Scarcity and software set to power Mercedes-Benz through 2022

A logo of Mercedes-Benz is seen outside a Mercedes-Benz car dealer, amid the coronavirus disease (COVID-19) outbreak in Brussels, Belgium May 28, 2020. REUTERS/Yves Herman

BERLIN, Feb 24 (Reuters) - Mercedes-Benz (MBGn.DE) will focus on its most luxurious vehicles and bring more software in-house to tackle higher costs and supply chain bottlenecks which are likely to continue to weigh on returns, the company said on Thursday.

The carmaker saw sales drop 5% in 2021 as supply chain shortages constrained production and it continues to widen its source base for semiconductors and develop safety stock to protect against continued bottlenecks, CFO Harald Wilhelm said.

Despite supply constraints, the carmaker expects top-end vehicle sales to rise 10% this year as it prioritises delivery of its most expensive models over maximising unit sales, a strategy CEO Ola Kaellenius hopes will solidify Mercedes-Benz' image as a luxury company.

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The cost of bringing software in-house was no more than bringing in different components from various partners, Kaellenius said, adding that it was a better way to control spending.

"Do you continue the path we have been on for the last 20-30 years, purchasing a patchwork of software... or do you take destiny in your own hands and make sure you have the core stack controlled by you?" Kaellenius said.

The Mercedes-Benz Cars & Vans division more than doubled its annual adjusted earnings before interest and taxes (EBIT) to 13.9 billion euros ($15.61 billion) from 6.8 billion euros last year, lifted by revenue from top-end vehicle sales and electric passenger cars, which grew 30% and 64% respectively.

The company will propose a dividend of 5 euros per share for the year, a significant jump from last year's 1.35 euros. Around 0.7 euros of this will represent the Daimler Truck (DTGGe.DE) dividend, as the truckmaker will not make a separate payout this year, the company said.

Revenue is expected to rise slightly this year compared with 2021 as supply chain bottlenecks ease but it was too soon to predict an end to the global semiconductor shortage, the company said.

($1 = 0.8903 euros)

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Reporting by Victoria Waldersee Editing by Simon Cameron-Moore and Elaine Hardcastle

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