting by Maria Sheahan; Additional reporting by Daniela Pegna; Editing by David Hulmes and Will Waterman)

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