© Reuters.

By Scott Kanowsky 

Investing.com — Mercedes-Benz Group AG (ETR:) better-than-expected income in the fourth quarter, thanks to a spike in electric vehicle sales that helped offset weakness at its financing business stemming from elevated borrowing costs.

In the final three months of 2022, the Germany-based automaker posted earnings before interest and taxes of €5.4B, an increase of nearly a third compared to the same period in the prior year. Bloomberg consensus estimates had placed the figure at €4.5B.

Despite flagging a « challenging » macroeconomic environment and geopolitical concerns, Mercedes-Benz sold 2.04 million passenger cars over the quarter, leading to core profit for the division of €4.24B that was higher than anticipated. Partly driving this uptick was strong demand for electric vehicles, a key pillar of the company’s long-term strategy, with sales of these units surging by 67%.

Shares in the group rose in early European trading on Friday.

Van sales also grew by 8% worldwide, but were weighed down by supply chain constraints and logistics issues, Mercedes-Benz said. But returns at Mercedes-Benz’s financing and leasing arm dropped by 44%, as higher interest rates and a subdued economic outlook led to a jump in cost of credit risk. Volumes were lower as well following the spin-off of the Daimler Truck unit in December 2021.

« We have redesigned Mercedes-Benz to be a more profitable company thanks to our focus on desirable products and disciplined margin and cost management. We cannot control macro or world events, but 2022 is a case in point that we are moving in the right direction, » said chief executive officer Ola Källenius in a statement.

The company added that it would launch a share buyback program worth up to €4B, stripping away incidental costs, that will last for up to the next two years. For 2022, a dividend of €5.20 per share was set, translating to a payout of €5.6B.

However, Mercedes-Benz warned that core earnings will be slightly below the prior-year level in 2023, while annual revenue would remain unchanged, as headwinds linger from the war in Ukraine, raw material costs, and possible supply chain disruptions.

« In addition, continued inflationary pressure for consumers and companies and the associated central bank increases in interest rates, as well as a more pronounced growth slowdown in the economy, make the outlook more difficult, » it said.

Meanwhile, first quarter trading in China – the world’s largest auto market – was impacted by spill-over effects from an uptick in COVID-19 cases following the country’s sudden move away from pandemic-era restrictions late last year. Orders in Europe have also been « sluggish, » Mercedes-Benz noted.