October 22, 2015 / 6:11 AM / 4 years ago

UPDATE 3-Daimler defies China gloom as luxury car sales boom

* Q3 adj EBIT 3.66 bln eur vs 2.79 bln year-ago

* Keeps FY guidance on EBIT, sales and deliveries

* Lowers sales outlook at trucks division (Adds comments from finance chief on China market outlook)

By Andreas Cremer

BERLIN, Oct 22 (Reuters) - A fast-growing middle class in China could underpin future expansion in the country’s luxury car market, Daimler said on Thursday as strong Chinese demand for its sport-utility vehicles helped push up its quarterly profit.

New launches have spurred Daimler’s luxury-car sales globally to record levels this year, eclipsing Volkswagen’s Audi but still behind BMW.

Its luxury-car division Mercedes-Benz launched the redesigned A-Class compact car and the GLC and GLE sport-utility vehicles (SUVs) in September, and its sales in China - the world’s biggest car market - jumped 53 percent in that month. Audi’s sales in the country rose 2.9 percent.

The upbeat Chinese prospects contrast with weak sales figures in the country from other carmakers, including General Motors and BMW, which raised concerns that a big source of profitable growth over the past decade may be running dry as the market matures and economic growth slows.

Daimler expects the Chinese auto market to expand by about 5-6 percent per year over the long term with a chance that growth in the country’s luxury segment could outpace that, finance chief Bodo Uebber said.

“There is now a strong growing middle class in China. This could help the premium market to grow disproportionately in coming years ... versus the mass market,” he added.

Daimler said compact SUVs were among the popular cars in China and that it was also benefiting from being better able to service the demand by producing the new GLA compact SUV in the country since April.

The strong sales in China, as well as in Europe, helped Daimler’s third-quarter earnings before interest and tax (EBIT) rise by almost a third to 3.66 billion euros ($4.15 billion), it said on Thursday, near the 3.76 billion-euro top-end forecast in a Reuters poll.

Mercedes-Benz beat Audi by 28,474 cars in worldwide sales over the first nine months of the year in what could upset the pecking order among Germany’s premium brands. Mercedes had been trailing Audi since 2011.

“There appears to be no end to Daimler’s product momentum,” said Frankfurt-based Bankhaus Metzler analyst Juergen Pieper, who recommends buying the stock. “These are strong results - any fault-finding would be difficult.”

Daimler shares were up 3 percent at 76 euros at 1443 GMT.

RISKS

In China, Mercedes has narrowed the sales gap with Audi and BMW this year and expects strong demand to continue in the fourth quarter and in 2016.

“There’s a growing middle class in China which is hugely attracted by compact SUVs. The SUV trend has extended into luxury segments over the past years and there is strong potential going forward,” said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne.

Daimler stuck to its 2015 guidance for a significant gain in global deliveries, revenue and operating profit.

But the Stuttgart-based group scaled back expectations for volume growth in global auto markets, saying demand will likely be flat this year because of previous weakening in China, after having guided for growth of about 2 percent before.

Latest economic indicators “reveal a significant increase in uncertainty on the parts of investors and consumers”, it said.

Germany’s finance ministry said earlier the risks to German industry had risen due to the economic slowdown in China and other emerging markets, as well as uncertainty generated by the Volkswagen emissions scandal.

Daimler lowered its sales target for truck operations on weaker emerging markets, saying it now expects a slight increase in truck deliveries rather than a significant gain.

M.M. Warburg analyst Marc-Rene Tonn, who will keep his “buy” rating, said: “New products will continue to drive Mercedes in China and elsewhere, though maybe not at such a pace,” citing the 53 percent sales growth Mercedes posted in China in September. He added that he did not expect Mercedes to steal market share from Audi due to the VW emissions scandal.

Audi, due to report quarterly earnings on Nov. 2, will push offerings of purely-electric cars including a new SUV planned for 2018 to win back customers’ faith, Chief Executive Rupert Stadler told a gathering of 7,000 workers on Wednesday.

“That’s our response to the diesel issue,” he said.

$1 = 0.8825 euros Editing by Pravin Char

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