Resilience paving the way for sustainable growth for Mercedes SA

MARCH 13, 2017
Resilience paving the way for sustainable growth for Mercedes SA

Mercedes-Benz South Africa (MBSA) Ltd group of companies on Monday announced that its revenue for the year ended 2016 increased by 10.8%, to R73.4bn. Earnings before Interest and Tax (EBIT) of R5.6bn was achieved for the same period, an increase of 27.3%.

The figures released are unaudited and preliminary - for the 2016 financial year.

EBIT for the previous financial year, ended 31 December 2015, excludes the impact of a once-off reporting item from the sale of Atlantis Foundries, while the 2016 figure excludes the once-off impact from the sale of some of MBSA's own retail dealerships.

The revenue gains were, as in the preceding year, in large part due to higher production volume out of its East London Plant, as well as the concurrent increase in export revenue generated from that facility.

 "The group of companies showed resilience in a continuously changing landscape by remaining true to the vision we have set out for ourselves. This landscape included fluctuating exchange rates; a subdued local market for both passenger and commercial vehicles; as well as increasing global uncertainty. We remain steadfast in our goal of sustainable growth through our product offensive, steadily increasing production and by collaborating with all stakeholders to actively build not only our company, but also the South African economy. And in all of this, our customers remain our top priority," says Arno van der Merwe, CEO and Executive Director Manufacturing, MBSA.

The company also continued its investment into the East London Plant with a total of R461m invested for the period. Included in this amount, was the preparation for the introduction of the C 350 e plug-in hybrid into the production line-up as well as other projects to ensure consistent quality and boost productivity.

Van der Merwe once again reiterated the group of companies' commitment as a socially responsible corporate citizen to South Africa. He announced that the East London Plant will start production of three Mercedes-AMG models in 2017 - the Mercedes-AMG C 43 4MATIC, Mercedes-AMG C 63 and the Mercedes-AMG C 63 S. Along with these AMG models, the Mercedes-Benz C 400 4MATIC will also be added for production from the plant.  The total investment for these new models will be above R200 million.

Group Revenue in Rbn

2015

66.2

2016

73.4

Group EBIT (from on-going business) in Rbn

2015

4.4

2016

5.6

 

DIVISIONAL BREAKDOWN

Mercedes-Benz South Africa East London Plant

To gear up for sustained record production and export achievements, and to ensure the East London Plant keeps abreast of global mobility solutions, significant investment was made in 2016 towards both shopfloor innovations and the introduction of new models. The total investment for the year - for various capacity projects, product investments as well as tooling and equipment, totalled R461m.

One of the major highlights of this total investment, the C 350 plug-in hybrid[1], officially rolled off the production line in September 2016. The introduction of the hybrid has expanded the Plant's technical capabilities, having added the necessary technology to the  shopfloor. This in turn positioned the East London  shopfloor as the most advanced in the country, setting a global benchmark in production best practice both in technology and staff excellence.

In the 2016 financial year, the Plant continued its record production excellence, which culminated in more than 114 000 passenger car units (an increase of 12% from the previous year) and more than 4 500 commercial vehicles being manufactured or assembled at the facility. Currently, the Plant exports roughly 90 percent of the passenger car units manufactured to various markets across the world. 

These sustained high production numbers are in part the result of consistently excellent attendance from employees, who are guided by both a high calibre of leaders as well as by sustainable labour agreements. The East London Plant's most recent labour agreement, the Siyaphambili Agreement, which was signed in 2016, is a benchmark development in the manufacturing sector's labour market, and will ensure sustainable and stable labour relations for the next five years.

The labour agreements are informed by industry-wide policies and negotiations in which MBSA is involved. Significantly, the 2016 National Bargaining Forum (NBF) negotiations broke the trend of strike action that has been seen in recent years. They were also concluded in a manner that encourages labour stability.

As a significant investor to the economic hub of the region, MBSA understands the importance of reinvesting into both its labour catchment areas as well as the greater community. As such, the Mercedes-Benz Learning Academy (MBLA), one of the organisation's key drivers in human and community development, was officially launched in March 2016 in collaboration with National Treasury's Jobs Fund. The MBLA trains 230  shopfloor workers and around 50 artisans per year. Since training started, approximately 400 people trained have secured formal employment, with another 100 in the pipeline for employment placing.

The East London Plant, through collaborative efforts, will continue to build on its past achievements and thus contribute to skills development, job creation and economic development in the region.

Mercedes-Benz Cars leads the luxury segment at home and abroad

Despite a challenging year for the overall local passenger car market, down by -12.8%, Mercedes-Benz Cars increased its market share slightly to 7% of the total South African market, and were 1 581 units ahead of its closest premium competitor.

"We will continue our product offensive with several new additions to the model range.  By 2020 we will have over 40 models. With new cars with ground-breaking designs that inspire our customers, and with new technologies, our products and services will grow even faster," says Florian Seidler, Co-CEO Mercedes-Benz South Africa and Executive Director, Mercedes-Benz Cars.

"In 2017, we will introduce a number of new and exciting products such as the new Mercedes-AMG E-Class 63 S+ sedan, the new E-Class Coupé and Cabriolet, and the new GLA that will inspire our customers even further," adds Seidler.

Mercedes-AMG continues to drive performance and 2016 saw this performance brand achieving record sales of almost 2 000 units - out-shining its closest competitor for the third consecutive year. 

Mercedes-AMG is celebrating 50 Years of AMG - and what better way of celebrating than by introducing the new Mercedes-AMG GT Roadster, AMG GT R and AMG GT C Roadster.  These sports models arrive mid-2017 completing the Mercedes-AMG GT roadster family.

The AMG brand stands for driving performance and with the introduction of the AMG 43 range, driving performance is now extended through the Power of 43 - performance has been given a new number - 43!

Five new AMG 43 models have been added to this performance range: the C-Class sedan, coupe and cabriolet 4MATICs; the SLC roadster; the GLC 43, GLC 43 Coupe, GLE 43 and GLE 43 Coupe from the extensive SUV range.  The sporty E 43 complements the E-Class range from the second quarter. 

With the new generation of the E 63 S 4MATIC+, AMG is taking the dynamic driving limits to a completely new level. The powerful 4.0 litre V8 biturbo engine achieves a new peak power of 450 kW and is the most powerful engine ever in an E Class.  With an acceleration of 0 - 100 km/h in 3.4 secs, the E 63+ is the fastest executive sedan in its class. 

"The launch of the GLA facelift in 2017 completes the mid-life refresh of all our compact cars.  The compact car range has been immensely popular all around the word and has contributed to Mercedes-Benz taking the number one spot in the luxury market.  Our compact range continues to support the rejuvenation of the Mercedes-Benz brand and consistently attracts new and trendy customers to the brand," adds Seidler.

Trends and buying habits are evolving and this is no different in the fast-changing motor industry.  MBSA launched its Beautiful News partnership with News24.com on 1 November 2016 and these films have been distributed to more than 37-million unique browsers overall.  MBSA is the first non-publishing brand to distribute editorial content of this nature to such a large and varied audience.

"The feedback has been phenomenal and we are proud to promote the stories of people with such a heart-warming approach.  Mercedes-Benz is not all about cars, we believe in the pure goodness of people in their everyday lives," says Seidler.

The digital space is evolving and following the brand's dominance on Facebook as the first local automotive manufacturer to reach 1m fans, Mercedes-Benz Accessories recently opened an Online Store hosting a wealth of gift ideas for an ever-growing fan base.  On offer is a wide range of quality lifestyle items for every motoring enthusiast.

The launch of the online shop, hosted at Shop.Mercedes-Benz.co.za, means customers can now choose a selection of high-end branded items from the comfort of their phone, tablet or laptop.

Technology and safety remains a priority and by combining these imperatives with a host of services, Mercedes-Benz Cars is now offering an incredible service to its customers - Mercedes me connect. Mercedes me connect is broken down into five areas - "move me", "connect me", "assist me", "finance me" and "inspire me" - and takes into account all product-relevant areas such as the purchasing, financing and servicing of vehicles, as well as Daimler's internationally acclaimed mobility services. In this way, "Mercedes me connect" allows all service and mobility areas to be integrated seamlessly and conveniently, thus raising the bar once again for individual customer care. (See complete release for full details)

Emission-free automobiles are the future:  Mercedes-Benz Cars is consolidating all activities in connection with electric mobility under the new product brand EQ and the Concept EQ gives a clear outlook onto a completely new generation of vehicles. Globally Mercedes-Benz Cars plans to launch more than ten electric vehicles by 2025: in all segments from smart to large SUVs. Parent company Daimler expects that until 2025 the proportion of electric vehicles in total unit sales of Mercedes-Benz will be between 15 and 25 percent. This is dependent on the development of infrastructure and client preferences.

"Our hybrid offering of the Mercedes-Benz C 350 e and the S 500 e is the current e-mobility solution for our local customers due to the long-distances travelled in southern Africa.  With the extension of the mileage of electric models, from 200 km - 500 km we will actively look at bringing electric vehicles to South Africa in the future.  We are on board with this project, and will work with the industry to find solutions to provide charging infrastructure and battery exchange programmes," concludes Seidler.

Daimler Trucks & Buses remains market leader in a competitive environment

Daimler Trucks & Buses (DT&B) utilised 2016 as a year to cement its vision statement: "We aim to be the benchmark commercial vehicle solutions provider that makes a real difference in the lives of all our stakeholders."

The various Daimler brands (Mercedes-Benz Trucks, Western Star, Mercedes-Benz Buses and FUSO Trucks) achieved this by providing customised mobility solutions.

FUSO Trucks launched the medium to heavy-duty FJ 16-230, which proved to be the truck of choice in the southern African region. With the addition of the robust vehicle, the manufacturer offered a wide choice for various applications such as distribution, rentals, courier and small-, micro- and medium-enterprises.

Mercedes-Benz Bus & Coach continued in their pioneering ways, as the division delivered 150 dual fuel city buses - a world-first for Mercedes-Benz - to Johannesburg's MetroBus, as well as handing over 40 Compressed Natural Gas buses to the City of Tshwane.

Mercedes-Benz Trucks increased its market share by almost two percentage points last year, as a result of the continued focus on adding value to its customers. The original equipment manufacturer offers vehicles with the lowest total cost of ownership in the market and strives to increase vehicle uptime.

"A depreciating rand and harsh operating conditions did not dampen our collective spirits as DT&B in 2016. In fact, these factors pushed us to innovate through campaigns such as Total Cost of Ownership, allowing us to further prove that we always put our customers' mobility requirements first. This approach resulted in DT&B selling 4 631 trucks and buses, a figure we are proud of in such a tough economy," says Jasper Hafkamp, Executive Director, Daimler Trucks & Buses Southern Africa.

Mercedes-Benz Trucks, FUSO Trucks, Western Star and Mercedes-Benz Bus & Coach all contributed in making 2016 yet another milestone year for DT&B.  One of the major reasons why the manufacturer continued to yield positive results is that it offers benchmark value chain offerings.

DT&B saw penetration of these value chain products increase across the board. CharterWay enjoyed a 39 percentage point increase on penetration for all its service contracts, due to the Integrated Service Plan. The manufacturer's driver and vehicle management system, FleetBoard, increased penetration by six percentage points, while Mercedes-Benz Financial Services increased penetration across the DT&B offering by 10 percentage points.

Forming part of the value chain is the manufacturer's pre-owned vehicles and trailers arm, TruckStore South Africa, which remains a success story with total sales growing by 8% in 2016 compared to the previous year. The outlet is the biggest and most successful single TruckStore centre outside Germany, and continues to develop the pre-owned commercial vehicle and trailer business by exploring a number of opportunities.

One of these was supplying Daimler's Regional Centre Southern Africa market with products and services that cannot be matched by any of its competitors in the region.  This led to TruckStore increasing export sales into the southern African markets.

Mercedes-Benz Vans - robust sales in a challenging market

During 2016, Mercedes-Benz Vans increased its market share in South Africa by 2.8 percentage points in the large van market. For the mid-size market, the division achieved 39% growth in unit sales. These impressive numbers were due to the success of the V-Class, Vito and the class-leading Sprinter.

The division exceeded its customers' expectations by being innovative and always putting its most important stakeholder first - the customer. A case in point was how the division expanded its Sprinter product range to include a new variant with a permissible gross vehicle weight (GVW) of 5.5 tons. This represented an increase in payload of almost half-a-ton, a record level in this weight class.  This allows various sectors, which require maximum payload, to master their given tasks more effectively and profitably.

Coupled with this, the Mercedes-Benz Sprinter was also the first large van to be introduced with an Integrated Service Plan in South Africa. The CharterWay Service BestBasic 5-year/105 000 km service plan assists operators to concentrate on their business' core requirements, by offering guaranteed vehicle availability and reduced administration.

Undoubtedly, the most exciting development in 2016 for Mercedes-Benz Vans was the press reveal of the most-anticipated bakkie, the Concept X-Class. With the Concept X-Class, the manufacturer aims to offer its customers a class-leading vehicle that not only matches their specific needs, but also sets new standards in a growing segment. This new model entrant is poised to make an unmistakable mark in the Southern African market once it is launched in early 2018.

"As Mercedes-Benz Vans South Africa, we made use of our strong position and we ensured that 2016 was the year of the Vans customer. All our efforts were squarely focused on ensuring that our customers' needs were met at every touchpoint - from both a sales and after-sales perspective - and that is why we had significant volume growth in the mid-size segment, where the Vito and V-Class operate.  Mercedes-Benz dominates the large van market, and despite the decline in the market, we still grew our market share. That is undisputable evidence that we continue to be the leaders when it comes to all things Vans," says Nadia Trimmel, Vice-President of Mercedes-Benz Vans Southern Africa.

Mercedes-Benz Financial Services: Showing solid performance

Mercedes-Benz Financial Services (MBFS) added a total of almost R9.5bn worth of acquisitions in 2016, resulting in an all-time high portfolio of R28.6bn.  This achievement was mainly attributed to the close cooperation with all MBSA passenger cars and commercial vehicle divisions.

Mercedes-Benz Cars continues to contribute the largest share in the new acquisitions. This can be attributed to the continued success of the Agility Finance Product. In 2016 Agility Finance generated 57% of acquisitions in the Mercedes-Benz passenger cars segment.

MBFS finances two out of five Mercedes-Benz passenger cars sold in South Africa. In this segment MBFS focuses on the value proposition of Agility and continued to finance most of the transactions over three years whilst the market has moved to significantly longer contracts durations (72-84 months with balloon payments) to facilitate affordability of monthly payment.

For DT&B, MBFS increased the number of vehicles financed, with particularly strong growth coming from FUSO and Mercedes-Benz vans.

MBFS ranked #1 in the Dealer Satisfaction Index (a study conducted by Nielsen), leading competing banks by a healthy margin. MBFS Passenger Cars scored 89%, 10% ahead of its closest competitor and MBFS Commercial Vehicles 85%, 16% ahead of its closest competitor. MBFS ranked #1 in the Customer Satisfaction Index, compared to competing banks.

"During 2017 MBFS will endeavour to grow our core business and increase the focus on digitalising the customer journey. We are creating fascinating new products and we will not be able to offer these without the support of our highly engaged and motivated employees. These new products will enable us to excite our customers and dealers and we are looking forward to what the future holds," says Joerg Essig, Chairman of Mercedes-Benz Financial Services.