We have been warned about dire repercussions from the coronavirus lockdowns around the world. Now comes some of the hard facts and they’re eye-searing. Mercedes valuation this year was already dipping so things were puckering before the coronavirus crisis. But today Mercedes released preliminary adjusted Q1 earnings showing they tanked by almost 70% to $777 million. There is speculation that now Mercedes is looking for a merger partner as stockholder pressure mounts. Have no doubt; Mercedes is in trouble. Analysts are saying it is looking at mergers with BMW, Renault, or even Chinese manufacturer Geely.

Mercedes is now more than 50% off from this time last year.

Just in the last year, Mercedes stock has taken a dive. It is now more than 50% off from this time last year. Needless to say, shareholders are demanding action from new CEO Ola Kaellenius. Shareholders want Kaellenius to find savings through either key alliances or straight out mergers. 

Eyeing the Fiat Chrysler/PSA merger in the works market analyst Frank Schwope with NordLB told Reuters, “Fiat Chrysler and PSA are just the start. Perhaps it is time for Daimler to think about a deal given the low valuation.”

Analysts looking at three potential Mercedes mergers possible

Schwope sees at least three possible combinations of actions Mercedes can explore. It can create a deeper alliance with BMW, or possibly the PSA Group already finishing up merger details with Fiat Chrysler. Or it could merge with Volvo which is owned by Geely. The Chinese company already has a large stake in Mercedes. In January it invested almost $6 billion in a joint venture plan. 

Throughout Europe, vehicle sales are way down, with some countries experiencing worse numbers than others. For example, Italy has seen car sales dive over 85% in the last month as the coronavirus ravaged the country. On average Europe has seen over a 50% reduction in March. It is uncertain what numbers April will see but factories in Germany are beginning to start back up right now.

Things are no better for auto manufacturers in the US

Things are no better in the US. Ford estimates a $2 billion loss for Q1. It recently raised $8 billion from investors to float Ford for the time being. Could the US see Ford or GM merge with another company or each other? 

Even with factories slowly restarting some companies like Hyundai are expecting Q2 to be even worse. It told Reuters, “Demand is expected to worsen in the second quarter due to the prolonged suspension of dealer operations and factory operations in overseas markets,” Hyundai’s Chief Financial Officer Kim Sang-Hyun said. “Global automakers are expected to see their profitability decline in earnest.” Yikes!

Hyundai sales in March dropped more than 40%

Demand for Hyundai vehicles fell 24% for Q1 with March seeing a drop of more than 40%. Hyundai’s Q1 saw a 43% drop in China, a 14% drop in South Korea, and an 11% drop in the US. But at least it fared better than Mercedes.

This is only the beginning of some devastating news for not only car companies but businesses in general. Hold on because the rest of 2020 is going to be a rough ride.