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German Automakers Earn Big, Spend Big


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What's going on?

The three biggest German automakers – Daimler, Volkswagen and BMW – all published their earnings on Thursday. And while Daimler-owned Mercedes might keep on zooming past BMW, all three companies beat investors’ expectations!

What does this mean?

Mercedes has kept its spot at the top of luxury car sales among Germany’s biggest automakers, with sales growth three times that of BMW. But there were perhaps more similarities than differences in the results of the big three. All are spending heavily on new technology that’ll (hopefully) win them a place at the top of the industry as electric and self-driving cars go mainstream.

Why should I care?

For markets: German automakers are making big, expensive bets on the success of electric cars.

While BMW reported a drop in profitability versus last year, investors have chalked up those lower margins to the company’s investments in its electric car business. Daimler is also looking to make headway into that market: it’s investing €11 billion in electric cars over the next ten years, mostly for its Mercedes brand. Volkswagen is also making a huge push into electric cars as part of its “Strategy 2025”. The downside? The big increase in expenditures is hurting the profitability of all these companies in the near term.

The bigger picture: China remains a source of strength for German automakers.

China has been a nice place for German automakers to do business in the past few years – auto sales grew there by over 15% last year and German cars accounted for 19% of all car sales. Last year’s sales figures were pushed up by a temporary tax break on car purchases, which left some wondering if the demand for cars would stick around – however, strong quarterly sales from German automakers in that market suggested those alarm bells might have been premature.

Originally posted as part of the Finimize daily email.

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