A year ago, investors pretty much gave up on the major global automakers. The shares of Daimler, General Motors and Ford Motor were at a low of ten years. Start-ups of electric vehicles without sales were sometimes worth more than traditional car manufacturers with tens of thousands of employees and factories around the world. The pandemic looked like it would seal the fate of the dinosaurs.
But it seems that the old reindeer have not yet been condemned. The earnings reported by Daimler on Thursday underlined a remarkable return by some traditional carmakers. These companies have managed to survive the pandemic, reorientate to electric vehicles and convince stock market investors that they are not going to let Tesla’s customers take over without a fight.
Daimler shares have tripled since hitting a low in March, rising again on Thursday after the company said net profit for the year had risen by almost 50 percent from 2019 to 4 billion euros, or $ 4.8 billion. .
General Motors’ shares have also nearly tripled since March. The company beat analysts’ expectations last week when the fourth-quarter net profit of $ 2.8 billion was reported at a loss a year earlier.
In addition to making more money than investors thought was possible in a year of turmoil, the two companies, dating from the early 20th century, have made decisions that show they understand the technological changes facing the industry.
GM shifted its perception of its commitment to electric vehicles when it said last month that it would phase out fossil fuel vehicles by 2035. Daimler shares rose after the company said this month that it would split its car and truck divisions into different companies, each with its own share list. Daimler, based in Stuttgart, Germany, makes Mercedes-Benz luxury cars and Freightliner trucks.
Ola Källenius, CEO of Daimler, said the decision to break up the company was intended to give executives more freedom to respond to technological change.
“As the speed of transformation of the automotive industry increases,” he said. Källenius said in an interview, “decision-making speed is crucial.”
GM’s promise to swear off fossil fuels, while not going to last another 14 years, has caused a chain reaction in the industry. Ford said on Wednesday that all its passenger vehicles sold in Europe will only run on batteries by 2030. Jaguar Land Rover said Monday that all of its Jaguar luxury cars and 60 percent of Land Rover luxury SUVs will only run on batteries by 2030.
Mr. Källenius avoided making a similar statement. In many markets where the business is active, there is no infrastructure for electric cars, he pointed out. Therefore, a vow of abstinence from fossil fuels ‘is not something we should do just to get a headline’, he said.
But all future Mercedes-Benz models will be designed to be electric, said Mr. Källenius said. “Our technological path is clear,” he said. “We are going to take a leading position. It’s a little too early to pick a date for the world when the last internal combustion engine will leave the production line. ”
Investors apparently reward car manufacturers who show that they can build electric cars. Shares of Ford, whose Mustang Mach-E received good reviews, have doubled since they passed in March. Shares of French carmaker Renault have also more than doubled since then; its affordable Zoe subcompact was the best-selling car with batteries in Europe last year.
Daimler will sell several new electric vehicles this year, including the Mercedes-Benz EQS, a counterpart to the company’s leading S-Class. The EQS will be offered for sale this summer at a starting price of probably more than $ 100,000.
“Gradually, the financial market starts to look at our technology portfolio, and everything we have in store,” he said. Källenius said.
So far, electric cars are not nearly as profitable for Daimler and other traditional car manufacturers as gasoline models. Battery systems are more expensive than ordinary engines and transmissions, and automakers are still learning how to manufacture electric motors efficiently. It will take time to reach the profit margins ‘to which we are accustomed on the combustion side’, said Mr. Källenius said.
Daimler’s unexpected healthy profit in 2020 was the result of old-fashioned cost savings rather than any technological breakthrough. The company reduced its workforce by 7,000 employees, or 4 percent, and reduced the budget for research and development, which Källenius said was still large compared to competitors.
When the pandemic struck, Daimler quickly switched production back so that it was not stuck with unsold vehicles, Mr. Källenius said.
Even after the sharp rise in their share prices, Daimler and GM are still only worth about a tenth as much on the stock market as Tesla, which makes only a small amount less vehicles. Investors have been mesmerized by Tesla CEO Elon Musk, and they have more confidence in a company that manufactures nothing but electric cars.
As Mr. Källenius conceded, the dinosaurs still need to be very convincing before investors will believe they have that much potential.
“The financial market will wait a bit,” he said. “How’s it going to play out?”