Daimler’s CMD lacks a positive surprise on group structure

Daimler - electric vehicle
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Daimler lowers margin guidance due to electrical vehicle (EV) transition

Daimler (DAI GY, HOLD, CS fundamental credit view: Stable) held its capital markets day (CMD) to showcase its strategy around autonomous, connectivity and electrification. The carmaker laid out a quicker roadmap towards electrification than previously guided (now expecting at least 25% of overall volumes to be pure electric powered by 2025 as opposed to its earlier 15–25% target). Higher investments and the lower expected contribution margin coming from EVs create a considerable headwind to earnings in the coming years.

Daimler is seeking to address this by launching a “Fit for leadership – 4.0” EUR 4 bn cost savings plan to offset some of the margin headwinds, but it now expects margin to fall between 8–10% margin corridor during the transition period (vs. earlier target of 10%). Further, the CMD disappointed by not announcing a change in its group structure, which was expected to unlock value and re-rate shares. We revise our fundamental credit view to Stable from Positive as we no longer view the credit profile as likely to strengthen from current levels. We are Hold-rated on Daimler bonds in various currencies.

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