Daimler AG Signals Supply Chain Risks With Shift To EVs
Zacks Investment Research | Feb 14, 2018 05:32AM ET
Daimler AG (DE:DAIGn) (OTC:DDAIF) has rung the warning bell that its shifting focus to electric vehicles (EVs) could compel it to support its supply chain, per a Reuters report. In fact, many automakers, including Daimler, have scaled up production of EVs and are also updating the engine management software to keep a lid on pollution level.
In fact, due to a shift in customer demand, from diesel to gasoline engines and planned electrification of new model series, there will be a huge change in the supply components, particularly for the Mercedes-Benz Cars segment.
The new demand pattern may lead to underutilization of production capacities for some supplies, whereas overutilization of production capacities for some other. In the changed scenario, some suppliers may have to opt for expansion of production capacities at its plants. If the supplier is not able to cover fixed-costs, there is a high chance that the suppliers could ask for a compensation payment.
Daimler projects that its profit in 2018 would be affected as the company is investing a lot in electric and autonomous vehicles. Moreover, the political doldrums could result in supply bottlenecks for some raw materials. However, due to the intense competition, the ability of the company to pass on the higher expenses of commodities and other materials to the price of end vehicle is limited.
Over the past year, shares of this company have outperformed the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.