Mercedes-Benz Group AG Ramps Up Shareholder Returns With $3.2 Billion Stock Buyback Announcement

Mercedes-Benz Group AG has unveiled plans to initiate a stock buyback program worth up to €3 billion ($3.2 billion), extending attempts to reward shareholders following robust cash flow performance. As reported by Bloomberg, the German luxury car manufacturer revealed that the new buyback initiative will commence immediately after the completion of its ongoing program, valued at €4 billion. This signifies the continuation of Mercedes-Benz's shareholder-focused strategy, with the current repurchase program being the first of its kind in 15 years, unveiled approximately a year ago.

The decision to embark on this buyback spree emerges amid a trend of carmakers increasing shareholder returns, fueled by pent-up demand following years of supply chain disruptions. Major players in the automotive industry, including General Motors, Ford and Stellantis, collectively spent $22.7 billion on share buybacks and dividends last year, showcasing a coordinated effort to prioritize shareholder value. Last week, Renault proposed its most significant shareholder payout in five years, further emphasizing the industry's commitment to rewarding investors.

Mercedes-Benz's American depositary receipts increased by 3.3% following the announcement of the new round of repurchases late Wednesday. This uptick in shareholder enthusiasm was spurred by the company's better-than-expected preliminary industrial free cash flow reported earlier this month, garnering anticipation for an extension of its share buyback program.

Despite benefiting from a robust order backlog that buffered against economic headwinds in the automotive sector, Mercedes-Benz, like its peers, has difficulties ahead. Sales are projected to stabilize this year amidst rising living costs and borrowing expenses, which are expected to slow down consumer spending. Moreover, the manufacturer struggles with declining interest in electric vehicles in Europe, intensified by competitive pressure from Tesla Inc.'s frequent price adjustments.

Mercedes-Benz Group AG is scheduled to release a comprehensive earnings report Thursday, shedding further light on its financial performance and strategic outlook amidst evolving market landscape.