The electric trucks from Daimler Truck should make the manufacturer noticeably more profitable.
(Photo: Reuters)
Boston, Vienna From a chronic underperformer to a star on the stock market: That is clearly Daimler Truck’s goal. After the world’s largest manufacturer of heavy trucks and buses had already noticeably raised its sales and profit expectations for the current financial year late Monday evening, the Dax group is now offering its shareholders significantly more profit in the longer term.
Specifically, the commercial vehicle manufacturer’s adjusted return on sales is expected to increase to twelve percent by 2030 – assuming “sunny conditions”. The Swabians announced this on Tuesday as part of a capital market day in Boston.
In 2022, Daimler Truck was only able to achieve an adjusted margin of 7.7 percent in the industrial business. This year, the Swabians are already aiming for a profit margin of up to ten percent. If this jump succeeds, it would be a novelty. Because the vehicle manufacturer has failed for decades to convert its size, which is unique in the industry, into strong earnings. Smaller competitors like the Volvo Group or Paccar have always been more profitable.
Martin Daum, CEO of Daimler Trucks, wants to change that quickly – by making the former secondary business of the luxury car manufacturer Mercedes-Benz even bigger. The company’s revenues are expected to increase by 40 to 60 percent between 2025 and 2030. Daimler Truck does not name a specific target amount, but it can be roughly derived.
Based on the previous year’s sales of 51 billion euros, the group should be aiming for an increase in revenue to 71 to 81 billion euros by the end of the decade. Depending on the assumption, the sales target could be significantly higher, according to internal sources. The group has identified three areas as growth drivers: the service business, electric trucks and the potential technological breakthrough in autonomous driving.
Core product electric truck
In the short term, the increased focus on maintaining, repairing and financing vehicles and selling spare parts offers the greatest opportunities. Compared to its competitors, Daimler Truck has long neglected its service area. Significantly higher margins can be achieved here than with the pure sale of trucks and buses.
Daimler Truck is now systematically changing its course here and is currently opening a branch in Europe every three months. In addition, since the end of 2021, the Group has been offering its own leasing and insurance products in more and more markets. The contract volume is already more than 24 billion euros.
In the medium term, the Dax group also hopes for a boom in electric trucks. The group calculates that battery-electric semi-trailers could be cheaper than comparable diesel vehicles in core markets such as Europe from 2024.
>> Read also: Electric trucks should be cheaper than diesel trucks by 2024
This assumption applies to the so-called total operating costs for trucks such as those in the Actros series. The expenses for fuel and electricity, maintenance, repairs, tolls and the resale value are considered – and not just the purchase price. The latter will probably always be higher for battery trucks than for combustion engines, which in turn should drive up Daimler Truck sales.
The group based in Leinfelden-Echterdingen does not want to completely abandon the diesel engine, which has been dominant for a hundred years. In a transitional phase, the diesel will continue to play an “important role”, also due to the lack of charging and refueling infrastructure for emission-free alternatives.
Dividend at Daimler Truck to increase sharply
In the long term, Daimler Truck swears primarily by electric drives. By 2030, around 60 percent of new vehicles in Europe, Japan and the USA will use a battery or a hydrogen-based fuel cell as an energy source. In long-distance transport in particular, hydrogen is set to become the energy source of choice for freight forwarders from the middle of the decade.
For special vehicles such as concrete mixers, the Unimog or SLT heavy-duty trucks with a total weight of up to 250 tons, neither batteries nor fuel cells should be considered. Daimler Truck is therefore considering converting its heavy diesel engine for applications with a very high power requirement so that it can also be operated with green hydrogen. The hydrogen combustion engine is currently being tested on the Unimog. The series is often used in winter service or in horticulture.
>> Read also: Daimler Truck expects rapid growth in electric buses
Meanwhile, Daimler Truck expects significant income from other new technologies. The group assumes that from 2030 it will be able to generate more than three billion dollars in sales and one billion dollars in profits with autonomous driving systems. The Swabians are pursuing a dual strategy here: on the one hand, the acquired start-up Torc is researching autopilot solutions for trucks, on the other hand, Daimler is equipping the Google subsidiary Waymo with its vehicles.
The shareholders should also benefit more from the booming business. Daimler Truck wants to buy its own shares worth up to two billion euros. In addition, the company intends to distribute up to 60 percent of its net income to the owners as a dividend in the future – previously it was 40 percent.
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