Mercedes-Benz Bolsters Supply Chain As It Braces For Less Gas

Mercedes-Benz is boosting its supply chain by dealing directly with chipmakers and forming contingency plans to cut gas usage by up to 50% in Germany, it said on Wednesday, raising its full-year financial guidance after a strong second quarter.

The luxury automaker is also working with Asian battery suppliers to move more cell production to Europe, chief executive Ola Kaellenius said, adding partners would soon announce where they were increasing production capacity, in part to serve its demand.

Mercedes-Benz's Asian battery suppliers include China's CATL, as well as South Korea's SK Innovation, LG Chem and Farasis.

Chip supply constraints hampered production of electric and top-end vehicles in the second quarter and will remain the main operational issue for the second half of the year, Kaellenius told analysts on a call, adding the company had struck several direct contracts with chipmakers.

On natural gas, the CEO said a mixture of efficiency measures, increased electricity consumption, adapting temperatures in production facilities and replacing gas with oil could lower gas use by up to 50% within the year, if necessary.

"On electricity, we would need to discuss this with our electricity companies. The entire German industry would need to adapt," Kaellenius said, adding a 10% reduction in consumption had already been achieved.

HIGHER OUTLOOK

The carmaker raised its full-year guidance on Wednesday to forecast a significant rise in revenues and slightly higher earnings than last year, with both metrics growing in the second quarter despite a fall in unit sales.

Adjusted earnings before interest and tax (EBIT) were 7.4% ahead of consensus in the second quarter at 4.9 billion euros ($5 billion) and group revenue rose 7% to 36.4 billion euros.

Mercedes-Benz shares were up 2.5% at 0930 GMT.

Kaellenius reiterated the carmaker would stick to its strategy of prioritising value over volume, even when supply chain issues currently restricting output ease.

Still, a statement earlier on Wednesday said a slight increase in sales in the Mercedes-Benz Cars division was expected this year, with the top-end luxury segment forecast to grow more than 10%.

"Lower sales in some markets in the second quarter were only driven by availability restrictions," Kaellenius said. "We expect high demand in relevant markets to continue."

($1 = 0.9854 euros)