Daimler AG Annual Report 2016

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FY2016 Annual Report · Daimler AG

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Annual Report 2016

A lot achieved –
more to come

+ 3 %

revenue growth
to €153.3 billion

+ 3 %

increase in EBIT adjusted for
special items to €14.2 billion

€ 3.25

proposed
dividend

+ 15 %

€7.6 billion for
research and development

Daimler AG
Mercedesstraße 137
70327 Stuttgart
Germany
www.daimler.com

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Annual Report 2016

Key Figures

Daimler Group

€ amounts in millions

% change

2016

2015

16/15

Revenue

153,261

149,467

Investment in property, plant and equipment

Research and development expenditure

Free cash ﬂ ow of the industrial business

EBIT

Net proﬁ t

Earnings per share (in €)

Dividend per share (in €)

5,889

7,572

3,874

12,902

8,784

7.97

3.25

5,075

6,564

3,960

13,186

8,711

7.87

3.25

Employees (December 31)

282,488

284,015

1 Adjusted for the eﬀ ects of currency translation, revenue increased by 3%.

+16

+15

-2

-1

Cover photo
With Concept EQ, Mercedes-Benz shows how the
electric car can move into the fast lane. The study
in the style of an SUV coupe appeals with a range
of up to 500 kilometers and the typical Mercedes
strengths of safety, comfort and connectivity. The
Concept EQ therefore stands for modern, sustainable
mobility. In the future, Mercedes-Benz will present
all of its e-mobility activities under the EQ brand,
with an ecosystem of products, services, technologies
and innovations. Customers will have access to a
spectrum ranging from electric vehicles to wall boxes,
charging services and home-energy storage units.

Daimler’s Divisions >
Daimler at a Glance >

Divisions

Internet, Information, Addresses

€ amounts in millions

Mercedes-Benz Cars
Revenue
EBIT
Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Unit sales

Employees (December 31)

Daimler Trucks
Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Unit sales

Employees (December 31)

Mercedes-Benz Vans
Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Unit sales

Employees (December 31)

Daimler Buses
Revenue

EBIT

Return on sales (in %)

Investment in property, plant and equipment

Research and development expenditure

thereof capitalized

Unit sales

Employees (December 31)

Daimler Financial Services
Revenue

EBIT

New business

Contract volume

Investment in property, plant and equipment

Employees (December 31)

2016

2015

2014

16/15

% change

89,284
8,112
9.1

4,147

5,671
2,008
2,197,956

139,947

33,187

1,948

5.9

1,243

1,264
57
415,108

78,642

12,835

1,170

9.1

373

442
238

359,096

24,029

4,176

249

6.0

202
11
26,226

17,899

20,660

1,739

61,810

132,565

12,062

83,809
7,926
9.5

3,629

4,711
1,612
2,001,438

136,941

37,578

2,576

6.9

1,110

1,293
26
502,478

86,391

73,584
5,853
8.0

3,621

4,025
1,035
1,722,561

135,553

32,389

1,878

5.8

788

1,188
34
495,668

87,628

11,473

9,968

880

7.7

202

384
153

682

6.8

304

293
68

321,017

22,639

294,594

21,598

4.113

214

5.2

104

184
13
28,081

18,147

18,962

1,619

57,891

116,727

9,975

4,218

197

4.7

105

182
11
33,162

17,473

15,991

1,387

47,912

98,967

8,878

+7
+2
.

+14

+20
+25
+10

-12

-24

+12

-2
+119
-17

-9

+12

+33

+85

+15
+56

+12

+16

-7

+10
-15
-7

-1

+14

+23

+21

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Contents

Future Mobility

Automobile next level
Transportation next level
Mobility next level

Leadership 2020

Chairman’s Letter

A | To Our Shareholders

The Board of Management
Report of the Supervisory Board
The Supervisory Board
Highlights of 2016
Daimler and the Capital Market
Objectives and Strategy

14
36
54

64
66
72
74
80
84

B | Combined Management Report

97
103
109
117

Corporate Profile
Economic Conditions and Business
Development
Profitability
Liquidity and Capital Resources
Financial Position
Daimler AG
(condensed version according to HGB)
120
Sustainability and Integrity
123
Overall Assessment of the Economic Situation 140
141
Events after the Reporting Period
Remuneration Report
142
Takeover-Relevant Information
and Explanation
Risk and Opportunity Report
Outlook

155
158
174

C | The Divisions

Mercedes-Benz Cars
Daimler Trucks
Mercedes-Benz Vans
Daimler Buses
Daimler Financial Services

D | Corporate Governance

Report of the Audit Committee
Corporate Governance Statement,
Corporate Governance Report

E | Consolidated Financial

Statements

180

182
188
193
196
199

202

204

207

216

218

Consolidated Statement of Income
Consolidated Statement of Comprehensive
Income/Loss
219
Consolidated Statement of Financial Position 220
Consolidated Statement of Cash Flows
221
Consolidated Statement of Changes in Equity 222
Notes to the Consolidated Financial
Statements

224

F | Further Information

Responsibility Statement
Independent Auditors’ Report
Ten Year Summary
Glossary
Index
Daimler Worldwide

304

306
307
308
310
311
312

Information on the Internet
Special information on our shares and earnings development
can be found in the “Investor Relations” section of our website.
w daimler.com It includes the Group’s annual and interim
reports and the company financial statements of Daimler AG.
You can also find topical reports, presentations, an overview
of various key figures, information on our share price and other
services.

Publications for our shareholders:

Annual Report
(German, English)

Interim Reports for the 1st, 2nd and 3rd quarters
(German, English)

Focus on Sustainability 2016
(German, English)

w daimler.com/investors

Daimler Corporate Brochure – Ready to start up
(German, English)

w daimler.com/ir/reports

daimler.com/downloads/en

Picture Credit:
pages 20/21 Arno Burgi/dpa
pages 56/57 Daimler Future Innovation
page 58 (cc) Gregor Fischer, re:publica 2013

The aforementioned publications can be requested from:
Daimler AG, Investor Relations, HPC 0324
70546 Stuttgart, Germany
Phone +49 711 17 92262
Fax +49 711 17 92287
order.print@daimler.com

Daimler AG
70546 Stuttgart
Phone +49 711 17 0
Fax +49 711 17 22244
www.daimler.com

Investor Relations
Phone +49 711 17 95277
+49 711 17 92261
+49 711 17 95256
Fax +49 711 17 94075
ir.dai@daimler.com

The paper used for this Annual Report
was produced from cellulose sourced from
certified forestry companies that operate
responsibly and comply with the regulations
of the Forest Stewardship Council.

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Information guidance system

Refers to an illustration or a table in the Annual Report

w Refers to additional information on the Internet
E Cross-reference within the Annual Report
K Refers to a Daimler publication

OUR BRANDS AND DIVISIONS

Mercedes-Benz Cars
Mercedes-Benz Cars

Daimler Trucks
Daimler Trucks

Mercedes-Benz Vans
Mercedes-Benz Vans

Daimler Buses
Daimler Buses

Daimler Financial Services
Daimler Financial Services

C | The Divisions

Mercedes-Benz Cars
Daimler Trucks
Mercedes-Benz Vans
Daimler Buses
Daimler Financial Services

D | Corporate Governance

Report of the Audit Committee
Declaration on Corporate Governance,
Corporate Governance Report

E | Consolidated Financial

Statements

180

182
188
193
196
199

202

204

207

216

218

224

F | Further Information

Responsibility Statement
Independent Auditors’ Report
Ten Year Summary
Glossary
Index
Daimler Worldwide

304

306
307
308
310
311
312

Contents

Future Mobility

Automobile next level
Transportation next level
Mobility next level

Leadership 2020

Chairman’s Letter

A | To Our Shareholders

The Board of Management
Report of the Supervisory Board
The Supervisory Board
Highlights of 2016
Daimler and the Capital Market
Objectives and Strategy

14
36
54

64
66
72
74
80
84

B | Combined Management Report

97
103
109
117

155
158
174

Information guidance system

Refers to an illustration or a table in the Annual Report

w Refers to additional information on the Internet
E Cross-reference within the Annual Report
K Refers to a Daimler publication

312 F | FURTHER INFORMATION | DAIMLER WORLDWIDE

Daimler Worldwide

F.02

Europe

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

NAFTA

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

Latin America (excluding Mexico)

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

Africa

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

Asia

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

Australia/Oceania

Production locations

Sales outlets

Revenue (in millions of euros)

Employees

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

Sales
Organization
Automotive
Businesses

Daimler
Financial
Services

–

38,261

122,852

–

19,782

8,360

–

939

679

–

1,328

3,799

–

27,067

3,877

–

1,924

380

–

10,466

36,871

–

13,445

19,508

–

1,455

8,162

–

1,047

443

–

6,258

13,359

–

507

299

–

9,958

21,361

–

1,375

524

–

399

1,886

–

212

115

–

666

–

222

102

–

3,009

15,499

–

283

485

–

554

1,383

–

200

426

–

3,960

–

1,491

–

712

–

378

–

2,282

–

250

–

8,026

7,786

–

10,440

1,880

–

285

362

–

277

176

–

1,383

1,645

–

249

213

Notes: Unconsolidated revenue of each division (segment revenue).

Future
Mobility

FUTURE MOBILITY 3

FUTURE MOBILITY 5

Concept EQ

Harbinger of a new era of mobility: The visionary
Concept EQ makes a fascinating impression with its
innovative electro-style look. The concept car offers
a detailed preview of our new generation of vehicles
equipped with battery-electric drive systems.

E pages 22 f
w ar2016.daimler.com/electric

Mercedes-Benz Vision Van

Delivers revolutionary concepts: With its fully automatic
cargo area, integrated delivery drones and other innovations,
the intelligent Vision Van defines the requirements for fully
connected delivery chains and the vans of the future.

E pages 44 f
w ar2016.daimler.com/connected

FUTURE MOBILITY 7

Mercedes-Benz Urban eTruck

Innovations on board: The locally emission-free
and extremely quiet, connected and fully electric
Urban eTruck demonstrates how heavy-duty
distribution transportation will be taken to a whole
new level in the cities of tomorrow.

E pages 42 f
w ar2016.daimler.com/connected

FUTURE MOBILITY 9

FUTURE MOBILITY 11

Mercedes-Benz Future Bus

Hop on, please: Autonomously driving city buses
will make local public transportation faster, safer and
more comfortable. The Future Bus with CityPilot has
already demonstrated this on a drive along Europe’s
longest Bus Rapid Transit route.

E pages 38 ff
w ar2016.daimler.com/autonomous

Future Mobility

We are and will remain pioneers. As the inventor of the automobile,
we are also shaping the future of mobility.
Connected, autonomous, integrated into mobility or service concepts and
powered by electricity — this is our vision of the vehicles of tomorrow.

Many of our innovations are already on the road, and our visionary ideas
continue to set the pace for future developments. That’s why we are
transforming ourselves from an automobile manufacturer into a provider
of mobility services, meeting changed customer requirements and
venturing into new markets. Our digital transformation is well under way
along the entire value chain. With the start-up spirit of our founders,
a new culture of cooperation, efficient processes and our commitment to
integrity, Daimler is continuing on its course of profitable growth and
creating long-term value.

CASE: Connected. Autonomous. Shared & Services. Electric.
We are fundamentally redefining mobility with an intelligent mix of
technologies and services.

FUTURE MOBILITY 13

Vehicle connectivity generates added value for our customers.
Adaptable systems and networked services support drivers and
communicate with the vehicle’s surroundings. Digital formats offer
access to services, enable users to remotely obtain vehicle informa-
tion and facilitate the efficient organization of delivery operations.

Autonomous driving represents the biggest mobility revolution
since the invention of the automobile — and it’s already a reality at
Daimler. In the autonomous mode, self-driving vehicles can manage
various situations on their own without a driver’s intervention. This
will make it possible to improve traffic flows, implement flexible
logistics processes and enjoy a relaxing driving experience.

Today, destinations can be chosen spontaneously and reached
flexibly by car or any other mode of transport. Renting vehicles on
the spur of the moment, sharing parking spaces, booking long-
distance bus trips, determining the best route from point A to point
B, and using cars as service platforms — just about anything is
possible with a smartphone and our mobility concepts.

Electric mobility is the future. And we’re on board! We already
offer numerous electric vehicles today, and the first EQ production
vehicle will be launched in the medium term. We are electrifying
vans, trucks and buses and establishing a service system with
batteries, stationary energy-storage devices, charging technologies
and recycling programs. We are also optimizing combustion engines,
which continue to be important for mobility.

Automobile
next level

More than just a car

Dynamic and vibrant cities are becoming more and more
crowded. The people who live in such cities have a growing
need for more privacy, time and individuality. They would
like to have a type of infrastructure that provides greater
personal freedom and mobility. Daimler is addressing all
of these needs as a pioneer of mobility. We are creating
new possibilities with electric drive systems and eﬃ cient
combustion engines, autonomous and connected vehicles,
shared mobility concepts and personalized services.

The automobile is set to take its place beside the home and
the oﬃ ce as the exclusive third realm for living and working.
Eﬃ cient traﬃ c ﬂ ows will improve air quality and road safety —
thus ensuring a better quality of life in urban areas. We are
on the road to a new age of mobility.

FUTURE MOBILITY 15

Concept EQ cockpit

Intelligence
on the move

Daimler is rapidly forging ahead with the development of autonomous
vehicles. The new Mercedes-Benz E-Class offers a look at what can already be
achieved today. The world’s most intelligent business sedan can automatically
maintain the right distance to vehicles ahead and drive partially autonomously
on highways and country roads, as well as in cities. It also assists the driver
with lane changes, evasive maneuvers and braking. What’s more, the E-Class
can even be parked remotely using a smartphone.

w daimler.com/products
w mercedes-benz.com/en/mercedes-benz/next/automation

FUTURE MOBILITY 17

Mercedes-Benz is
ahead of the rest for
autonomous driving

Intelligence

on the move

In the flow

More efficient traffic infrastructure and greater safety: Urban areas benefit
from autonomous vehicles. And drivers can enjoy greater comfort because there’s
less for them to do. All of this may sound like science fiction, but the automated
E-Class has already made it a reality in everyday driving situations.

Partially autonomous driving and automated parking at the
highest level of sophistication: Mercedes-Benz is setting
standards for autonomous driving with the new E-Class.
The model is equipped with numerous intelligent assistance
systems that support drivers in a way that’s never been
done before. This support reduces drivers’ stress levels. It
makes driving more enjoyable and increases driver atten-
tiveness, thus benefiting everyone on the road.

Innovative assistance systems are at the heart of the
automated E-Class. This enables the car to automatically
maintain an appropriate distance from vehicles ahead at a
speed of up to 210 km/h. It also automatically recognizes
speed limits. Drivers no longer need to operate the brake or
gas pedals, and they also receive steering support. However,
due to legal and other requirements, drivers must keep their
hands on the steering wheel during all automated maneuvers.

Swarm organization reduces stress. Like a swarm, the
E-Class takes surrounding vehicles and parallel structures
into account. Electronic assistants can actively intervene
even if road markings are unclear or nonexistent. The system
therefore makes things easier on drivers, especially in heavy
congestion and traffic jams.

Active Brake Assist issues a warning when pedestrians
cross the road. It also assists the driver with braking and
can even brake on its own if necessary. Evasive Steering
Assist helps the driver avoid obstacles in a controlled
manner and then drive past them safely.

Lane changes made easy. The new E-Class uses state-of-
the-art radar and camera technology to assist the driver
when changing lanes on multi-lane roads — when overtaking,
for example. Once the driver has activated the turn indi-
cator for at least two seconds, the system helps steer the
vehicle into the desired adjacent lane, provided it detects
that the lane isn’t occupied.

A further step on the road to autonomous driving.
The new E-Class is the world’s first production car to be
issued a test license for autonomous driving in Nevada in
the United States without having to undergo a hardware
modification — only the software has been slightly changed.

w mercedes-benz.com

Cautious autonomous
driving in cities brings
greater safety for all

FUTURE MOBILITY 19

For the first time, Remote Park Pilot allows a vehicle
to be moved into and out of garages and parking
spaces remotely using a smartphone. It also ensures
that occupants can enter and exit the car easily,
even if a parking space is very tight.

The centerpiece
of e-mobility

Highly efficient batteries hold the key to an emission-free future.
The construction of a second battery manufacturing plant at Daimler’s
Deutsche Accumotive subsidiary marks a further step in our systematic
strategy for electric mobility. The biggest and most modern facility for
the production of lithium-ion batteries in Europe is now being built in
Kamenz. The batteries will be used in all hybrid and electric vehicles
from Mercedes-Benz and smart, as well as for our new business activities
with stationary energy-storage devices.

w accumotive.com

FUTURE MOBILITY 21

We will offer electric drive for
all Mercedes-Benz car models

It’s electric!

Daimler is putting sustainable mobility on the road. It is doing so on a
large scale and at a fast pace with efficient high-tech combustion engines,
a plug-in hybrid offensive, electric vehicles powered by batteries and
fuel cells — and our new EQ product brand.

EQ, which is a fundamental component of our strategy for
the mobility of the future, stands for “Electric Intelligence.”
The brand’s portfolio includes all the battery-electric auto-
mobiles from Mercedes-Benz. We’re also taking things a
step further by establishing a holistic system of electric
mobility products, technologies, innovations and services.

We’re turning up the power. Many of our customers today
already use the Mercedes-Benz charging infrastructure, which
will be operated and further expanded under the EQ brand
name in the future. This infrastructure includes wallboxes
for the fast charging of electric vehicles, the Stromtank app
for public charging stations, and stationary energy-storage
devices for private and industrial applications.

Fine tuning the trailblazing fast-charging
technology for our electric models.

A scalable vehicle architecture for all
model types serves as the basis for all
battery-electric EQ models — i.e. SUVs,
sedans and coupes.

FUTURE MOBILITY 23

Concept EQ: Electric mobility redefined. The Concept
EQ is a show car with an SUV coupe design that points the
way forward to ultramodern electric mobility and offers a
preview of an all-new generation of electric vehicles. The
near-production vehicle study is equipped with two electric
motors with an output of up to 300 kW. It also has perma-
nent all-wheel drive and a range of up to 500 kilometers.
As a result, it offers extremely dynamic handling and loads
of driving pleasure.

Ready for the electric mobility offensive, from compacts
to the luxury class. The first series-produced EQ model
will be based on the SUV concept and launched near the
end of the decade. It will be built at the Mercedes-Benz
plant in Bremen. Preparations are already well under way.
All other electric vehicles from Mercedes-Benz will also be
manufactured in the brand’s global production network.

Fuel cell plus plug-in. Fuel cells are another key com-
ponent of our electrification strategy. We’ve already
demonstrated the market maturity of fuel cells with the
B-Class F-CELL (H2 consumption in kg/100 km: 0.97;
CO2 emissions in g/km: 0.0). This year, we will also
present a new generation of fuel-cell vehicles based on
the Mercedes-Benz GLC and equipped with innovative
plug-in technology. Our compact fuel-cell system now fits
into normal engine compartments for the first time. We
have also introduced a supplementary energy source for
the electric motor in the form of an additional lithium-ion
battery that can be easily recharged externally.

w ar2016.daimler.com/electric
w mercedes-benz.com/en/mercedes-benz/next

Hot and cool:
The avant-garde
Concept EQ

The distinctive electro-style look of the Concept EQ
reinterprets the Mercedes-Benz design philosophy
and highlights the vehicle’s powerful electric drive.

Three for the
charging station

New models from the pioneer of electric city cars. The smart fortwo electric drive
(electricity consumption combined: 13.1–12.9 kWh/100 km; CO2 emissions combined:
0 g/km) made Daimler the first German automaker to mass-produce electric cars.
Now the smart fortwo coupe, the smart fortwo convertible and the new four-seat smart
forfour have been equipped with battery-electric drive as well. The smart brand thus
boasts a complete electric fleet whose short charging times, fast-charging options and
range of up to 160 kilometers make city driving a pure pleasure.

w smart.com

FUTURE MOBILITY 25

Perfect for
urban mobility

Welcome
to the third
dimension
of living

A quality-time machine. Data fusion is transforming the automobile into
a mobile place of retreat that supplements both the home and the office.
Time spent on the road will take on a new quality, as drivers will also be able
to relax or work in their cars. We demonstrated such future possibilities in
Daimler’s F 015 research vehicle. Many of the revolutionary technologies
have long since been implemented in our production vehicles, where they
relieve drivers of certain tasks. The systems can find parking spaces and
make office functions available. Soon they’ll also offer smart health solutions
such as “motion seating” for greater comfort on long journeys.

w daimler.com/innovation/en
w mercedes-benz.com/en/mercedes-benz/innovation/autonomous-driving

FUTURE MOBILITY 27

Spending time on the road
in a whole new way

Car-to-X
safety net

What if a driver could see potential hazards around the next bend? Car-to-X
communication is transforming this vision of intelligent mobility into reality.
Daimler is the world’s fi rst automaker to put this innovation on the road.

Car-to-X technology enables vehicles to communicate with
each other and with the traffi c infrastructure so that they
can share information about a sudden traffi c jam over a
hill, for example, as well as about black ice on the road or
a construction site just ahead. This safety net is based
on a clever principle, namely that every vehicle equipped
with Car-to-X technology can both send and receive such
warnings. Car-to-X technology premiered in the new
Mercedes-Benz E-Class and will be gradually introduced
to more models in the future.

Eﬃ cient mobility through communication. If a vehicle
approaches a potentially dangerous area and receives a
warning, the driver will be alerted by a visual signal and an
alarm. The driver can then adjust his or her driving style
and thus avoid an accident or circumvent a traffi c jam.
In this manner, Car-to-X communication not only makes
driving safer, it also improves traffi c fl ows.

w daimler.com/innovation/connectivity
w daimler.com/products/specials/new-e-class/

car-to-x.html

Detecting hazards
in advance,
preventing accidents

The more extensive the information network,
the greater the beneﬁ ts for road users. The
goal is therefore to have all automakers jointly
operate Car-to-X communication systems.

FUTURE MOBILITY 29

Community-based parking is now making parking faster and easier with the help of the Remote Park Pilot system
in the Mercedes-Benz E-Class.

Community-based
Parking

Searching for a parking space often takes time and can be very annoying.
And while some people are looking for spaces, others who don’t need
a space drive by vacant ones. A new service from Mercedes-Benz now
makes it possible for the first time to provide drivers with information
about available parking spaces.

Community-based parking speeds up the process of
finding a space. Daimler developed this intelligent tech-
nology with Bosch, and it’s now being tested in Stuttgart.
Mercedes-Benz cars are serving as pilot vehicles that send
and receive information about available parking spaces.

Faster parking. The new E-Class from Mercedes-Benz
is a connected vehicle that continually scans the sides
of streets. The data especially collected for community-
based parking is made available to all drivers of vehicles
equipped with a community-based parking system. The
information is displayed in the vehicle as a digital parking
space map and can also be viewed using the Mercedes me
app. The car’s navigation system uses the data to direct
the driver to the nearest available space.

Cars are becoming parking
space search engines

It’s all
about me

What can we do for you today? Mercedes me offers
personalized services, products and lifestyle accessories.
Mercedes me connect links drivers and vehicles and
provides support with Car-to-X communication, live traffic
updates and tele-diagnosis services. Smartphones
can open and lock cars and can also be used to operate
the Remote Park Pilot or remotely view data about
vehicle functions. The new Digital Anticipation service
assists customers with vehicle purchases and deliveries.
The Concierge Service — the new personal assistant in
the vehicle — offers route tips, recommends restaurants
and books tickets.

w mercedes-benz.com/en/mercedes-me
w me.secure.mercedes-benz.com

FUTURE MOBILITY 31

In touch with the vehicle
and everything else

Like having
your own car

New variety for spontaneous mobility. car2go now offers Mercedes-Benz vehicles
along with smart models in many cities. Those who need a vehicle quickly — with cargo
space and room for several people — can choose between the A-Class and B-Class,
the CLA and the GLA. With the help of an app, it’s possible to rent the cars and drive
away on the spot, and billing is based on the number of minutes the vehicle is used.
The expanded fleet makes car2go customers even more flexible, and mobility options
are increased by the private carsharing services Croove and smart ready to share.

w car2go.com w letscroove.com w ar2016.daimler.com/shared

FUTURE MOBILITY 33

With over 2.2 million customers,
car2go is the world’s leading
flexible car sharing company

Shared happiness

Being flexibly mobile without having to get behind the wheel. Heading to
a club with friends or to the airport with business partners: Daimler’s
innovative mobility services get people where they need to go, while mytaxi
makes grabbing a cab a cinch. Cars are also making life easier in new ways —
for example, by transforming the trunk into a parcel delivery box!

Getting a taxi without having to make a phone call:
mytaxi. This innovative app enables taxis and customers
to find each other, and that makes ordering and paying for
a taxi easier and more efficient. Back in 2009, mytaxi revo-
lutionized the taxi business. With more than ten million
downloads, it quickly became the leading taxi-ordering
app and a brand icon in Europe. mytaxi has been continu-
ally refined since then, and it now offers everything from
advance ordering and payment to systems for setting
preferred drivers and rating drivers. mytaxi’s merger with
the Hailo taxi app in 2016 underscores Daimler’s position
as a leading provider of mobility services. The two compa-
nies complement each other perfectly with their combined
geographic coverage. The merger has created Europe’s
biggest company in this sector, with six million passengers
and 100,000 registered taxi drivers in more than 50 cities
in nine European countries.

Professional chauffeur service: Blacklane. More and
more people are interested in urban chauffeur services for
trips to airports, business meetings and various events.
Customers can book the Blacklane chauffeured limousine
service quickly and easily with an app. Blacklane is present
in 250 cities and 500 airports in more than 50 countries
worldwide.

Mobility searches, bookings and payments: moovel.
moovel is the first mobility app that makes it possible to
search for, book and pay for a variety of mobility services.
moovel can be used all over Germany to book and pay
for trips with car2go, mytaxi and the Deutsche Bahn rail
company. In Stuttgart and Hamburg, it can also be used to
directly purchase tickets for the local public transportation
systems in those cities. In the United States moovel transit
is the leading provider of mobile ticket solutions for public
transportation apps. In addition, moovel offers online
assistants for Facebook and Slack messenger services.

Ordered online and delivered to your car: smart
ready to drop. Cars can do more than just move people.
Innovative services from Daimler also let them make daily
life easier — and smart ready to drop is the first example.
Together with DHL and online retailers, smart enables
parcels to be delivered directly to a smart car’s trunk. Beta
tests are now under way in several German cities.

Digital loading assistant: pactris. A creative idea from
the smart lab transforms vehicles into service platforms:
The pactris app checks whether all purchased products will
fit in the trunk and shows how they should be arranged —
before the user has even finished shopping.

Order, pay and rate the trip:
the mytaxi app.

w mytaxi.com
w blacklane.com
w moovel.com
w smart.com

FUTURE MOBILITY 35

Transportation
next level

Mercedes-Benz Vision Van

Transportation

next level

FUTURE MOBILITY 37

More than just commercial vehicles

More and more people, vehicles and goods are now on the move in
cities. While the destinations and reasons for traveling diﬀ er, there
is one overriding goal: to achieve maximum safety, eﬃ ciency and
environmental compatibility. To this end, Daimler oﬀ ers future-oriented
buses, trucks and vans. Our electric drive systems, vehicle-sharing
services, autonomous driving options and vehicle connectivity systems
oﬀ er solutions for current and future requirements of passenger and
goods transportation.

We are transforming our commercial vehicles into digital logistics
centers on wheels, while our intelligent mobility concepts are supple-
menting local public transportation systems and reducing congestion
during rush hours. We are upping the pace in all areas.

Next stop:
the future

Revolutionary
design in motion

Next stop:

the future

FUTURE MOBILITY 39

Getting passengers to their destinations comfortably and on time.
Daimler’s Highway Pilot system has shown that long-distance road haul-
age can be made safer and more efficient with autonomous trucks. We
extensively enhanced the technology for use in city buses. Last year, the
Mercedes-Benz Future Bus with CityPilot demonstrated on its partially
automated maiden journey in Amsterdam that local public transportation,
urban spaces and the people who live in them can all benefit from the
greater efficiency, safety and comfort offered by autonomous buses.

w ar2016.daimler.com/connected

Smooth-flowing
traffic in Amsterdam

Better traffic flows literally offer a breath of fresh air in large cities. This vision is
now within reach, because Daimler is already designing the bus system of tomorrow.
A preview is provided by the Future Bus with CityPilot, which passed its first practical
test on a BRT (Bus Rapid Transit) route with flying colors last year.

Checks traffic and pulls
up to the stop, using radar
and a camera

The city bus generation of the future
has arrived: The Mercedes-Benz Future Bus
with CityPilot stops with centimeter precision
at bus stops, opens and closes the doors,
and then drives off automatically — without
any intervention by the driver.

FUTURE MOBILITY 41

The Future Bus from Mercedes-Benz is perfect for high-performance BRT systems.
These express bus lines with dedicated lanes are making traffic flows smoother and
more efficient in large cities and metropolitan areas around the world.

The Future Bus from Mercedes-Benz made its first-ever trip
on a section of Europe’s longest BRT (Bus Rapid Transit)
route between Amsterdam’s Schiphol Airport and the city
of Haarlem. The 20-kilometer segment has many curves
as well as several tunnels and traffic lights — but none of
that was a problem for the Future Bus with CityPilot, which
drove at speeds of up to 70 km/h and braked and stopped
on its own for pedestrians and other obstacles on the
road. The driver didn’t need to use either the brakes or the
accelerator.

CityPilot handles everything. CityPilot in the Future
Bus is based on the Highway Pilot system used in the
Mercedes-Benz Actros heavy-duty truck. The technology
was refined specifically for use with a city bus. As a result,
the Future Bus can automatically stay in its lane, recognize
traffic lights, stop at bus stops, drive through tunnels and
react autonomously to obstacles and pedestrians. Sophis-
ticated camera and radar technologies, as well as a GPS
system, provide the Future Bus with an extremely precise
“view” of its surroundings and position.

A bus that offers benefits to everyone. The camera and
radar system “sees” everything; this makes things easier
for drivers in complex traffic situations and also greatly
enhances safety. CityPilot improves efficiency as well. The
smooth anticipatory driving style it allows reduces compo-
nent wear, and that increases vehicle availability, lowers
maintenance costs and extends the buses’ service lives.
In addition, the system helps reduce fuel consumption and
emissions. Last but not least, the smooth ride ensures
greater comfort for passengers.

w daimler.com/innovation/autonomous-driving
w mercedes-benz.com/en/mercedes-benz/next

Clean, quiet and a range
of 200 kilometers

FUTURE MOBILITY 43

All-electric
distribution

Green light for emission-free electric trucks.
More and more people are now living in cities.
They want to have cleaner air and less noise
around them, but they also want to be able to
shop locally. Electric trucks make all three
things possible. In the future, such trucks will
supply the things people in large cities need
every day. With the Urban eTruck, the Vision Van
and the FUSO eCanter, Daimler is delivering
clean solutions for future logistics systems and
a better quality of life in urban areas.

w daimler.com/products/trucks/mercedes-benz

Emission-free
logistics

The time is ripe for electric trucks. Highly efficient batteries are paving the
way for a technological and economic transformation in the near future.
Daimler’s Urban eTruck ushers in a new age of heavy-duty distribution transport.
The Vision Van offers a preview of all-electric last-mile delivery system. And the
FUSO eCanter light-duty truck is already “electrifying” cities.

The Urban eTruck from Mercedes-Benz is not only locally
emission-free and extremely quiet, it also offers the same
payload and performance as a truck with a combustion
engine. The three-axle truck with 26 metric tons GVW has
an innovative power supply system that makes it extremely
economical to operate.

Economical and connected. The modular battery pack
enables perfect interaction between the drive and energy
regulation systems. The Predictive Charge Management
system, Predictive Powertrain Control and FleetBoard for
urban distribution make the Urban eTruck a very practical
vehicle that delivers maximum performance.

Urban eTruck: The heavy-duty electric truck pioneer.
The Urban eTruck is based on a three-axle distributor truck
from Mercedes-Benz. On it is mounted a cutting-edge drive
system with an electrically driven rear axle and electric
motors mounted near the wheel hubs. This system produces
a maximum output of 2 x 125 kW and torque of 2 x 500 Nm.
The innovative axle has already proved its worth in the basic
version used in Mercedes-Benz buses. Energy is supplied
by a package of lithium-ion battery modules. The truck has
a range of up to 200 kilometers, which makes it ideal for
typical distribution runs.

FUSO eCanter: The electric pioneer for light-duty trans-
port. Daimler has launched small-series production of the
third generation of the world’s first all-electric light-duty
truck. The new model is being offered in Europe, the USA
and Japan. The FUSO eCanter represents the systematic
further development of the FUSO Canter E-Cell, and it differs
from its predecessor model in visual terms and technologi-
cally. The small production series is equipped with individual
battery packs with three to six sets of batteries each. This
allows the eCanter to be adapted to different customer
requirements with regard to range, price and weight.

w daimler.com/products/trucks

Clever alternatives
for emission-free
urban logistics

The FUSO eCanter can be charged with either 7.2 kW
alternating current or 70 kW direct current via a standard
Combo 2 plug (combined charging system — CCS). Rapid
charging to 80 percent of battery capacity is possible in only
an hour with DC charging; AC charging takes seven hours.

FUTURE MOBILITY 45

A breath of fresh air for distribution
haulage in cities. The revolutionary
Vision Van has a 75 kW electric drive
system and a range of up to 270 km.
The vehicle is locally emission-free and
nearly noiseless, which makes it perfect
for use in areas with emission restric-
tions or for making late deliveries in
residential neighborhoods. The Vision
Van study will be followed in 2018
by a Mercedes-Benz production van
with electric drive.

The FUSO eCanter boasts
several outstanding features.
The locally emission-free
electric drive helps improve
air quality and reduce noise
in cities, and also offers an
economical alternative to a
diesel engine.

Combined efficiency

Innovations for road freight transport. Some
400,000 commercial vehicles built by Daimler
Trucks are digitally connected — and Daimler is
now developing a new high-performance logistics
network to make transportation processes even
safer and more efficient. During the world premiere
event for Highway Pilot Connect, three heavy-
duty trucks were grouped for the first time into a
fully automated aerodynamic platoon. The event
demonstrated that digitally coupled trucks not only
require less road space; they also consume less
fuel and produce much lower emissions.

w daimler.com/innovation/connectivity/

connected-trucks.html

Combined efficiency

FUTURE MOBILITY 47

Transforming a convoy
of independently driving
trucks into a connected
transportation system

Solutions for
the last mile

Online commerce is booming. That means an increasing number of parcels
need to be delivered very quickly — often on the same day they’re ordered or
on specific dates. To ensure a perfect job, customer service personnel want
to be able to order parts and tools at the push of a button and have them
delivered directly to their vehicles. With all this in mind, Daimler is connecting
vans to the Internet in order to create a flexible delivery system.

Mobile material service: An intelligent system saves
time and enables just-in-time parts deliveries. The van
of the future will be part of the Internet of Things and thus
a key component of the digital value chain. Mercedes-Benz
vans will enable much more efficient component and
tool management systems in the future — for example, in
vehicles used by customer service personnel as mobile
workshops. The parts needed for the next job will be
ordered automatically via an intelligent inventory manage-
ment system in the service vehicle. Those parts will then
be delivered directly to the van on the very next day.

Vans & robots — a perfect combination. The van of the
future will be networked with autonomous delivery robots
that will enable vehicles to serve as mobile warehouses
and transport hubs. A Mercedes-Benz Sprinter prototype
is already showing how this can be done. The van serves
as a base for parcel deliveries by eight autonomous robots.
With its intelligently linked delivery processes, the Sprinter
creates new possibilities for significantly increasing the
efficiency of last-mile logistics.

Delivery systems in the future: Vans and robots will
speed up and simplify the parcel delivery process within
the framework of an automated logistics system.

Clever robots will allow
delivery drivers to devote
more time to other tasks

FUTURE MOBILITY 49

Revolution in
the cargo area

The Vision Van from Daimler is defi ning the van of the future.
The revolutionary concept vehicle is not only fully electric, it also
digitally links all participants and processes in the delivery chain
from start to fi nish — from the goods distribution center to the
recipient. The van’s fully automatic cargo area and integrated delivery
drones will accelerate the last-mile delivery process in the future.

Networked technologies make the Mercedes-Benz Vision
Van the intelligent centerpiece of a completely automated
logistics chain. All processes in this visionary concept
are controlled by innovative algorithms and cloud-based
software. This includes everything from parcel picking,
packing and loading to cargo area management, optimal
route planning and aerial drone operation.

Within reach: faster deliveries in an interactive net-
worked system. The intelligent cargo area management
system in the Vision Van uses an internal disbursal system

to hand out presorted parcels to the driver for manual
delivery. The system simultaneously supplies two drones
with parcels for delivery within a ten-kilometer radius.
This substantially reduces the delivery time per package
as well as vehicle idle time. The Vision Van also creates
new possibilities for same-day deliveries and deliveries
on specifi c days. Customers will thus enjoy greater
convenience in the future, and unsuccessful deliveries
will largely become a thing of the past.

w daimler.com/innovation/specials/vision-van

Pioneering fleet
service on board

FUTURE MOBILITY 51

Customized
rentals and
management

Mobility concepts that increase availability and
improve efficiency. Fleet operators are increasingly using
rentals to manage peak activity periods while maintaining
optimal liquidity. For 25 years now, CharterWay from
Daimler has been providing everything fleet managers
need for the flexible procurement and management of
commercial vehicles. The company’s rental fleet is spread
across 75 centers in Germany and 57 centers in other
European countries, and encompasses the entire range
of trucks offered by Mercedes-Benz. The vehicles can be
rented for 24 hours or several weeks or months. Charter-
Way’s expanding service portfolio will continue to meet
the complete needs of its customers in the future.

w charterway.com

Available 24/7

Economy and round-the-clock availability are a must for fleet managers,
whose trucks, vans and buses always have to be ready to roll — without
having to make unexpected stops or visits to a repair center. Daimler’s
customized services ensure maximum reliability and underscore the solid
partnership between the company and its customers.

Mercedes-Benz Uptime. The new FleetBoard Truck Data
Center continually monitors the status of all vehicle sys-
tems in Mercedes-Benz trucks while they’re on the move.
This ensures that shipping companies can obtain real-time
information about critical events or repair and maintenance
requirements before a truck breaks down. Vehicle failures
and costly downtime can thus be avoided and visits to
workshops can be organized more efficiently.

Van ProCenter. Mercedes-Benz has sales outlets and
authorized partners certified as Van ProCenters in 11 Euro-
pean countries, thereby ensuring an extensive network
of van expertise. The Van ProCenters offer customers a
comprehensive range of products and services for vans,
including everything from advice and repairs to financial
products, mobility services and vehicle body and fleet solu-
tions. The Van ProCenters are staffed by specially trained

van experts, have extra-long opening hours and display a
large selection of Mercedes-Benz vans in their showrooms.
Periodic inspections are also conducted to ensure that the
high standards associated with Van ProCenter certification
are complied with at all locations.

OmniPlus. This extended range of services for buses from
Mercedes-Benz and Setra offers remote diagnosis with the
FleetBoard telematics system. This feature can significantly
reduce downtime in the event of a breakdown. In addition,
a new Bus Depot Management system enables authorized
service points to ensure outstanding fleet operations.
OmniPlus also includes a unit that offers specialized ser-
vices to long-distance bus companies.

w mercedes-benz.com/en/
mercedes-benz/next/connectivity
w omniplus.com

Perfect teamwork

Transport processes made more efficient. Mercedes-Benz Vans
Mobility GmbH offers our customers holistic solutions in the form of
innovative mobility services for Mercedes-Benz Vans vehicles.

Mercedes-Benz Vans Mobility. This company, which is
part of Daimler Financial Services, will begin providing
all-encompassing van-related mobility services in mid-
2017. This will enable Daimler to meet the rising demand
for flexible and innovative concepts for the utilization of
vans. Mercedes-Benz Vans Mobility GmbH will be respon-
sible for all such services in the future. Customers will be
able to obtain the right solution for their specific needs
from a single source at any time. The portfolio includes
new sharing, rental, leasing and fleet management services
for vans. These services were developed specifically for
the entire model range of Mercedes-Benz Vans and are
supplemented by numerous equipment and vehicle body
solutions for all business sectors.

CAR2SHARE cargo. The new CAR2SHARE cargo fleet
and driver management system is another example of the
innovative transport solutions provided by Mercedes-Benz
Vans Mobility. The pioneering system, which is being
tested in a pilot project, improves efficiency by optimizing
everything from assignment planning and route coordination
to spur-of-the-moment vehicle rentals in bottleneck situ-
ations. CAR2SHARE cargo offers three service modules:
Smart Van for flexible rentals of Mercedes-Benz vans via
the car2go approach, with app-based management and
billing; Courier Assist for fleet management and assign-
ment planning; and Virtual Fleet for the flexible rental of
additional vehicles during peak activity periods or seasonal
fluctuations, for example.

w car2share.com

Future-oriented concepts from Daimler
for efficient communication between fleet
managers, drivers and vehicles.

FUTURE MOBILITY 53

Optimally on the move
in urban areas with the
MVMANT mobility
platform

In cooperation with the
MVMANT start-up,
Mercedes-Benz Vans is
testing efficient and
needs-oriented solutions
for the passenger trans-
portation of tomorrow.

FUTURE MOBILITY 55

Mobility next level

Which aspects will mobility encompass in the future? Many of our visionary
vehicles and mobility concepts are already being used, or soon will be.
As the inventor of the automobile, Daimler will continue to create new mobility
opportunities in the areas of connectivity, autonomous driving, flexible sharing
and services, and electric drive systems.

Leadership 2020:
together into
the future

Those who talk about change also
need to deliver change!

The world is changing rapidly. The way we work, obtain
information and communicate is also becoming faster and
more direct and is taking place in real time. Daimler is
more successful than ever and plans to continue keeping
pace with the latest developments. In fact, we plan to set
the pace in the automotive industry — just as we have done
for the past 130 years. That’s one of the reasons why we
have a new goal: to establish a new management culture —
a culture that ensures we will remain successful in the
future as well.

Leadership 2020: The transformation now has a name
and a mission. We have been engaged in constant activity
and dialogue since January 2016 — across all hierarchies
and national borders, in a digital, transparent and net-
worked manner. Above all, we’ve focused on authenticity
and tried to make sure that every employee can see and
understand our efforts. Leadership 2020 means change.
Initial results have already been achieved. Daimler is
undergoing a transformation that’s being supported by
all employees for all employees.

LEADERSHIP 2020 57

Eight game changers will transform our organization in key areas. New principles of leadership will serve as the foundation
for our conduct and actions at Daimler. These principles of leadership are as follows: driven to win, agility, customer orientation,
co-creation, empowerment, learning, pioneering spirit and purpose.

In workshops, forums and special events being held on a regular basis, representatives of the Leadership 2020 Community are
exchanging ideas on how to effectively implement the eight new game-changing principles of leadership. One idea being discussed
here is how swarm organizations might ensure greater agility and flexibility throughout the company in the future.

A lot achieved –
more to come

+ 3 %

revenue growth
to €153.3 billion

+ 3 %

increase in EBIT adjusted for
special items to €14.2 billion

€ 3.25

proposed
dividend

+ 15 %

€7.6 billion for
research and development

Daimler AG
Mercedesstraße 137
70327 Stuttgart
Germany
www.daimler.com

6
1
0
2

t
r
o
p
e
R

a
u
n
n
A

Annual Report 2016

Key Figures

Daimler Group

€ amounts in millions

% change

2016

2015

16/15

Revenue

153,261

149,467

Investment in property, plant and equipment

Research and development expenditure

Free cash ﬂow of the industrial business

EBIT

Net proﬁ t

Earnings per share (in €)

Dividend per share (in €)

5,889

7,572

3,874

12,902

8,784

7.97

3.25

5,075

6,564

3,960

13,186

8,711

7.87

3.25

Employees (December 31)

282,488

284,015

1 Adjusted for the eﬀ ects of currency translation, revenue increased by 3%.

+16

+15

-2

-1

Daimler’s Divisions >
Daimler at a Glance >

“To shape the future of mobility
from a leading position, we started
the biggest transformation in our
companyʼs history in our best year
to date.”

CHAIRMAN’S LETTER 59

Stuttgart, February 2017

For your company, 2016 was the best year in its history of more than

130 years. Never before have more customers decided in favor of a vehicle

from the Daimler Group: more than three million altogether. Revenue

of 153.3 billion euros was three percent higher than in the previous year.

We increased our EBIT adjusted for special items by 3 percent to 14.2 billion

euros. On that basis, the return on sales in the automotive business was

9.4 percent. The bottom line is net profit of 8.8 billion euros. At the Annual

Shareholders’ Meeting, the Board of Management and the Supervisory Board

will propose the distribution of a dividend of 3 euros and 25 cents per share.

These good figures are the result of the tremendous commitment

of our 282,000 employees. I would like to thank them wholeheartedly

on behalf of the entire Board of Management.

Let’s have a look at the development of the individual divisions.

At Mercedes-Benz Cars, we sold 2.2 million cars – that’s an increase

of ten percent compared with the previous year and a new record. We are

especially pleased that we achieved our target for 2020 already in 2016:

Mercedes is once again at the top of premium segment also in terms of unit

sales. Our strong products are an important reason for this dynamic sales

performance. In 2016, we continued our model offensive – above all with the

new E-Class. We made particular progress in China. Our development in

Europe was also very positive. With all of this success, a crucial point is that

we achieved our profitability target of ten percent return on sales.

60 CHAIRMAN’S LETTER

Daimler Trucks defended its position in a diﬃ cult market environment last

year. As the world’s biggest manufacturer of trucks above six tons, we

maintained our strong position in our core markets. But the positive impetus

from Europe did not oﬀ set the negative development in Latin America, the

NAFTA region and parts of Asia, so the division’s total unit sales decreased.

The new Freightliner Cascadia, which we presented in September, should

help us to consolidate our strong market position in North America. The year’s

highlight at Daimler Trucks was the IAA Commercial Vehicles trade fair in

Hanover, where we demonstrated our leading techno logical role – also in the

ﬁ eld of electric mobility.

Daimler Buses’ business was also aﬀ ected by the diﬃ cult economic

situation in Latin America. Nonetheless, we achieved a pleasing return

on sales while defending, and in some cases strengthening, our market

leadership in the markets important to us.

Mercedes-Benz Vans set new records for unit sales and earnings.

Growth was primarily driven by the V-Class and Vito models. Both are now

available also in China. The division’s proﬁ t margin was also very satisfactory:

Adjusted for special items, it was over ten percent. In 2017, we will close one

of the last gaps in our portfolio: The X-Class, our new premium pickup,

will be in the dealerships.

Daimler Financial Services posted another record year. Its return on equity

was above the targeted level. For the ﬁ rst time, the number of vehicles on

its books passed the mark of four million. The value of all ﬁ nanced or leased

vehicles increased by almost 16 billion euros, partially due to the acquisition

of the leasing specialist Athlon. With this investment, DFS is strengthening its

position in the European ﬂ eet business.

CHAIRMAN’S LETTER 61

The basis for all this success is the ability to reinvent ourselves time and again.

In order to shape the future of mobility from a leading position, we started

the biggest transformation in our company’s history in our best year to date;

because the automotive industry is facing several fundamental changes.

Connectivity, autonomous driving, sharing and electric mobility – each of these

topics has the potential to turn our industry upside down. Our ambition is

clear: Daimler aims to lead in all four areas.

We have set the right course to do so. At Mercedes-Benz Cars, we will

launch more than ten new electric cars by 2025. We are starting this year

with the electric smart models. In addition, with the “EQ” brand, we are

creating a complete electric-mobility ecosystem – from inductive charging

to home energy storage. And we are also electrifying our commercial vehicles:

Production of the eCanter light-duty electric truck starts already this year.

By 2020, we will have developed a heavy-duty truck as far as series maturity

with a range suitable for urban delivery. On the way towards the public

transport of the future, we will launch an electric bus in 2018. Daimler will

invest a total of ten billion euros in electric vehicles in the coming years.

But our concept of the mobility of the future goes far beyond the drive system.

A key element is autonomous driving. We intend to strengthen our leading

position in this ﬁ eld. We will also utilize the enormous potential oﬀ ered by

vehicles’ digital connectivity. The car of tomorrow isn’t just an oﬃ ce, but

also a ﬁ tness coach and a personal assistant. Our vision of the truck of the

future is that it’s fully loaded, hardly ever stuck in a traﬃ c jam and nearly

always in use. At the same time, we are developing from being a van manufacturer

into a provider of complete transport systems.

62 CHAIRMAN’S LETTER

And we plan to further develop our mobility platforms at Daimler Financial

Services. mytaxi is the biggest app-based taxi network in Europe. In the

future, we intend to enter additional markets. car2go is the worldwide market

leader for ﬂ exible car sharing. We plan to double the use of those cars and

to launch new electric ﬂ eets in the coming years.

In order to forge ahead successfully with all of this, we are also reinventing our

corporate culture; for example with faster decision making and more ﬂ exible

forms of cooperation. And we are on the right track: I have never experienced

such a positive and optimistic atmosphere at Daimler before.

At the same time, we are working continuously on establishing integrity and

compliance even more ﬁ rmly at the Group. In the past ﬁ nancial year,

we were involved in some legal proceedings, in which we fully cooperated

with the relevant authorities.

Although a number of political risks exist, the economic conditions suggest

that 2017 will be a good year. Against this backdrop, we plan to increase

our unit sales once again. Daimler Financial Services also aims to achieve

further growth.

The future of mobility oﬀ ers us plenty of opportunities. Daimler has the ideal

strategy, the right products and technologies, and above all the right team

to utilize those opportunities. We look forward to continuing this journey with

you, our shareholders.

Sincerely yours,

Dieter Zetsche

A | TO OUR SHAREHOLDERS | CONTENTS 63

We are steadily implementing
our strategy

We aim to inspire our customers, to be the leaders in the area of technology and
innovation, and to continue our proﬁ table growth. We intend to shape the safe
and sustainable individual mobility of the future with outstanding products and
services and with pioneering innovations. In this way, we will create value – for our
shareholders, our customers, our employees and society in general. To achieve
those goals, we are pursuing a globally oriented technology and growth strategy.
We passed some major milestones in the year under review – ﬁ nancial year 2016
was an overall success. That will be to the beneﬁ t also of our shareholders: through
an attractive dividend and an attractive share price.

A | To Our Shareholders

The Board of Management
Report of the Supervisory Board
The Supervisory Board
Highlights of 2016
Daimler and the Capital Market
Objectives and Strategy

The Board
of Management

The mobility of the future is
connected, autonomous, ﬂexible
and electric. Each of these
trends alone has the potential
to revolutionize our entire
industry. Real success will be the
result of intelligently linking up
all four areas. We are working hard
on this, and are repositioning our
company to make sure we succeed.
We are pushing ahead with the
start-up spirit of our founders,
with pioneering products and with
innovative business models.

Dieter Zetsche
63 | Chairman of the Board of Management, Head of Mercedes-Benz Cars,
since February 10, 2017, also interim Head of Daimler Trucks and Buses,
Appointed until December 2019

Ola Källenius

47 | Group Research & Mercedes-Benz Cars Development,
Appointed until December 2022

Hubertus Troska

56 | Greater China,
Appointed until December 2020

A | TO OUR SHAREHOLDERS | THE BOARD OF MANAGEMENT 65

Wolfgang Bernhard

56 | Daimler Trucks and Buses,
Appointed until February 10, 2017

Renata Jungo Brüngger

55 | Integrity and Legal Affairs,
Appointed until December 2018

Britta Seeger
46 | Mercedes-Benz Cars Marketing & Sales,
Appointed until December 2019

Wilfried Porth

58 | Human Resources and Director of Labor Relations,
IT & Mercedes-Benz Vans, Appointed until April 2022

Bodo Uebber

57 | Finance & Controlling, Daimler Financial Services,
Appointed until Dezember 2019

Thomas Weber

62 | Group Research & Mercedes-Benz Cars Development,
Retired on December 31, 2016

66 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

Report of the Supervisory Board

Dear Shareholders, in a volatile market environment marked by growing political and economic
challenges, Daimler AG concluded financial year 2016 with excellent earnings once again.
The transformation process initiated in the context of digitization in all of the divisions and in
Daimler’s corporate culture is fully supported by the Supervisory Board.

Supervisory and advisory activities of the Supervisory
Board
The Supervisory Board of Daimler AG fully performed its tasks
as defined by the law, the Company’s Articles of Incorporation
and rules of procedure. The Supervisory Board continually
advised and supervised the Board of Management and provided
support with strategically important issues relating to the
Group’s further development. The Supervisory Board examined
whether the annual company and consolidated financial state-
ments, the combined management report and the other financial
reporting were in conformance with the applicable require-
ments. In addition, it approved numerous business matters for
which its consent was required following careful reviews and
consultations. Those matters included finance and investment
planning, major capital changes at companies of the Group,
key individual investments and the conclusion of contracts
with particular importance for the Group, the further develop-
ment of strategic programs in the various divisions and various
cooperation projects around the world.

During the reporting period, the Board of Management regu-
larly informed the Supervisory Board about all significant
developments of the Group and the divisions. In addition, it
continually provided information to it on all fundamental
questions of corporate planning, including finance, investment,
sales and personnel planning, current developments at the
companies of the Group, the development of revenue and the
situation of the Company and the divisions. Furthermore,
the Board of Management reported to the Supervisory Board
continually - and whenever appropriate also in comparison
with competitors - on return on equity and the Group’s liquidity
situation, the development of sales and procurement markets,
the overall economic situation and developments in the capital
markets and the area of financial services. Additional topics
included the further development of the product portfolio,
securing the Group’s long-term competitiveness, and the
ongoing implementation of measures for safeguarding future-
oriented and sustainable mobility. The Supervisory Board
also dealt in detail with the development of the share price and
the related background, as well as the expected impact of
strategic projects on the share price.

Daimler works systematically on the implementation of its
strategy and made further progress along its growth path also
in the year 2016. Our divisions have extremely attractive and
competitive products and services. The Group was very suc-
cessful with them last year, also in sometimes difficult market
situations. The Group’s financial strength and sound balance
sheet allow this growth strategy to be continued while paying
out an attractive dividend to our shareholders. The automotive
industry is faced with fundamental changes in the coming
years. The future issues of digitization and electrification,
as well as new services, will redefine mobility. Daimler intends
to meet these challenges from a position of strength. For that
purpose, large volumes of advance expenditure will be made
also in the coming years. The transition from combustion
engine to electric mobility must take place gradually and over
the long term. With the presentation of important new products
and concept vehicles, Daimler demonstrated in 2016 that it
has great expertise in both of those technologies. At the same
time, Daimler is working hard at all levels to further develop
its corporate culture and to make it fit for the challenges of the
future. The Supervisory Board fully supports all of these steps.

Working culture and areas of Supervisory Board activity
In the year 2016, the Supervisory Board convened for eight
meetings and dealt intensively and comprehensively with the
strategic and operating development of Daimler AG. Participation
in the meetings by the members of the Supervisory Board was
at a high level in the year 2016. All members of the Supervisory
Board participated in significantly more than half of the mee-
tings of the Supervisory Board and of its committees of which
they are members in the year under review. The work of the
Supervisory Board featured open and intensive exchanges
of information and opinions. In each meeting, an executive
session was arranged so that topics could be discussed also in
the absence of the Board of Management. The members of
the Supervisory Board and of the Board of Management came
together for the bilateral exchange of opinions also outside the
regular meetings. The members representing the employees
and the members representing the shareholders regularly pre-
pared the Supervisory Board meetings in separate discussions,
which were attended by members of the Board of Manage-
ment. The Board of Management informed the Supervisory
Board with written reports about the most important indicators
of business development and existing risks, and submitted
the interim financial reports to the Supervisory Board.
The members of the Supervisory Board independently attended
such courses of training and further training regarded as
necessary for the performance of their tasks, relating for

Dr. Manfred Bischoff, Chairman of the Supervisory Board

example to questions of corporate governance and changes in
the legal framework, or to new products and future-oriented
technologies. In a special onboarding program, new members
of the Daimler Supervisory Board have the opportunity to
meet the members of the Board of Management and other senior
executives for a bilateral exchange of opinions and information
on the current topics of the various Board of Management areas.
The objective of this program is to provide the new members
– outside of the regular meetings of the Supervisory Board –
with an overview of the topics relevant to the Daimler Group.

In the meeting of the Supervisory Board in early February
2016, which was attended by the external auditors, the prelim-
inary key figures of the annual company and consolidated
financial statements for 2015 and the dividend proposal to be
made at the 2016 Annual Shareholders’ Meeting were dis-
cussed, taken note of and approved. The Supervisory Board
determined that no objections were to be raised to their
publication. The preliminary key figures for the year 2015 and
the proposal on the appropriation of profit were announced
at the Annual Press Conference on February 4, 2016.

In the Supervisory Board meeting held on February 16, 2016,
the Supervisory Board first decided on the personnel changes
in the Board of Management described on E page 70.
Subsequently, it dealt with the annual company financial state-
ments, the annual consolidated financial statements and the
combined management report for Daimler AG and the Daimler
Group for the year 2015, each of which had been issued with
an unqualified audit opinion by the external auditors, as well
as with the reports of the Audit Committee and the Supervisory
Board, the corporate governance report, the remuneration
report and the proposal on the appropriation of profit. In
preparation, the members of the Supervisory Board were
provided with comprehensive documentation.

The Audit Committee and the Supervisory Board dealt with
those documents in detail and discussed them intensively in
the presence of the external auditors, who reported on the
results of their audit and were available to answer questions
and to provide further information. Following the final results
of the review by the Audit Committee and its own review,
the Supervisory Board declared its agreement with the results
of the audit carried out by the external auditors. It determined
that no objections were to be raised, approved the financial
statements and the combined management report as presented
by the Board of Management, and thus adopted the financial
statements for the year 2015. On this basis, the Supervisory
Board consented to the proposal made by the Board of
Management on the appropriation of distributable profit. In
addition, the Supervisory Board approved the report of the
Supervisory Board, the corporate government statement, the
corporate governance report and the remuneration report,
as well as its proposed decisions on the items of the agenda
for the 2016 Annual Shareholders’ Meeting.

Also in the meeting on February 16, 2016, the Supervisory Board
received detailed information on the development of a local
production facility of Mercedes-Benz Cars in Russia and granted
its approval to the project. The Supervisory Board also
approved a capital increase at the Group company Mercedes-
Benz do Brasil Ltda. and a capital increase at the Chinese
joint-venture company Beijing Benz Automotive Co., Ltd. for the
expansion of engine production. Furthermore, the Supervisory
Board consented to the submission of a binding offer by Toll
Collect GmbH and other partners to the Federal Republic
of Germany in the tendering procedure “Tolls on all Federal
Highways.” In addition, the Supervisory Board dealt with
the impact of digitization on the automotive industry and with
the Group’s strategic initiatives until 2020, with which the
increasing personnel requirement in the field of digitization
is to be covered. Finally, the Supervisory Board dealt with
questions of corporate governance and with matters pertaining
to Board of Management remuneration. In addition, approval
was granted for the other board memberships and sideline
activities of the members of the Board of Management that
were presented in the meeting.

68 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

One of the items on the agenda of the Annual Shareholders’
Meeting held on April 6, 2016 was the reelection of Petraea
Heynike and Dr. Manfred Bischoff as members of the Super-
visory Board representing the shareholders. After he was
elected by the Annual Shareholders’ Meeting, the Supervisory
Board reelected Dr. Manfred Bischoff as the Chairman of the
Supervisory Board of Daimler AG. In accordance with applica-
ble regulations, the Chairman of the Supervisory Board is
also a member of and Chairman of the Mediation Committee,
the Presidential Committee and the Nomination Committee.

In another meeting held on April 22, 2016, the Supervisory
Board dealt with the acquisition of the internationally active
and manufacturer-independent fleet-management company
Athlon Car Lease International B.V., and granted its approval
for the project. Subsequently, the Supervisory Board received
information on changes to insider laws resulting from the
European Market Abuse Directive, which has been in force since
July 3, 2016, and discussed the resulting specific effects and
duties for the members of the Supervisory Board. The Supervi-
sory Board also discussed the strategic background of the
planned establishment of an engine and component plant for
Mercedes-Benz Cars in Poland, which is intended to secure
the division’s projected unit sales in the medium and long term.

On June 17, 2016, the Supervisory Board held an extraordinary
meeting to deal with the agreement to a settlement involving
the payment of a fine in antitrust proceedings taken by the
European Commission against European truck manufacturers,
including Daimler. Following detailed discussion of the advan-
tages and disadvantages and under consideration of detailed
legal expertise, the Supervisory Board consented to a settle-
ment agreement under the conditions negotiated with the
European Commission. Furthermore, the Supervisory Board
approved in this meeting the contribution of Daimler’s shares
in Renault and Nissan into the German pension plan assets,
in order to improve the funded status of the company’s retire-
ment provision.

Supervisory Board meeting outside Germany
On July 20 and 21, 2016, the Supervisory Board had the
opportunity to deal in detail with the strategy of Daimler Trucks
North America (DTNA) in Portland, Oregon, USA. In view of
the importance of the North American market, the Supervisory
Board convened at the new headquarters of DTNA for an
intensive two-day program in order to discuss current develop-
ments and strategic perspectives with the members of the
Board of Management and local employees. The focus points
included the sales markets of North America, the product
portfolio of Daimler Trucks and the technological transformation
that is opening up new business models also with commercial
vehicles.

Another regular meeting of the Supervisory Board was also
held in Portland. In that meeting, the Supervisory Board first
decided on the appointment of Britta Seeger as a member
of the Board of Management responsible for Mercedes-Benz
Cars Sales and succeeding to Ola Källenius, effective January 1,
2017. After discussing the course of business and the results
of the first half of the year, the Supervisory Board received
information on the planned expansion of the global production
network of Mercedes-Benz. The Supervisory Board approved
the investment in a new plant with highly flexible production at
the Group’s site in Kecskemét, Hungary. An ultramodern and
efficient facility is to be established there with flexible produc-
tion of various vehicle models. The Supervisory Board was
also informed about the business model of the Group company
Mercedes-Benz Grand Prix Ltd. Finally, the Supervisory Board
dealt with the latest developments in the diesel issue.

Strategy meeting of the Supervisory Board
During a two-day strategy workshop at several locations in the
Stuttgart region in September 2016, the Supervisory Board
was informed about the enormous changes facing the automo-
tive industry: from combustion engines to electric motors,
from owning to sharing, from human-controlled vehicles to
autonomous driving. One of the points focused on in the dis-
cussion with the Board of Management was the changing com-
petitive environment, in which traditional automobile competi-
tors are being joined by new competitors that offer mobility
services through digital channels, and which could therefore
challenge the existing business model. In a constructive and
open dialog, the members of the Supervisory Board and of
the Board of Management discussed how Daimler will approach
these new challenges.

Another important point of discussion was Initiative Leadership
2020, and thus the question of how the leadership model
and leadership culture at Daimler can be developed further
in a sustainable way, namely, by the employees themselves.
The Supervisory Board also dealt with the further development
of the global logistics network for the supply of spare parts,
and approved the expansion of warehouse space at the Euro-
pean locations.

A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD 69

The Supervisory Board also discussed in detail and with the
involvement of external legal experts the consequences of the
antitrust proceedings taken against truck manufacturers by
the European Commission. These proceedings were concluded
in July 2016 with the imposition of a fine by the European Com-
mission. Like Daimler, other manufacturers have also decided
to cooperate fully with the authorities and their proceedings
have meanwhile also been concluded. The Supervisory Board
and the Board of Management are of the opinion that cooperation
with the authorities and the settlement of the proceedings by
mutual agreement were in Daimler’s interest, in order to avoid
lengthy litigation and ultimately a possibly higher fine. None-
theless, immediately after the announcement of the accusations
of the European Commission in 2011, the Supervisory Board
commissioned an independent law firm to clarify, in accordance
with its statutory responsibilities, whether claims for compen-
sation were to be made against former or current members
of the Board of Management. On the basis of the so far com-
missioned and repeatedly updated reviews and investigations,
as well as detailed discussions in the Supervisory Board taking
into account the welfare of the Company, the Supervisory
Board did not so far see sufficient basis to claim compensation
from former or current members of the Board of Management,
in each case based on the information available.

Meeting on operational planning 2017/2018
On the day before the meeting in December 2016, the members
of the Supervisory Board were occupied with new vehicle
models, design studies and forward-oriented technologies. In
the context of the actual meeting on December 8, 2016, the
Supervisory Board first decided on the proposal described on
E page 70 to be made at the Annual Shareholders’ Meeting
in 2017 for the election of a member of the Supervisory Board.
During the further course of the meeting and on the basis
of comprehensive documentation, the Supervisory Board
discussed in detail and approved the operational planning for
the years 2017 and 2018. This included discussion of existing
opportunities and risks as well as the Group’s risk manage-
ment.

The Supervisory Board also discussed in detail - against the
background of the increasing electrification of automotive
drivetrains – the international production strategy for high-volt-
age batteries and approved the sites proposed for future
battery production. Subsequently, the Supervisory Board dealt
with the question of allowing additional partner companies
to acquire shares in the digital mapping company HERE, with
the goal of positioning an independent, globally leading
and neutral platform for location-based mobility services based
on networked vehicles. To this effect, the Supervisory Board
approved the sale of shares to two additional international
cooperation partners. Furthermore, the Supervisory Board
once again received information on the status of litigation,
investigations and consultations with the authorities in
connection with the diesel issue. Other topics discussed at
the December meeting were corporate governance, also
with regard to the recommendations of the German Corporate
Governance Code, and Board of Management remuneration.
Finally, the Supervisory Board dealt with the probable main
topics of the year 2017.

Corporate governance and declaration of compliance
During the year 2016, the Supervisory Board was continually
occupied with the standards of good corporate governance.

The members of the Supervisory Board of Daimler AG are
obliged to disclose conflicts of interest – especially those that
might arise due to an advisory or board function for a cus-
tomer, supplier or creditor of Daimler or for other third parties
– to the entire Supervisory Board. There were no indications
of any actual conflicts of interest in 2016. Dr. Bernd Bohr was
a member of and chairman of the supervisory board of Knorr
Bremse AG from March 11 until July 4, 2016. During that period,
the Supervisory Board did not deal with any matters that
could have given rise to a conflict of interest. In order to avoid
individual conflicts of interest, some members of the Supervisory
Board did not participate in discussions of certain items of
the agendas in the year 2016. As a precautionary measure and
in view of his position as chairman of the supervisory board
of Siemens AG, Joe Kaeser did not participate in the consulta-
tions and decision on the involvement of Toll Collect in the
new tender for toll collection on highways in the Federal Republic
of Germany on February 16, 2016. Furthermore, on April 21,
2016, Dr. Bernd Bohr, Dr. Jürgen Hambrecht and Dr. Bernd
Pischetsrieder did not participate in the joint preliminary dis-
cussions of the members representing the employees and the
shareholders concerning the “status update on the diesel
issue” and left the meeting room on July 21 and on December 8,
2016 during the discussion of the related items of the agenda.
As a result, for at least half of the members representing the
shareholders, there were no potential conflicts of interest
during the year under review.

The Supervisory Board is convinced that effective work in the
Supervisory Board in terms of good corporate governance
requires two things: On the one hand, its members must have
high levels of specialist expertise. On the other hand, diversity
amongst the members in terms of internationality, gender,
experience and cultural background must reflect the Group’s
size and internationality. Both of these requirements are
fulfilled at Daimler.

Also in December, the Supervisory Board approved the 2016
declaration of compliance with the German Corporate Gover-
nance Code pursuant to Section 161 of the German Stock
Corporation Act (AktG). With the exceptions explained in the
declaration, all the recommendations of the Code have been
complied with and continue to be complied with.

In the year 2016, the Supervisory Board once again arranged
for an externally moderated efficiency review to be carried
out, thus fulfilling the requirement to carry out a regular effici-
ency review as called for by the Articles of Incorporation
and the German Corporate Governance Code. The results of
the efficiency review, which the Supervisory Board dealt
with intensi vely in its meeting on February 10, 2017, indicate
very good and constructive cooperation within the Supervisory
Board and with the Board of Management. No fundamental
need for action or change was apparent but some individual
suggestions were made, which were implemented.

70 A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD

Law on the equal participation of women and men in
management positions
For supervisory boards of listed companies subject to parity
codetermination, like that of Daimler AG, the German Stock
Corporation Act prescribes a binding gender ratio of at least
30% women. The ratio is to apply to the entire supervisory
board. If the side of the supervisory board representing the
shareholders or the side representing the employees objects
to the chairman of the supervisory board before the election
about the application of the ratio to the entire supervisory
board, the minimum ratio is to apply separately to the share-
holders’ side and to the employees’ side for that election.

In the Supervisory Board of Daimler AG, the proportion of 30%
women is fulfilled on the shareholder side as of December 31,
2016 by the members Sari Baldauf, Andrea Jung and Petraea
Heynike. On the employee side, the proportion of women as
of that date is 20% with the members Elke Tönjes-Werner and
Sibylle Wankel. In its meetings on December 8, 2016, and
February 10, 2017, the Supervisory Board dealt with the specific
proposals for candidates for election to be made at the Annual
Shareholders’ Meeting in 2017, and, against this backdrop,
stated that the shareholder side and the employee side should
separately achieve the legally prescribed proportion of women.
The members representing the shareholders stated in both
meetings that they object to the overall fulfilment of the
statutory gender quota. Subsequently, the Supervisory Board
decided to propose the election to the Supervisory Board
of Dr. Clemens Börsig and Bader Mohammad Al Saad at the
Annual Shareholders’ Meeting in 2017. The next election to
the Supervisory Board of members representing the employees
will take place in 2018.

In its meeting in December, the Supervisory Board updated the
rules of procedure of the Supervisory Board and its commit-
tees. As before, the Supervisory Board specified the goal for
the composition of the Board of Management of at least
12.5% female members, applicable until December 31, 2020.

Corporate governance at Daimler is described in detail in the
corporate governance report on E pages 207 ff and in the
remuneration report on E pages 142 ff of this Annual Report.

The work of the committees

The Presidential Committee convened six times last year. It
dealt primarily with corporate governance topics and questions
Board of Management. As in previous years, compliance targets
constituted part of the individual target agreements of the
members of the Board of Management. Once again, additional
non-financial targets were also included as criteria in the
target agreements. For the past financial year, they were the
further development and permanent establishment of the
corporate value integrity, diversity, the maintenance and enhance-
ment of a high level of employee satisfaction, and high product
quality.

The Audit Committee met six times in 2016. Details of those
meetings are provided in a separate report of that committee
on E pages 204 ff.

The Nomination Committee prepared recommendations for
the Supervisory Board’s proposals to the Annual Shareholders’
Meeting in 2017 on the candidates for election to the Super-
visory Board. The proposals on the election of Dr. Clemens
Börsig and Bader Mohammad Al Saad take into consideration,
apart from the qualifications defined for each position, the
recommendations of the German Corporate Governance Code.

There was no occasion to convene the Mediation Committee
in 2016.

Personnel changes in the Supervisory Board and the
Board of Management
On April 6, 2016, the Annual Shareholders’ Meeting elected
Petraea Heynike and Dr. Manfred Bischoff as members of the
Supervisory Board representing the shareholders until the
end of the Annual Shareholders’ Meeting that decides on ratifi-
cation of actions for the year 2020. The election proposal
made by the Supervisory Board to the Annual Shareholders’
Meeting was based on a recommendation made by the
Nomination Committee. Effective August 25, 2016, Sibylle
Wankel was appointed by the court to the Supervisory Board
as a member representing the employees, after Dr. Sabine
Maaßen had stepped down from the Supervisory Board as
of June 30, 2016.

In the Supervisory Board meeting on February 16, 2016,
Dr. Dieter Zetsche was reappointed as the Chairman of the
Board of Management and Head of Mercedes-Benz Cars
for a further three years as of January 1, 2017. In addition, the
Supervisory Board decided in this meeting to assign Board
of Management responsibility for Group Research & Mercedes-
Benz Cars Development to Ola Källenius as of January 1, 2017.
He will thus succeed to Prof. Dr. Thomas Weber, who stepped
down from his position as a member of the Board of Manage-
ment of Daimler AG after 14 years on December 31, 2016.

In the Supervisory Board meeting on July 21, 2016, the Super-
visory Board appointed Britta Seeger as a member of the
Board of Management for a period of three years starting on
January 1, 2017. Britta Seeger took over responsibility for
Mercedes-Benz Cars Sales from Ola Källenius. In addition,
the appointment of Wilfried Porth as a member of the Board
of Management with responsibility for Human Resources
and Director of Labor Relations, IT & Mercedes-Benz Vans was
extended by five years until April 30, 2022.

In the meeting on December 8, 2016, the members of the
Supervisory Board representing the shareholders decided
on the basis of a recommendation by the Nomination Committee
to propose the reelection to the Supervisory Board of
Dr. Clemens Börsig at the Annual Shareholders’ Meeting in 2017.

In the Supervisory Board meeting on February 10, 2017,
Ola Källenius was reappointed to the Board of Management of
Daimler AG as the member responsible for Group Research &
Mercedes-Benz Cars Development for a further five years as
of January 1, 2018.

In advance of this meeting, Dr. Wolfgang Bernhard, Board
of Management Member responsible for Daimler Trucks and
Buses appointed until February 2018, stated that he would
not be available for an extension of his contract beyond that
date. The Supervisory Board regretted this decision, thanked
Dr. Wolfgang Bernhard for his committed work, and respected
his personal decision. The appointment of Dr. Wolfgang
Bernhard was terminated with effect as of midnight on Febru-
ary 10, 2017. Board of Management Chairman Dr. Dieter
Zetsche has taken over as Head of Daimler Trucks and Buses
until a successor is appointed.

Also in the meeting on February 10, 2017, the members of the
Supervisory Board representing the shareholders decided on
the basis of a recommendation by the Nomination Committee to
propose to the shareholders at the 2017 Annual Shareholders’
Meeting that Bader Mohammad Al Saad be elected as a member
of the Supervisory Board. In the interests of the Company,
Dr. Bernd Bohr has announced that he will step down from the
Supervisory Board at the end of the 2017 Annual Shareholders’
Meeting. The Supervisory Board has declared its intention
to reelect Dr. Bernd Bohr to the Supervisory Board within the
next two years.

Audit of the company and consolidated financial
statements
The financial statements of Daimler AG and the combined
management report for the Company and the Group for 2016
were duly audited by KPMG AG, Wirtschaftsprüfungsgesell-
schaft, Berlin, and were given an unqualified audit opinion.
The same applies to the consolidated financial statements for
2016 prepared according to IFRS.

In a meeting in early February 2017 attended by the external
auditors, the Supervisory Board discussed, took note of
and approved the preliminary key figures of the annual company
and consolidated financial statements for 2016 and the
dividend proposal to be made at the 2017 Annual Sharehold-
ers’ Meeting. The Supervisory Board determined that no
objections were to be made to their publication. The prelimi-
nary key figures for the year 2016 were announced at the
Annual Press Conference on February 2, 2017.

In the meeting on February 10, 2017, the Supervisory Board
dealt with the annual company financial statements, the annual
consolidated financial statements and the combined manage-
ment report for Daimler AG and the Daimler Group, each of
which had been issued with an unqualified audit opinion by
the external auditors, as well as with the reports of the Audit
Committee and the Supervisory Board, the corporate govern-
ment statement, corporate governance report, remuneration

A | TO OUR SHAREHOLDERS | REPORT OF THE SUPERVISORY BOARD 71

report and the proposal on the appropriation of profit. In
preparation, the members of the Supervisory Board had been
provided with comprehensive documentation including
the Annual Report with the consolidated financial statements
according to IFRS, the combined management report for
Daimler AG and the Daimler Group, the corporate governance
statement, the corporate governance report and the remunera-
tion report, the annual company financial statements of
Daimler AG, the proposal of the Board of Management on
the appropriation of profit, the audit reports of KPMG on the
annual company financial statements of Daimler AG and
the consolidated financial statements, each including the
combined management report, as well as drafts of the reports
of the Supervisory Board and of the Audit Committee.

The Audit Committee and the Supervisory Board dealt with
those documents in detail and discussed them intensively in the
presence of the responsible external auditors, who reported
on the results of their audit and were available to answer
supple mentary questions and to provide additional informa-
tion. Following the final results of the review by the Audit
Committee and its own review, the Supervisory Board declared
its agreement with the results of the audit by the external
auditors; it determined that no objections were to be raised
and approved the financial statements and the combined
management report as presented by the Board of Manage-
ment. The company financial statements of Daimler AG for
the year 2016 were thereby adopted. On this basis, the Super-
visory Board consented to the proposal made by the Board
of Management on the appropriation of distributable profit.
Furthermore, it approved the report of the Supervisory Board,
the corporate governance report and the remuneration
report, as well as its own proposed decisions on the items of
the agenda for the 2017 Annual Shareholders’ Meeting.

Appreciation
The Supervisory Board warmly thanks all of the employees
and the management of the Daimler Group for their committed
contributions to the very successful year 2016.

Special thanks are due to Prof. Dr. Thomas Weber, who served
with great passion for many years as the member of the Board
of Management for Group Research and Mercedes-Benz Cars
Development. He had a lasting impact on Daimler AG and
contributed significantly to the Group’s current success. His
membership of the Board of Management ended as planned
on December 31, 2016. We also thank Dr. Sabine Maaßen,
who closely accompanied the company through her committed
work in the Supervisory Board and Audit Committee, and
who stepped down on June 30, 2016.

Stuttgart, February 2017

The Supervisory Board

Dr. Manfred Bischoff
Chairman

72 A | TO OUR SHAREHOLDERS | THE SUPERVISORY BOARD

The Supervisory Board

Dr. Manfred Bischoff
Munich
Chairman of the Supervisory Board of Daimler AG
elected until 2021
Other supervisory board memberships/directorships:
SMS Holding GmbH

Michael Brecht*
Gaggenau
Chairman of the General Works Council, Daimler Group
and Daimler AG;
Chairman of the Works Council, Gaggenau Plant, Daimler AG;
Deputy Chairman of the Supervisory Board of Daimler AG
elected until 2018

Dr. Paul Achleitner
Munich
Chairman of the Supervisory Board of Deutsche Bank AG
elected until 2020
Other supervisory board memberships/directorships:
Deutsche Bank AG – Chairman
Bayer AG

Sari Baldauf
Helsinki
Former Executive Vice President and General Manager
of the Networks Business Group of Nokia Corporation
elected until 2018
Other supervisory board memberships/directorships:
Fortum OYj – Chairwoman
Deutsche Telekom AG
AkzoNobel N.V.
Vexve Holding OY - Chairwoman

Michael Bettag*
Nuremberg
Chairman of the Works Council of the Nuremberg Dealership,
Daimler AG
appointed until 2018

Dr. Bernd Bohr
Stuttgart
Former Member of the Management Board
of Robert Bosch GmbH
elected until 2019
Other supervisory board memberships/directorships:
Formel D GmbH

Dr. Clemens Börsig
Frankfurt am Main
Chairman of the Board of Directors
of Deutsche Bank Foundation
elected until 2017
Other supervisory board memberships/directorships:
Linde AG
Bayer AG
Emerson Electric Co.

Dr. Jürgen Hambrecht
Ludwigshafen
Chairman of the Supervisory Board of BASF SE
elected until 2018
Other supervisory board memberships/directorships:
BASF SE – Chairman
Fuchs Petrolub SE – Chairman
Trumpf GmbH + Co. KG – Chairman
Nyxoah SA

Petraea Heynike
Vevey
Former Executive Vice President of the Executive Board
of Nestlé S.A.
elected until 2021
Other supervisory board memberships/directorships:
Schulich School of Business
Aiglon College

Andrea Jung
New York
President and Chief Executive Officer of Grameen America, Inc.
elected until 2018
Other supervisory board memberships/directorships:
Apple Inc.
General Electric Company

A | TO OUR SHAREHOLDERS | THE SUPERVISORY BOARD 73

Joe Kaeser
Munich
Chairman of the Board of Management of Siemens AG
elected until 2019
Other supervisory board memberships/directorships:
Allianz Deutschland AG
NXP Semiconductors N.V.

Sibylle Wankel*
Frankfurt am Main
General Counsel of the German Metalworkers’ Union
(IG Metall)
(since August 25, 2016)
appointed until 2018
Other supervisory board memberships/directorships:
Siemens AG

Ergun Lümali*
Sindelfingen
Chairman of the Works Council at the Sindelfingen Plant;
Deputy Chairman of the General Works Council of Daimler AG
elected until 2018

Wolfgang Nieke*
Stuttgart
Chairman of the Works Council, Untertürkheim Plant,
Daimler AG
elected until 2018

Dr. Bernd Pischetsrieder
Munich
Chairman of the Supervisory Board of the Münchener
Rückversicherungs-Gesellschaft, Aktiengesellschaft
in München
elected until 2019
Other supervisory board memberships/directorships:
Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft in München – Chairman
Tetra Laval Group

Valter Sanches*
Geneva
General Secretary
IndustriALL Global Union
elected until 2018

Jörg Spies*
Stuttgart
Chairman of the Works Council, Headquarters, Daimler AG
elected until 2018

Dr. Frank Weber*
Sindelfingen
Director of the Press Shop, Sindelfingen Plant, Daimler AG;
Chairman of the Management Representatives Committee,
Daimler Group
elected until 2018

Roman Zitzelsberger*
Stuttgart
German Metalworkers’ Union (IG Metall),
District Manager Baden-Württemberg
appointed until 2018
Other supervisory board memberships/directorships:
Heidelberger Druckmaschinen AG

Retired from the Supervisory Board:

Dr. Sabine Maaßen*
Frankfurt am Main
General Counsel of the German Metalworkers’ Union
(IG Metall)
(retired on June 30, 2016)

Committees of the Supervisory Board:

Committee pursuant to Section 27 Subsection 3
of the German Codetermination Act (MitbestG)
Dr. Manfred Bischoff – Chairman
Michael Brecht*
Dr. Jürgen Hambrecht
Roman Zitzelsberger*

Elke Tönjes-Werner*
Bremen
Deputy Chairwoman of the Works Council, Bremen Plant,
Daimler AG
elected until 2018

Presidential Committee
Dr. Manfred Bischoff – Chairman
Michael Brecht*
Dr. Jürgen Hambrecht
Roman Zitzelsberger*

Audit Committee
Dr. Clemens Börsig – Chairman
Michael Brecht*
Joe Kaeser
Ergun Lümali* (since July 1, 2016)
Dr. Sabine Maaßen* (until June 30, 2016)

Nomination Committee
Dr. Manfred Bischoff – Chairman
Dr. Paul Achleitner
Sari Baldauf

* Representative of the employees

The new E‑Class: The most intelligent business sedan
Mercedes-Benz has taken a major step into the future with the new E-Class, which
had its world premiere in January 2016 at the North American International Auto
Show in Detroit under the motto “Masterpiece of Intelligence.” The tenth generation
of the business sedan sends a strong message with its clear yet emotive design
and an exclusive and high-quality interior. The new E-Class also features numerous
technological innovations that were premiered in the new model. These innovations
allow safe and comfortable driving at a previously unattained level, as well as
providing new dimensions of driver assistance.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2016 75

Highlights of 2016

Daimler successfully continued its strategy of profitable growth in 2016. The most
important factor in the Group’s success is our attractive and innovative range
of products and services, which we systematically renewed and expanded at all
divisions. Our most important new model was the new E-Class, the world’s most
intelligent business sedan. We also enhanced our leading position in the area of
autonomous driving with the introduction of innovative assistance systems. Our
groundbreaking role in this field is underscored by our cutting-edge Mercedes-Benz
research vehicles – the Concept EQ, the Future Bus, the Urban eTruck and the
Vision Van. As a pioneer, we are developing outstanding innovations for the future of
mobility. We are also moving ahead with the systematic digitization of our products
and the entire company, thus laying the foundation for ongoing success in the future.

76 A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2016

Daimler invests in battery production
Daimler plans to invest a total of €1 billion in its global battery
production network. Production capacity for lithium-ion batteries
is to be significantly expanded at Daimler’s Deutsche Accu-
motive subsidiary in Kamenz, Germany. Approximately €500
million will be invested in a second battery factory, where
production of lithium-ion batteries for Mercedes-Benz and
smart hybrid and electric vehicles is scheduled to begin
in the spring of 2017.

Daimler Financial Services named Germany’s
best employer in 2016
The financial services division of the Daimler Group takes first
place in the category “2,000 to 5,000 employees” in this year’s
competition run by the independent Great Place to Work
Institute, which honors companies that have an especially
attractive workplace culture. The evaluation is based on
anonymized employee surveys and assessments of the quality
of the companies’ human resources and management work.

Passenger-car production launched in Brazil
The new plant in Iracemápolis is a key component of the
“Mercedes-Benz 2020” growth strategy. The facility will initially
manufacture the C-Class sedan, which will later be followed
by the GLA compact SUV.

Autonomous driving in a convoy
Daimler Trucks presents a new dimension of autonomous
driving: The Highway Pilot Connect system enables several
semitrailer rigs driving in automated mode to be linked in
a “platoon.” This setup offers impressive benefits, including up
to 7% in fuel savings, a 50% reduction in required road space
and a significantly higher level of safety.

New regional centers for commercial vehicles
Two new regional centers in Africa and another in Southeast
Asia are opened for the sales and service of our commercial
vehicles. The center for South Asia follows in May 2016. This
means that the realignment of sales and service activities
has been completed within seven months. We are now even
closer to our customers in key growth regions.

Three-millionth Mercedes-Benz Sprinter delivered
Mercedes-Benz Vans has now delivered three million units
of its Sprinter “global van” to customers since the model’s
market launch in 1995. The large van is now on the road in
more than 130 countries.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2016 77

Annual Shareholders’ Meeting approves Daimler’s
highest-ever dividend of €3.25 per share
Approximately 5,500 shareholders attend the Daimler AG
Annual Shareholders’ Meeting at the CityCube in Berlin
on April 6. Daimler is the first DAX-listed company to offer
its shareholders a mobile ticket that can be sent to their
smartphones.

World’s biggest Mercedes me Store opens in Beijing
Along with an interactive brand experience, the store in the
trendy Sanlitun neighborhood boasts ultramodern architecture
and high-class catering. It also serves as a venue for numerous
events. Beijing is now the sixth city with a Mercedes me Store
– after Hamburg, Milan, Tokyo, Hong Kong and Munich
(see photo below).

car2go launched in China
car2go establishes its first location in Asia in Chongqing,
a huge metropolis of 30 million inhabitants in central China.
The Daimler subsidiary thus becomes the first international
Western company to implement the concept of spontaneous
car sharing mobility in China. car2go, which uses the addi-
tional brand designation of JiXing (“drive off immediately”) in
Chong qing, initially launches operations with around 400
smart fortwo models.

Fleet test with FUSO Canter E-Cell
In Germany, Daimler Trucks starts its first fleet test with locally
emission-free electric trucks. Five battery-powered FUSO
Canter E-Cell trucks are tested in the coming months by the
City of Stuttgart and the logistics company Hermes.

New engine plant in Poland
Daimler will invest approximately €500 million in a new pro-
duction facility in Poland that will create several hundred new
jobs. Plans call for four-cylinder gasoline and diesel engines for
Mercedes-Benz cars to be built at the plant in Jawor.

DigitalLife Day 2016 – Daimler is shaping the
digital transformation
Some 500 employees from numerous departments and Group
locations attend the event with the motto “Information,
Inspiration, Innovation.” DigitalLife Day 2016 focuses on the
Group’s digital strategy and on presentations by internal
and external experts. As was the case in the previous year,
when the event took place for the first time, an employee
competition for ideas related to digitization is also held in 2016.

Daimler strengthens its pension fund
The Board of Management of Daimler AG approves the alloca-
tion of approximately €1.8 billion to the pension fund. This
is carried out by contributing the shares in Renault S. A. and
Nissan Motor Co. Ltd. into the Daimler AG pension-plan
assets.

Daimler continues along successful path
Daimler finishes the second quarter with new records for unit
sales and adjusted EBIT. For full-year 2016, Daimler continues
to anticipate a slight increase in EBIT adjusted for special
items.

78 A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2016

Greater flexibility with mobile working
Daimler implements a new and expanded policy on mobile
working in order to improve the work-life balance of its employ-
ees. The policy stipulates that all Daimler AG employees have
the right to work outside the office if such a format is compati-
ble with the task at hand. Daimler operates many initiatives
designed to further improve its employees’ work-life balance
and to develop a new management culture more firmly
based on trust and the personal responsibility of both execu-
tives and employees.

Daimler presents the city bus of the future
The Mercedes-Benz Future Bus with CityPilot drives in partially
autonomous mode for the first time on a Bus Rapid Transit
(BRT) line of approximately 20 kilometers in Amsterdam. The
bus drives at speeds up to 70 km/h, stops exact to one
centimeter at bus stops and traffic lights, brakes for obstacles
and pedestrians and communicates with traffic signals.
Daimler Buses is the world’s first bus manufacturer to drive
a city bus in a partially automated mode on a BRT route.

Daimler presents numerous new products and services
at the IAA Commercial Vehicles Show
The Daimler commercial vehicle brands underscore the pio-
neering role they play in connectivity, efficiency and safety
by presenting a wide range of new products and services at
the 66th IAA Commercial Vehicles Show. Among other things,
the Mercedes-Benz Urban eTruck, the Future Bus and the Vision
Van offer a preview of the future of the transport industry.

Daimler Trucks presents the new Freightliner Cascadia
The new Cascadia sets standards for connectivity, fuel
efficiency and safety. A new, exclusive connectivity platform
allows automated analyses of efficiency and safety. The
aerodynamic shape and ultramodern drive components help
to achieve fuel consumption up to 8% lower than that of the
predecessor model.

Paris Motor Show: focus on electric mobility
The Mercedes-Benz Cars presentation at the Paris Motor Show
focuses on electric mobility and the digital transformation.
The Concept EQ from Mercedes-Benz, which offers a preview
of an all-new generation of battery-electric vehicles, has
its world premiere in Paris. Other models debuting in Paris are
the electric drive versions of the new smart fortwo, the smart
fortwo cabrio and, for the first time as an electric model,
the smart forfour.

Sales milestone for smart: two million urban microcars sold
Since its market launch in 1998, the trendy city car has enjoyed
great success as both a private and a fleet vehicle. And since
2008, it has also been hugely successful as a vehicle perfectly
tailored to the car2go car sharing program. The smart brand
has always played a pioneering role in the automotive industry
in terms of mobility services and customization options, and
continually redefines urban mobility.

A | TO OUR SHAREHOLDERS | HIGHLIGHTS OF 2016 79

car2go passes the two-millionth customer mark
The car sharing company extends its market leadership in Europe
and around the world, and now has more than two million
registered users worldwide. One of the company’s 14,000 vehicles
at 30 locations around the world is used every 1.5 seconds.

Investment in the future: approximately 1,900 young men
and women begin their training at Daimler
Some 1,900 teenagers and young adults once again begin a
training program at Daimler or a course of study at the Cooper-
ative State University in 2016. The Group is now training a
total of approximately 6,300 young men and women in Germany.
This means that Daimler accounts for more than one third
of all training positions in the German automotive industry.

Mercedes-Benz presents Concept X-CLASS
Mercedes-Benz Vans is expanding its product range to include
another model series and will become the first premium
automaker to enter the segment for mid-size pickups. The new
pickup model is scheduled to be launched at the end of 2017
under the name Mercedes-Benz X-Class. The key markets for
the new model will be Europe, Argentina, Brazil, South Africa,
Australia and New Zealand.

Daimler improves its credit rating
Standard & Poor’s Global Ratings agency (S&P) raises its credit
rating for Daimler AG from A- to A on November 2, 2016,
and also upgrades the company’s short-term rating from A-2
to A-1. The ratings outlook for the company remains unchanged
at “stable.” S&P cites the greater competitiveness of our
Mercedes-Benz Cars division especially as the reason for its
ratings decision.

Daimler Financial Services acquires Athlon
Daimler Financial Services acquires Athlon Car Lease Inter-
national B.V. It is planned to operate Daimler’s entire fleet-
management business under the Athlon brand. This will create
a strong competitor in the European fleet management sector
with a portfolio consisting of approximately 360,000 cars and
vans.

High-performance charging network for electric vehicles
Daimler AG, the BMW Group, Ford Motor Company and the
Volkswagen Group with Audi and Porsche plan to establish
a joint venture to create the most effective charging network
for electric vehicles in Europe. All the partners have signed
a memorandum of understanding to this end. The goal is
to significantly improve the travel range of battery-electric
vehicles by establishing a full-coverage network.

80 A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET

Daimler and the Capital Market

There was a generally positive tendency on global stock markets in 2016, although they remained
volatile. Announcements by central banks around the world continued to have a pronounced
influence on investor behavior. Despite a very attractive dividend yield, Daimler’s share price
declined by 9% over the year 2016, although it did recover in the second half of the year with a
significant gain of 32%. The Board of Management and the Supervisory Board will propose to the
Annual Shareholders’ Meeting that a dividend of €3.25 (2015: €3.25) per share be paid for 2016.

A.01
Development of Daimler’s share price and of major indices

End of 2016 End of 2015

16/15

% change

Daimler share price (in euros)

70.72

77.58

-9

DAX 30

Dow Jones Euro STOXX 50

Dow Jones Industrial Average

Nikkei

Dow Jones STOXX Auto Index

11,481

3,291

19,763

19,114

543

10,743

3,268

17,425

19,034

566

+13

-4

A.02
Key figures per share

Amounts in euros

Net profit

Dividend

Equity (December 31)
Xetra price at year end1
Highest1
Lowest1

1 Closing prices

2016

2015

16/15

% change

7.97

3.25

54.17

70.72

73.64

51.97

7.87

3.25

50.06

77.58

95.79

63.26

-9

-23

-18

Generally positive tendency on global stock markets
Global stock markets began the year 2016 with substantial
losses, recording the worst start of a year in decades in the
period until mid-February. Investors were initially concerned
about the economic situation in China and, for the first time,
in the United States as well. The ongoing decline in raw material
prices added to this uncertainty. However, share prices then
rose for a period, with this positive development largely due
to the expansionary monetary policy of the European Central
Bank (ECB) and indications by the US Federal Reserve that
a course of rather moderate interest rate increases would
be pursued in the United States. In the months that followed,
reserved financial reports from European companies and
discussions in the run-up to the Brexit referendum in the United
Kingdom put a damper on investors’ willingness to take risks.
Share prices fell sharply in June after the British vote to leave
the European Union. However, markets quickly recovered after
that and even went on to post substantial gains. Automotive
stocks, which had come under pressure during the course of
the year, were able to rally and post significant gains once
again. Nevertheless, expectations regarding the future behavior
of central banks worldwide remained very much on investors’
minds. After a phase of varied development, the looming election
in the United States in November began influencing the per-
formance of global stock markets. More specifically, market
fluctuations and volatility increased significantly, and auto-
motive stocks were also affected by this development. The result
of the US election led to a brief period of uncertainty, after
which the major markets in the United States, Europe and Japan
began recording gains once again. The ECB’s announcement
that it would continue its government-bond purchasing program
until the end of 2017 led to additional market gains in December.

The index of the most important shares in the euro zone, the
Dow Jones Euro STOXX 50, rose by 1% in 2016. With a rise
of 7%, the DAX, Germany’s leading index, performed significantly
better. In Japan, the Nikkei index closed with a slight increase
over the full year, while in the United States the Dow Jones
reached an all-time high of 19,975 in December and recorded
a 13% increase for 2016 as a whole.  A.01

Daimler share price down by 9% over the year
On January 4, 2016, the Daimler share price reached €73.64,
which was its peak for the year. The year 2016 began with
declining share prices on global markets. Daimler shares were
also affected by this development. However, the ongoing
product offensive and our relatively good sales development
compared to our competitors led our share price to increase
once again in February and March. The development of our share
price was also positively impacted by the Daimler’s announce-
ment that it would significantly increase the dividend to the new
record of €3.25 per share. Political and economic uncertainties
in the period that followed led to renewed high volatility on
the stock markets. The unfavorable outlook in key truck markets,
particularly in the NAFTA region and the Middle East, had a
negative effect on expectations regarding our business opera-
tions in the truck segment. The result of the Brexit referendum
in the UK at the end of June took investors by surprise and
led to a dramatic short-term decline in share prices worldwide.
In this situation, the Daimler share price dropped to its lowest
point of the year 2016 when it fell to €51.97 on July 6. During
the prolonged phase of recovery that followed, automotive
stocks, which had come under strong pressure throughout the
course of the year, were able to rally and post significant
gains once again. Sales at Mercedes-Benz Cars developed very
favorably as a result of high demand for our new products,
which had a positive effect on the development of our share
price. During the China Capital Market Day event at the
beginning of September, management provided a description
of the strategy at Mercedes-Benz Cars. This strategy had
already been underpinned by the solid development of business
in China and was therefore very positively assessed by analysts
and investors. With regard to commercial vehicles, investors
kept a close eye on key markets, especially in the NAFTA
region and Europe, throughout the rest of the year. In the fourth
quarter, our share price climbed again and developed signifi-
cantly better than the DAX. Daimler shares closed at €70.72
on December 30. At the end of the year, the company had
a market capitalization of €75.7 billion (2015: €83.0 billion).
Daimler’s share price declined by 9% over the year as a whole,
underperforming the DAX (+7%) and the Dow Jones STOXX
Auto Index (-4%). When the dividend payout of €3.25 per share
is included, our shareholders saw the value of their investment
decrease by 5%.

Dividend of €3.25  A.02
We paid the highest dividend in the company’s history in 2016
(€3.25 per share). This corresponds to a total dividend payout
of €3,477 million, which was the highest dividend payout of
any DAX-listed company. The Board of Management and the
Supervisory Board will recommend the payment of a stable
dividend of €3.25 per share for 2016 at the Annual Shareholders’
Meeting on March 29, 2017. The total dividend will amount
to €3,477 million.

A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET 81

A broad shareholder structure  A.07
Daimler continues to have a broad shareholder base of approx-
imately one million shareholders. Shareholder numbers in-
creased during the reporting year, particularly as a larger num-
ber of private investors purchased our shares. The Kuwait
Investment Authority (KIA) currently owns 6.8% of the company’s
shares, making it Daimler AG’s largest single shareholder.
The Renault-Nissan Alliance continues to hold 3.1% of Daimler’s
shares. BlackRock Inc., New York, still holds a stake above
the 5% reporting limit as defined by Germany’s Securities Trading
Act (WpHG). In May 2016, BlackRock notified us that its
proportion of the voting rights was 5.18% as of May 11, 2016.

The aforementioned and all other voting-rights notifications are
published on the Internet at w daimler.com/investors/share/
voting rights.

A.03
Daimler share price (high/low), 2016

In euros

100

85
80
75

1/16

2/16

3/16

4/16

5/16

6/16

7/16

8/16

9/16

10/16

11/16

12/16

A.04
Share price index

120

115

110

105

100

12/31/15

2/29/16 4/29/16 6/30/16 8/31/16 10/31/16

12/31/16

Daimler AG
Dow Jones STOXX Auto Index
DAX

82 A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET

A.05
Key figures for Daimler shares

End of 2016 End of 2015

16/15

% change

Share capital
(in millions of euros)

Number of shares
(in millions)

Market capitalization
(in billions of euros)

Number of shareholders
(in millions)

Weighting in share indices

DAX 30

Dow Jones Euro STOXX 50

Long-term credit ratings

Standard & Poor’s

Moody’s

Fitch

DBRS

3,070

1,069.8

75.7

1.0

83.0

0.9

+11

-9

7.52%

3.18%

8.67%

3.63%

A-

A (low)

A.06
Stock-exchange data for Daimler shares

ISIN

German Securities Identification Number

Stock-exchange symbol

Reuters ticker symbol

Bloomberg ticker symbol

DE0007100000

710000

DAI

DAIGn.DE

DAI:GR

A.07
Shareholder structure as of December 31, 2016

By type of shareholder

Kuwait Investment Authority

Renault-Nissan

Institutional investors

Retail investors

6.8 %

3.1 %

70.6 %

19.5 %

A.08
Shareholder structure as of December 31, 2016

By region

Germany

Europe, excluding Germany

USA

Kuwait

Asia

Rest of the world

36.4 %

29.2 %

24.3 %

6.8 %

2.9 %

0.4 %

Institutional investors hold a total of 71% of our equity capital,
while private investors own 20%. Approximately 66% of our
capital is in the hands of European investors and around 24% is
held by US investors.  A.08 Daimler shares’ weighting in
major indices declined during the course of the year as a result
of the development of the overall share price. With a weighting
of 7.52% (2015: 8.67%), Daimler was ranked sixth in the German
DAX 30 index at the end of 2016.  A.05 In the Dow Jones
Euro STOXX 50 index, our shares had a weighting of 3.18%
(2015: 3.63%), which put them in tenth place. Daimler shares
are listed on the stock exchanges in Frankfurt and Stuttgart.
A total volume of 1,210 million shares were traded in Germany
in 2016 (2015: 1,188 million). Daimler shares are also increas-
ingly being traded on multilateral trading platforms and in the
over-the-counter market.

Employee share purchase plan implemented once again
Staff members entitled to purchase employee shares were
able to do so once again in March 2016. As was the case in the
previous year, the employees received a discount as well as
bonus shares. At 19.8%, the participation rate in the year under
review was significantly higher than in 2015 (11.7%). A total
of 34,500 employees took part in the program (2015: 20,400);
this is the highest number since 2008. The total number of
shares purchased by employees also increased substantially,
from 300,000 in 2015 to approximately 576,000 (of which just
under 52,000 were bonus shares) in the year under review. The
high participation rate for the employee share purchase plan
was probably due to a significantly lower share price compared
to the prior year, a high profit-sharing payout and the substan-
tially higher dividend of €3.25 per share.

Annual Shareholders’ Meeting in the CityCube in Berlin
Our Annual Shareholders’ Meeting, which took place on April 6,
2016, was held for the second time in the CityCube in Berlin.
Some 5,500 shareholders (2015: 5,000) attended the meeting.
A total of 50.77% of the equity capital (2015: 36.15%) was
represented at the meeting (actual attendees and shareholders
who voted by absentee ballot). This positive increase is a
reflection of our successful efforts to encourage more inves-
tors to exercise their voting rights. A large majority of the
shareholders approved each of the agenda points proposed by
the company’s management. For example, the Annual Share-
holders’ Meeting approved the highest dividend in the company’s
history (€3.25 per share; 2015: €2.45) and re-elected
Dr. Manfred Bischoff, Chairman of the Supervisory Board of
Daimler AG, to the Daimler Supervisory Board as a member
as a representing the shareholders. In addition, Petraea Heynike,
a former member of the Executive Board of Nestlé S. A., was
re-elected to the Daimler AG Supervisory Board. Important
documents and information related to the Annual Shareholders’
Meeting can be found on our website at w daimler.com/
investors/events/annual-meetings. In the exhibition areas
of the CityCube, Daimler presented its technological expertise
and broad range of products and services under the motto
“Innovative. Digital. Leading.” The presentation highlights
included the Concept Intelligent Aerodynamic Automobile
(Concept IAA) 2015, which attracted a lot of admiring looks.
This aerodynamic world champion was developed and
built almost entirely digitally in just ten months. A group of
our trainees, as well as the global Laureus Sport for Good
movement established by Daimler and Richemont 16 years
ago, were also on hand to provide an insight into their work,
and with “Mercedes me,” the Mercedes-Benz brand presented
services in addition to its products.

A | TO OUR SHAREHOLDERS | DAIMLER AND THE CAPITAL MARKET 83

Number of online shareholders remains at a high level
Our shareholders continue to make good use of our range
of personalized electronic information and communication.
A total of 86,500 shareholders received the invitation and
agenda for the Annual Shareholders’ Meeting by e-mail rather
than by post in 2016 (2015: 84,000). We would like to thank
those shareholders for helping to protect the environment
and cut costs. As was the case in the past, those shareholders
once again had the opportunity to win attractive prizes in a
lottery. Access to the e-service for shareholders and additional
information can be found at w https://register.daimler.com.

Refinancing benefits from high level of capital-market
liquidity and good ratings
The ongoing expansionary monetary policies at central banks
also impacted bond markets during the year under review.
As a result of the high level of liquidity, companies with invest-
ment-grade ratings saw their risk premiums remain at a
moderate level.

In 2016, Daimler primarily covered its refinancing needs by
issuing bonds. A large proportion of those bonds were in
the form of benchmark bond issuances (bonds with high nominal
volumes) in euro and US-dollar markets. In the US capital
market, for example, Daimler Finance North America LLC issued
bonds worth a total of $5.5 billion in July and October 2016.
Those bonds had terms of three and five years. In addition,
Daimler AG issued euro bonds in benchmark format with a
total volume of €10.0 billion and terms of two, three, four, five,
seven, eight, ten and 12 years. Daimler AG also issued two
bonds in China (so-called Panda bonds), with a total volume of
CNY 8.0 billion. Furthermore, many smaller bonds were issued
by the Daimler Group in a variety of currencies and markets.

At the end of 2016, companies of the Daimler Group had issued
bonds that were still outstanding in a volume of €63.1 billion
(2015: €51.4 billion). Besides raising funds through the issuance
of bonds, Daimler also issued a small volume of commercial
paper in 2016.

Daimler also conducted several asset-backed security (ABS)
transactions in the United States, Canada, Germany and China
during the reporting year. In the United States, for example,
the company generated a refinancing volume of US$6.6 billion
through six issuances. A further C$0.5 billion was placed in
Canada. In addition, Mercedes-Benz Bank used the Silver Arrow
Platform to sell €1.0 billion in ABS bonds to European investors
once again. Two ABS transactions were also successfully
conducted in China for the first time, with a total volume of
CNY 6.4 billion. E pages 114 f

Continuation of comprehensive investor relations
activities
In 2016, we once again provided institutional investors, analysts,
rating agencies and private investors with timely information
regarding the company’s business development. We organized
road shows for institutional investors and analysts in the
finance capitals of Europe, North America, Asia and Australia.
We also held many one-on-one meetings at investor confer-
ences. This was especially the case at the international motor
shows in Geneva and Paris. Sustainability-focused investors
were also able to meet and talk with company representatives
at an event held at the Paris Motor Show and at a conference
in Paris in November. We reported on our quarterly results in
conference calls and webcasts. The presentations can be
viewed on our website at w daimler.com/investors/events/
presentations. The talks with analysts and investors focused
on the latest earnings expectations for 2016, as well as on
the business development and profitability of the individual
divisions and regions. In addition, top executives from
Daimler Trucks discussed the strategies and goals of their divi-
sion during a capital market event held in June in Leinfelden
(near Stuttgart), where they also offered participants the oppor-
tunity to go for a ride in a partially automated truck. Numerous
analysts and investors accepted our invitation to join us for
another capital market day in Beijing in September. During this
event, the local top-management team described its strategies
and activities in the crucial growth market in China, and also
explained why we are so optimistic that Daimler will continue
to expand its business in the Chinese market. The audio record-
ings and charts and illustrations from the events are available
at w daimler.com/investors/events/capital-market-days.

Awards once again for the print and online versions
of the Annual Report
Our Annual Report won prestigious international awards once
again in the year under review. Both the print version and
the online version with numerous additional features took
Platinum in the LACP 2015 Vision Awards competition
w ar2015.daimler.com. Our Annual Report was also named
the best printed annual report worldwide from among the
top 100 international submissions to the LACP.

Significantly more use of corporate website after
modernization
In November 2015, the broad range of information offered on
our website at the existing address w daimler.com was trans-
ferred to a more powerful software platform and given a new
design. We have also gradually made additional improvements
since that time. Among other things, our website adapts to
any device and is thus always displayed in an optimal size and
format. Our modernization measures have increased the at-
tractiveness of our website and significantly enhanced the user
experience. As a result, the numbers of visits to our website
and the session durations there have both risen considerably.

84 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

Objectives and Strategy

We invented the automobile more than 130 years ago, thus fundamentally changing the nature of
mobility. Today as well, we are on the verge of a fundamental transformation, as our vehicles
are becoming increasingly connected, autonomous and electric – and are being linked to innovative
services. We accept the challenges associated with such developments and are creating new
dimensions of mobility. And we want to take the lead – with outstanding products and services, new
and profitable business models and a corporate culture that can keep pace with the requirements
of a digitized world. We aim to achieve profitable growth and increase the value of the company.
We plan to achieve our goals by focusing our activities on four strategic areas.

Four objectives

Delighted customers
Our leading brands in all divisions create value for our customers.
We aim to finish at the top of all relevant customer-satisfaction
rankings and win over customers with our outstanding quality.
For that purpose, we create interfaces for sales and aftersales
processes that ensure we can maintain contact with customers
at all times. We want to expand connectivity in the vehicle
even further, thus creating added value for our customers.
We also offer our customers tailored transport and mobility
services that improve efficiency and reflect the growing
trend toward a sharing economy.

Technology leadership, innovation and digitization
We set standards for technology and innovation. We want our
products from all the divisions to be the industry leaders in
terms of safety, autonomous driving and green technologies.
Here, we exploit the potential generated by Group-wide
research activities and predevelopment and, where possible,
we also make use of standardized systems and solutions.
With the application of digital technologies, we aim to be at the
forefront, both with our products and services and along
the entire value chain. With connected products and services,
we aim to inspire our customers, attract new customers,
and utilize new business models in the fields of mobility and
transport.

Profitable growth
We intend to achieve a 9% average return on sales (EBIT in rela-
tion to revenue) for the automotive business on a sustained
basis. This overall figure is based on the return targets for the
individual divisions. Those targets are 10% for Mercedes-Benz
Cars, 8% for Daimler Trucks, 9% for Mercedes-Benz Vans and
6% for Daimler Buses. For Daimler Financial Services, we
have set a target of 17% for return on equity.

The “Mercedes-Benz 2020” growth strategy is designed to
ensure that our Mercedes-Benz Cars division will play the lead-
ing role in the premium segment worldwide over the long term.
We also plan to further enhance the smart brand’s pioneering
role in urban mobility. In addition, we want to further strengthen
Daimler Trucks’ position as the leading truck manufacturer in
the global truck business. Mercedes-Benz Vans aims to achieve

further profitable growth with the help of its “Mercedes-Benz
Vans goes global” divisional strategy. Daimler Buses plans
to further strengthen its leading position in the segment for
buses above eight metric tons gross vehicle weight. Daimler
Financial Services plans to maintain its position as the best
captive financial and mobility services provider; it will continue
to grow further in close cooperation with our other divisions.

In order to safeguard our profitability also under difficult market
conditions, we are adapting our business system in a way
that enables us to react quickly and flexibly to market fluctua-
tions and create value as close to our markets as possible.

Best teams
We work in teams whose diversity in terms of gender, national-
ity and age is of great importance. Our employees are proud
to work at Daimler, and we are one of the employers most sought
after by job applicants. Our core corporate values – passion,
respect, integrity and discipline – form the basis of our actions.
Integrity is particularly important for Daimler, and guides our
actions with regard to our employees, the Group, business part-
ners and customers. We are firmly convinced that conducting
business with integrity makes us more successful over the long
term and is also good for society as a whole. E pages 137 ff

Sustainability is a fixed element of our philosophy. For us, sus-
tainability means conducting business responsibly to ensure
long-term economic success in harmony with the environment
and society. E pages 123 ff

Four strategic focus areas

We plan to achieve our goals through four strategic focus
areas.  A.09
We will focus on
– strengthening our core business,
– growing globally,
– leading in technology and
– moving ahead with digitization.

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 85

A.09
Strategic focus areas

Strengthening
core business

Growing
globally

Leading
in technology

Pushing
digitization

The four focus areas of the Daimler strategy

Strengthening our core business

Mercedes-Benz Cars is strengthening its core business with
innovative first-rate products and services, competitive cost
structures, flexible processes and a customer-oriented sales
organization. Our new products and services set standards
in the strategic future-oriented fields of connectivity (Connected),
autonomous driving (Autonomous), flexible use (Shared &
Services) and electric drive systems (Electric). These areas
are combined in the acronym CASE. Our strategy for Mercedes-
Benz Cars now focuses on playing the leading role in each
future-oriented area and on linking these areas to create out-
standing products, services and business models. The major
highlight of 2016 was the new E-Class, whose innovative assis-
tance and safety systems have taken the model a step further
in the direction of autonomous driving. We will launch two
additional new E-Class models in 2017: the E-Class Coupe and
the E-Class Cabrio. Furthermore, we will underscore our
leading position in the area of autonomous driving and connec-
tivity with the launch of an updated S-Class model. We will
expand our range of electric vehicles in 2017 with additional plug-
in hybrids and three new electric vehicles from the smart
brand, and before the end of this year, we will present a com-
pletely new fuel-cell vehicle on the basis of the Mercedes-
Benz GLC. Mercedes-Benz also unveiled its new EQ brand in
September 2016, thereby ushering in a new era of electric
mobility. By 2025, Mercedes-Benz plans to launch more than
ten electric cars on the market.

We continue to forge ahead with our vehicle architecture and
module strategy. By progressing with standardization and
modularization at our manufacturing plants, we are reducing
our investment requirements and fixed costs. The interaction
between lead and partner plants is safeguarding both the trans-
fer of knowledge and the high quality standards associated
with “Made by Mercedes” worldwide. Extensive repositioning
is helping to safeguard the future of our German plants. At
the same time, we continue to expand our international produc-
tion network. For example, we are building a new facility at

our site in Kecskemét, Hungary, and will begin manufacturing
four-cylinder engines at a new plant in Jawor, Poland, in 2019.
We are investing a total of €1 billion in our battery production
operations, with €500 million of this amount earmarked for
the construction of a second battery factory to be operated
by our Deutsche Accumotive subsidiary in Kamenz, Germany.

Our “Best Customer Experience” initiative is designed to offer
our customers the best experience among all automakers.
All of our sales, service and financial services activities are
aligned with each other throughout the entire duration of the
customer relationship – right from the first contact. New sales
formats such as mobile sales pavilions and Mercedes me
Stores create meeting points that enable us to establish contact
with new customers as well. Our “She’s Mercedes” initiative
is allowing us to address women customers in a more targeted
manner. More personalized service and advice is now being
provided in our direct sales operations by including additional
product experts. With the digital platform and service brand
Mercedes me, we are providing innovative services, products
and lifestyle offerings going beyond the car itself. E pages 30 f

The smart brand stands for innovative urban mobility concepts.
We will continue to expand the range of smart products for use
as trendy city cars, as private and fleet vehicles, and as tai-
lored models for the car2go car sharing program. The smart
brand is already a leader today when it comes to personaliza-
tion and mobility services. Moreover, with its smart ready to
drop delivery service, the brand is now also starting to offer a
range of quality digital services.

Daimler Trucks relies on its technology leadership, global
presence and intelligent use of platforms. The platform strategy
allows the use of key synergy advantages. Our customers
profit from simplification through the rapid availability of rele-
vant truck technologies. Our drive-system component plat-
forms for medium and heavy-duty engines and automatic trans-
missions already enjoy great success on the market. We are
now following up with chassis and cab standardization and by

86 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

implementing a uniform electric and electronic architecture.
In the future, the new “Truck Data Center” connectivity hardware
will be installed as the heart of the connected truck across
all Daimler Trucks brands. Possibilities for further efficiency
improvements include not only the platform and common-
component strategy, but also the rationalization of the product
program and the streamlining of processes, especially at
Mercedes-Benz Trucks. In order to further strengthen our com-
petitiveness, we will continue optimizing our fixed costs. For
the expansion of its core business, Daimler Trucks is pushing
forward with electrification, as can be seen with the new FUSO
eCanter and the Mercedes-Benz Urban eTruck. E pages 42 ff

Mercedes-Benz Vans’ “Mercedes-Benz Vans goes global”
strategy has three elements: market strategies for global
expansion, product strategies for the further expansion and
differentiation of the product portfolio, and the development
and commercialization of customer-focused and holistic
transport solutions. As of late 2017, we will expand our port-
folio with the launch of the Mercedes-Benz X-Class – a
premium pickup truck that will be sold in Europe, Latin America,
South Africa, Australia and New Zealand. Our current Sprinter
with up to 5.5 metric tons gross vehicle weight is more power-
ful and boasts a higher payload capacity than before, making
it even more versatile and efficient for customers. Further
growth in online retail sales of goods can be expected to lead
to higher sales of commercial vans in the future as well.
Mercedes-Benz Vans is placing increasingly priority on electric
mobility for the future of urban delivery transport.

Daimler Buses will focus over the coming years on achieving
further sustainable and profitable growth and continual effi-
ciency gains. Cost efficiency will be further improved through
closer coordination between the facilities that manufacture
complete buses and chassis. Additional business volume will
be generated through increased sales of highly attractive
complete buses and bus chassis, as well as by a convincing
overall package of new and used vehicles, service and
maintenance contracts, financing plans and new mobility
services. In addition, Daimler Buses is increasingly focusing
on natural-gas and electric drive.

Daimler Financial Services remains on course for growth and
offers its customers a tailored system of financial and mobility
services. These services range from leasing, financing and
insurance solutions to car sharing, taxi apps and transport
information and ticket purchasing services. About half of all
the vehicles delivered by Daimler around the world today are
either financed or leased by Daimler Financial Services.
The division currently finances and leases 4.3 million cars and
commercial vehicles worldwide, and plans to increase this
figure in the future. Daimler Financial Services is also aiming
to achieve the highest possible degree of customer satisfaction
and greater customer loyalty under the motto “Engaging
customers for life.” The independent Great Place to Work Insti-
tute lists Daimler Financial Services among the best multi-
national companies in the world to work for. This serves as an
incentive to continue focusing on our attractiveness as an
employer. With the acquisition of Athlon Car Lease International
B.V., Daimler Financial Services made a strategic investment
in the fleet-management business in 2016. This has made the
division into a strong competitor in European fleet Management.

Growing globally

Growth in global demand for automobiles will take place mainly
in Asia over the long term. Although growth rates in China
will be more moderate in the next several years, we expect
the Chinese automotive market to continue expanding consider-
ably in terms of absolute sales figures. For example, over
the next ten years, the sales volume in the world’s largest car
market is likely to increase from the current 22 million to around
30 million vehicles. For Daimler, growing further on a global
scale means improving our strong position in passenger-car
and commercial-vehicle markets in Europe, North America
and Japan, while also fully exploiting growth potential in Asia
and various emerging markets.

In order to achieve Mercedes-Benz Cars’ sales targets outside
Europe, we are intensifying our activities in the world’s biggest
sales market, China. Today, around two thirds of the Mercedes-
Benz cars sold in China are manufactured locally. We produce
the long and short versions of the new E-Class and the C-Class
in China, as well as the GLC and GLA SUVs. In the electric-
vehicle segment, we have teamed up with the Chinese battery
and vehicle manufacturer BYD to develop a battery-electric
automobile. This electric vehicle, which was launched in China
in 2014 under the DENZA brand name, was joined in 2016
by another electric model with a range of 400 km. Our research
and development center in Beijing is an important component
of our international research and development network. In India,
we are now building the GLC, our ninth car model to be pro-
duced there. In addition, Mercedes-Benz Research and Devel-
opment India (MBRDI) in Bangalore is Daimler’s largest
research and development center outside Germany. In Brazil,
we put a new facility into operation in 2016 at our site in
Iracemápolis, where we produce the C-Class and the compact
GLA SUV for the local market. In Aguascalientes, Mexico, we
and our strategic partner Renault-Nissan are building a produc-
tion plant for the next generation of premium compact models.

Our goal for Daimler Trucks is to safeguard the division’s
strong position in Europe and North and South America
(regardless of market fluctuations), and to achieve significant
growth in the Asian markets. We are present in Asia with
two regional companies, Mitsubishi Fuso Truck and Bus Corpo-
ration (MFTBC) and Daimler India Commercial Vehicles (DICV),
which has been operating in India for several years. At DICV
in India, we build trucks of the BharatBenz brand as well as
FUSO trucks for export to other markets. The FUSO trucks built
in India are mainly aimed at price-sensitive markets in Asia,
Africa and Latin America. Our activities in the field of medium-
duty and heavy-duty trucks in China focus on cooperation
with our partner Foton, with which we produce Auman brand
trucks through our joint venture Beijing Foton Daimler Auto-
motive Co. Ltd. (BFDA). We plan to begin selling locally pro-
duced Mercedes-Benz trucks in China as well at the end of
the decade. With regard to Iran, we have now made preparations
for the resumption of local production and sales of trucks,
depending on the further development of local conditions.
In order to fully utilize growth opportunities in the markets of
the future in Africa, Asia and Latin America, we are positioning
ourselves even closer to the pulse of the market in these
regions with our new regional centers. These centers concen-
trate fully on sales and aftersales for commercial vehicles
of the Daimler brands.

Mercedes-Benz Vans plans to continue growing in new markets
within the framework of its “Mercedes-Benz Vans goes global”
strategy. In order to further increase sales in North America
and to improve our cost position, a new production plant is
being established in North Charleston, South Carolina. Both
the Vito, which we launched in North America under the
name Metris in 2015, and the Sprinter are currently being
assembled from parts kits in North Charleston.

Daimler Buses plans to grow in the emerging markets in the
coming years. Great potential for growth exists especially
in Latin America, and this potential can be utilized once the
markets in the region begin to recover. Daimler Buses is well
positioned in Latin America with a total of four production loca-
tions in Brazil, Mexico, Argentina and Colombia. In India,
Daimler Buses operates a bus plant within the framework of
its Daimler India Commercial Vehicles organization. With
this approach, Daimler Buses aims to penetrate the Indian
premium bus segment under the Mercedes-Benz brand name
and the volume-bus segment under the BharatBenz brand,
as well as offering tailored school buses and other complete
buses for the requirements of export markets in the Middle
East, Africa and Latin America. With its new Mercedes-Benz
Conecto city bus, Daimler Buses is now strengthening its sales
position in markets in Eastern Europe and the Middle East.
With a low total cost of ownership and little emissions accord-
ing to Euro VI, this bus perfectly meets the requirements of
those markets. In the coming years, Daimler Buses aims to
grow and gain market share also in its European core markets.

The Daimler Financial Services division continues to expand
its business activities in line with the growth strategies of the
automotive divisions. The division offers leasing and financing
models tailored to specific regions, as well as a broad range
of mobility services worldwide. China especially offers good
opportunities for further substantial growth in the future.
Daimler Financial Services supports the worldwide sales of
Daimler vehicles in approximately 40 countries.

Leading in technology

As a pioneer of automotive engineering, we continue to expand
our technology leadership in the areas of drive systems, safety,
autonomous driving and the connectivity of our vehicles.

At Mercedes-Benz Cars we have significantly expanded our
activities in the area of electric mobility. As things stand now,
we believe that by 2025, 15% to 25% of our new vehicles will
be all-electric models. Until then, we plan to introduce more
than ten new electric vehicles. All of our purely battery-powered
vehicles will be consolidated under our new EQ brand in the
future. In other words, EQ is more than just the name of a vehicle.
Instead, it encompasses our comprehensive electric-mobility
ecosystem of products, services, and charging and storage
technologies. In total, we will invest approximately €10 billion
in the expansion of our range of electric vehicles in the coming
years. E pages 20 ff

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 87

The systematic optimization of combustion engines remains
a key component of our efforts to achieve zero-emission mobility.
One important aspect here is the complete electrification of
the drivetrain through the use of new technologies such as the
integrated starter-generator (ISG) and the 48-volt on-board
power system. The new four-cylinder diesel engine, which was
introduced in the new E-Class in 2016, will be followed in
2017 by four additional members of the new engine family.
Systematic hybridization is another important interim solution
on the road to zero-emission mobility. Our new plug-in hybrid
vehicles combine the highest levels of dynamic handling and
comfort with outstanding fuel consumption, and they also
allow purely electric and thus locally emission-free driving.
Taken together, our measures in this area are paying off:
As early as 2015, we were able to reduce the CO2 emissions
of newly registered vehicles from Mercedes-Benz Cars in
the European Union to an average of 123 grams per kilometer.
This means we achieved our 2016 target of 125 g/km ahead of
schedule. We were able to maintain the average of 123 g/km
in 2016 despite the fact that our sales structure changed
towards upper-mid and large vehicles. We succeeded by means
of technical innovations and further reduced the CO2 emis-
sions of individual models. E pages 30 f

Fuel efficiency is a key selling point also for commercial vehi-
cles. In order to improve fuel efficiency even further, we are
continually optimizing vehicles and drivetrains at the Daimler
Trucks division. In Europe, we aim to reduce the fuel consump-
tion of our truck fleet by an average of 20% over the period
of 2005 to 2020. Our integrated approach, which incorporates
all the players from the transportation sector – ranging from
commercial vehicle producers, bodybuilders and tire manufac-
turers to logistics companies – has taken us a major step
towards achieving this goal. During the year under review, we
conducted a field test with a comprehensively optimized pro-
duction truck that was not only equipped with a new engine,
but also featured an enhanced trailer as well as modified
tires and other key components. The CO2 emissions produced
by this vehicle were 20% lower than those generated by a
standard semitrailer rig.

In the North American market, the new Freightliner Cascadia
is once again setting standards for fuel efficiency. With the
help of additional optimization measures for aerodynamics and
the drive system, we succeeded in improving the fuel effi-
ciency of the new Freightliner Cascadia by up to 8% compared
with the predecessor model. We are the world leader for
hybrid technologies in commercial vehicles. As early as 2006,
we launched series production of the FUSO Canter Eco Hybrid
for the Japanese market. The FUSO Canter Eco Hybrid boasts
fuel savings of up to 23% compared with conventional models,
and its owners are able to recoup the moderately higher cost
for the hybrid model within just a few years.

In 2017 we will launch a small production series of the third
generation of the all-electric FUSO eCanter light-duty truck and
will begin delivering the model to customers. This truck’s
locally emission-free drive system is already helping to reduce
exhaust and noise emissions in cities. The Mercedes-Benz
Urban eTruck will allow purely electric transport for the first
time in a vehicle with a gross vehicle weight of up to 26 metric
tons and a range of up to 200 kilometers. As things stand
now, we should be able to launch this model on the market at
the beginning of the next decade.

88 A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY

Mercedes-Benz Vans is also benefiting from the fuel savings
and emission reductions achieved with the new diesel engines
in our passenger cars. Nevertheless, the division is increas-
ingly focusing on electric mobility solutions for urban delivery
operations in the future. For example, Mercedes-Benz Vans
will launch series production of a commercial van with electric
drive in 2018. The purely electric drivetrain is being developed
by Mercedes-Benz Vans and is designed especially for the require-
ments of customers in the urban delivery sector.

Fuel savings of up to 8% have also been achieved through
the launch of Euro VI bus models. Use of the latest generation
of the OM 470 and OM 471 diesel engines in the Setra and
Mercedes-Benz Travego, as well as vehicle-related measures,
have led to a reduction in fuel costs and CO2 emissions
of a further 4% for these coaches. Daimler Buses is making
greater use of natural gas and electric drive systems. The
Mercedes-Benz Citaro NGT is a city bus with a natural-gas
engine and CO2 emissions that are up to 10% lower than
those of the predecessor model. Daimler Buses also plans
to launch an electric bus for the segment of locally
emission-free vehicles in 2018.

We continue to strengthen our leading position with regard
to safety and assistance systems in all our automotive divisions.
Our approach to autonomous and accident-free driving is
based on the use of comprehensive safety and assistance
systems combined with vehicle connectivity technology
and real-time digital maps. This approach guides us as we
develop autonomously driving cars and commercial vehicles
to the series-production stage. At Mercedes-Benz Cars, this
development is being spearheaded by the extensive assis-
tance systems in the new E-Class, and among our commercial
vehicles by the Freight liner Inspiration Truck concept vehicle
with automated driving mode, the Mercedes-Benz Actros with
Highway Pilot, and the Mercedes-Benz Future Bus with City-
Pilot. Daimler Trucks underscores its leading position in the
field of safety with the further development of proven safety
technologies. With fourth-generation Active Brake Assist and
with Sideguard-Assist – both of which feature person recogni-
tion – Mercedes-Benz Trucks has started another new chapter
for active safety technology. These systems primarily serve to
protect the weakest road users: pedestrians and cyclists.

Detailed information on the topic of “Maintaining our
technology leadership” can be found in this Annual Report
on E pages 12 ff and 126 ff

Moving ahead with digitization

Digitization is leading to major changes in society, economic
competition, the way customers think and act and, ultimately,
everything we do. It is altering our products and services,
our communication with customers and the manner in which
we create value at Daimler. Digitization is also paving the
way for new mobility concepts and enabling the development
of new business models for mobility and transport. In order
to stay on top as this fundamental transformation proceeds,
we are moving ahead with digitization at all levels and along
the entire value chain, while continuing to focus on our custom-
ers. Our activities involve enhancing the connectivity of our
products and services – i.e. developing customer-focused digi-
tal services and new business models and increasing digital
communication with customers, starting with the initial contact
and extending through the entire relationship.

Digitization along the entire value chain allows us to shorten
development times, design production processes more flexibly
and utilize marketing and sales channels in a more direct
manner. Industry 4.0 will digitize factories through the use of
systems for augmented reality, virtual assembly or human-
robot cooperation. The amount of monotonous and strenuous
work will be reduced as a result. The intelligent use of conti-
nually increasing volumes of data, along with the networking
of all points in the value chain, will enhance efficiency, improve
quality and make the entire production process even more
flexible.

We continue to roll out connected vehicles at Mercedes-Benz
Cars. Mercedes me connect, which will be made available
in additional countries and regions, allows customers to access
their vehicle online at any time and from any location.
Mercedes me is our digital platform that brings together mobil-
ity, financing and other services (connect, assist, move and
finance), and also provides information and news about the
Mercedes-Benz brand (inspire). E pages 30 f Meanwhile,
smart is introducing a range of high-quality digital services for
urban mobility with the new “smart ready to...” The new range
of services has been launched with smart ready to drop, which
offers parcel deliveries straight to the trunk of a smart vehicle.

We also continue to expand digitization and vehicle connectiv-
ity at Daimler Trucks. Connectivity will be a crucial factor
for success in the logistics sector in the future. Daimler Trucks
is the leader by far here, with approximately 400,000 con-
nected vehicles worldwide. Our products are part of a compre-
hensive logistics system. The foundation for this is new
connectivity hardware known as Truck Data Center that will
be installed in all our trucks in the future. The system can
be used for diverse applications and the hardware can also
be installed in trucks from non-Group brands. The module
receives all internal truck data and serves as an interface
for external communication as well. Daimler Trucks plans to
invest around €500 million in truck connectivity between now
and 2020. In the meantime, services already available today
such as Mercedes-Benz Uptime are helping to further reduce
commercial vehicle downtimes. With the opening of the
FleetBoard Store for apps at the beginning of 2017, we are
establishing an open platform that allows software experts
from other industry partners, as well as app developers, to con-
tribute useful apps that increase the efficiency of the haulage
sector as a whole. We are also further expanding our Detroit
Connect telematics services in North America, in cooperation
with partners from the IT sector such as Microsoft and AT&T.

With its adVANce strategic initiative, Mercedes-Benz Vans is
underscoring its transformation from a pure vehicle manu-
facturer into a provider of customer-focused system solutions.
The new Mercedes PRO service brand bundles professional
services on a digital platform and has started the year 2017 with
the launch of innovative connectivity solutions (Mercedes
PRO connect). Our Vision Van concept vehicle offers a preview
of the future of the digitized van, which will be part of a supply
chain optimized down to the last mile through comprehensive
connectivity. We will invest €500 million for the future
initiative by 2020.

A | TO OUR SHAREHOLDERS | OBJECTIVES AND STRATEGY 89

Substantial investment in the future of
the Group

In the coming years, we will continue to move ahead systemati-
cally with our innovation offensive in order to implement
our growth strategy through the introduction of new products,
innovative technologies and state-of-the-art manufacturing
facilities. A large amount of our investment will be used for the
digitization of processes and products throughout the entire
Group. We will therefore invest more than €14 billion in prop-
erty, plant and equipment in 2017 and 2018, as well as more
than €16 billion in research and development projects. With
this plan, we are once again increasing our investment in order
to safeguard the future of the Daimler Group.  A.10 and A.11

The investment in property, plant and equipment will mainly
be used to prepare for the production launches of our new
models and new combustion engines. However, we will also
use our investment to realign our manufacturing facilities in
Germany, to increase local production in growth markets and
to expand our battery production network. E page 178

Most of our outlay for research and development will be used
for new products, innovative drive-system and safety technolo-
gies, vehicle connectivity systems and the further development
of autonomous-driving technologies. Plans also call for
substantial funds to be invested in our comprehensive electric
mobility offensive. E page 178

A.10
Investment in property, plant and equipment

2015

2016 2017–2018

Amounts in billions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

5.1

3.6

1.1

0.2

0.1

5.9

4.1

1.2

0.4

0.1

Daimler Financial Services

0.03

0.04

14.3

10.5

2.3

1.2

0.2

0.06

A.11
Research and development expenditure

Amounts in billions of euros

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

2015

2016 2017–2018

6.6

4.7

1.3

0.4

0.2

7.6

5.7

1.3

0.4

0.2

16.2

12.2

2.7

0.9

0.4

Connectivity at Daimler Buses also offers huge benefits
for everyone from bus operators (in terms of fleet management
and maintenance costs) to bus drivers traveling their routes.
Moreover, passengers benefit from e-tickets and many other
features. An important component of future urban mobility
solutions are Bus Rapid Transit (BRT) systems, which are already
offering efficient, fast and affordable local public transport in
many cities around the world.

Digital technologies also offer us the opportunity to develop
new and innovative mobility concepts for private, business and
public transport applications. Examples here include car2go,
CharterWay, Bus Rapid Transit and the “moovel” mobility plat-
form. With car2go, which is our biggest business for private
mobility services and is managed by Daimler Financial Services,
we are the world’s leading company for flexible car sharing
with more than 2.2 million customers. moovel offers our cus-
tomers the opportunity to optimally compare various
mobility services and then book and pay for them. In July 2016,
the Daimler subsidiary mytaxi and Hailo, two leading app-
based taxi providers, decided to merge. They now Have 100,000
drivers in more than 50 cities in nine countries, and constitute
the biggest European taxi network. In addition, Daimler increased
its interest in the exclusive chauffeur service Blacklane in the
third quarter, and has an interest in the long-distance bus com-
pany Flixbus.

New ways of thinking and acting are required if the digital
transformation at our company is to be successful. We want
to enthuse our employees for digital technologies and to
strengthen our culture of innovation. DigitalLife@Daimler is a
program that promotes the digital transformation throughout
the Group, improves employees’ digital literacy and raises their
enthusiastism for digital technologies and topics. Internal
communities, blogs, events, roadshows and idea competitions
offer opportunities for the development of new digital ideas
and are used to promote the most innovative concepts as
“internal startups.” In addition, we launched for example the
Startup Autobahn initiative, which we operate with several
partners. Our DigitalLife Day series of events takes employees
into the digital world of tomorrow.

We are also changing our structures and processes in order to
ensure that we can optimally utilize the opportunities offered
by digitization. To this end, we have created new organizational
units such as Future Transportation Systems and Mercedes-
Benz Mobility GmbH at Mercedes-Benz Vans and CASE at
Mercedes-Benz Cars. These organizations can develop their
own products and business ideas independently of the pro-
cesses at their respective divisions or business units. Our goal
here is to combine the speed and risk-taking culture of the
digital sector with our company’s focus on perfection and inno-
vative capability.

Together with our employees, we are developing a new manage-
ment culture within the framework of the Leadership 2020
program, which will help ensure our success also in the future.
With this approach, we are addressing the challenges associ-
ated with the digital world and creating the basis for cultural
changes throughout the Group.

We develop solutions for the
mobility of the future

Daimler continued along its path of proﬁ table growth in 2016. Unit sales and revenue
surpassed the prior-year levels and the Group’s EBIT adjusted for special items
was also higher than in 2015. On the basis of solid ﬁ nances, we focused our business
on the future: with outstanding vehicles and services, with new, proﬁ table business
models and with a corporate culture that meets the requirements of the digitized world.
We invested more than €13 billion in the future of the Daimler Group, thus creating
the right conditions for further proﬁ table growth.

B | COMBINED MANAGEMENT REPORT | CONTENTS 91

B | Combined Management Report

Corporate Proﬁ le

Business model
Portfolio changes and strategic partnerships
Important events
Performance measurement system
Corporate governance statement

Economic Conditions and Business
Development

The world economy
Automotive markets
Business development

Proﬁ tability

EBIT
Consolidated statement of income
Dividend
Net operating proﬁ t
Value added

Liquidity and Capital Resources

Principles and objectives of ﬁ nancial management
Cash ﬂ ows
Financial guarantees, contingent liabilities and
other ﬁ nancial obligations
Investment
Reﬁ nancing
Credit ratings

Financial Position

Daimler AG (condensed version
according to HGB)

Proﬁ tability
Financial position, liquidity and capital resources
Risks and opportunities
Outlook

92
94
95
95
96

97
98
99

103

103
106
107
107
107

109

109
110

113
113
114
116

117

120

120
121
122
122

Sustainability and Integrity

Sustainability at Daimler
Research and development
Innovation and safety
Environmental protection
The workforce
Social responsibility
A culture of integrity
Compliance programs

Overall Assessment
of the Economic Situation

Events after the Reporting Period

Remuneration Report

Principles of Board of Management remuneration
Board of Management remuneration
in the ﬁ nancial year 2016
Commitments upon termination of service
Remuneration of the Supervisory Board

Takeover-Relevant Information
and Explanation

Risk and Opportunity Report

Risk and opportunity management system
Risks and opportunities
Industry and business risks and opportunities
Company-speciﬁ c risks and opportunities
Financial risks and opportunities
Risks from guarantees, legal and tax risks
Overall assessment of the risk
and opportunity situation

Outlook

The world economy
Automotive markets
Unit sales
Revenue and earnings
Free cash ﬂ ow and liquidity
Dividend
Investment
Research and development
The workforce
Overall statement on future development

123

123
124
126
130
133
135
137
138

140

141

142

146
148
154

155

158

158
160
160
167
169
171

173

174

174
175
176
177
177
178
178
178
178
179

92 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

Corporate Profile

Business model

Daimler can look back on a tradition covering 130 years – a tra-
dition that extends back to Gottlieb Daimler and Carl Benz, the
inventors of the automobile, and features pioneering achieve-
ments in automotive engineering. Today, the Daimler Group is a
globally leading vehicle manufacturer that offers an unparalleled
range of premium automobiles, trucks, vans and buses. The
product portfolio is rounded out by a range of tailored financial
services and mobility services. Daimler’s goal is to continue to
play a leading role in the automotive industry in the development
of products and services for the future of mobility.

Daimler AG is the parent company of the Daimler Group and is
domiciled in Stuttgart (Mercedesstraße 137, 70327 Stuttgart,
Germany). The main business of Daimler AG is the development,
production and distribution of cars, trucks and vans in Germany
and the management of the Daimler Group. The management
reports for Daimler AG and for the Daimler Group are combined
in this management report.

With its strong brands, Daimler is active in nearly all the countries
of the world. The Group has production facilities in a total of
19 countries and more than 8,500 sales centers worldwide.
The global networks of research and development activities

B.01
Consolidated revenue by division

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

56.0%

20.7%

8.0%

2.7%

Daimler Financial Services

12.6%

and of production and sales locations give Daimler considerable
advantages in international competition and also offer additional
growth opportunities. In addition, we can apply our innovations
in a broad portfolio of vehicles while utilizing experience and
expertise from all parts of the Group. This also helps us with
the further development of technologies and services that
point the way forward to the future of mobility. Additional poten-
tial is generated by the digitization of our processes and products.

In 2016, Daimler increased its revenue by 3% to €153.3 billion.
The Group’s five divisions contributed to this total as follows:
Mercedes-Benz Cars 56%, Daimler Trucks 21%, Mercedes-Benz
Vans 8%, Daimler Buses 3% and Daimler Financial Services 13%.
At the end of 2016, Daimler employed a total workforce of more
than 282,000 men and women worldwide.

The products supplied by the Mercedes-Benz Cars division
comprise a broad spectrum of premium vehicles of the
Mercedes-Benz brand, its Mercedes-AMG high-performance
brand and its Mercedes-Maybach luxury brand. These vehicles
range from the compact models of the A-Class and B-Class to
a highly varied program of sport utility vehicles, roadsters,
coupes and convertibles and S-Class luxury sedans. The port-
folio is rounded out by the Mercedes me sub-brand and the
high-quality small cars of the smart brand. Furthermore, we
launched the new EQ brand in 2016 for all activities connected
with electric mobility. The most important markets for
Mercedes-Benz Cars in 2016 were China with 22% of unit
sales, the United States (16%), Germany (14%) and the other
European markets (30%). In the context of its growth strategy,
the division is continually further developing its flexible and
efficient production network with 29 plants on four continents.
The plants are operating at a high level of capacity utilization,
so we are expanding our production capacities with a new facility
in Jawor, Poland, and a second, highly flexible plant in Kecskemét,
Hungary. The German facilities are our lead plants and
competence centers and form the backbone of the worldwide
production organization. In connection with our electric
offensive, we are examining the possibility of producing electric
vehicles and components at existing sites within our global
production network. Thanks to highly flexible structures, we
can produce vehicles with different drive systems in our plants,
allowing us to react flexibly and quickly to changing demand in
the markets. The first series-production vehicle from the EQ
brand will be produced at our plant in Bremen. We have already
started with intensive preparations there.

B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE 93

As the biggest globally active manufacturer of trucks above
6 metric tons gross vehicle weight, Daimler Trucks develops
and produces vehicles in a global network under the brands
Mercedes-Benz, Freightliner, Western Star, FUSO and BharatBenz.
The division’s 26 production facilities are located in the NAFTA
region (14), Europe (7), Asia (3) and South America (2). In China,
Beijing Foton Daimler Automotive Co., Ltd. (BFDA), a joint
venture with our Chinese partner Beiqi Foton Motor Co., Ltd.,
has been producing trucks under the Auman brand name since
2012. Daimler Trucks’ product range includes light, medium
and heavy-duty trucks for local and long-distance deliveries
and construction sites, as well as special vehicles used mainly
in municipal applications. Due to close links in terms of pro-
duction technology, the division’s product range also includes
the buses of the Thomas Built Buses and FUSO brands. Daimler
Trucks’ most important sales markets in 2016 were the NAFTA
region with 35% of unit sales, Asia (30%), the EU30 region
(European Union, Switzerland and Norway – 19%) and Latin
America excluding Mexico (7%).

Mercedes-Benz Vans is a global supplier of a complete range
of vans and associated services. The division’s product range in
the segment for commercial vans comprises the Sprinter large
van, the Vito mid-size van (marketed as the “Metris” in the
United States) and the Mercedes-Benz Citan urban delivery
van. The range of vans in the private-customer segment consists
of the V-Class multi-purpose vehicle (MPV) and the Marco Polo
camper vans and recreational vehicles. Mercedes-Benz Vans
has manufacturing facilities at a total of nine locations in Ger-
many, Spain, the United States and Argentina, as well as in
China within the framework of the Fujian Benz Automotive Co.,

Ltd. joint venture, in France in the context of the strategic alliance
with Renault-Nissan, and in Russia in cooperation with our
partners GAZ and YaMZ. The most important markets for vans
at present are in the EU30 region, which accounts for 70% of
unit sales in the reporting year, and the NAFTA region (12% of
unit sales). We are also systematically exploiting new growth
potential within the framework of the “Mercedes-Benz Vans
goes global” business strategy. For example, we are moving into
new product segments and we will become the first premium
manufacturer to introduce a model series in the very promising
segment of mid-size pickups when we launch the X-Class at
the end of 2017. We are also expanding our presence in growth
markets. In the summer of 2016, we began building a new
Sprinter production facility in South Carolina in the United States.
We also expanded our presence in China, the world’s biggest
automotive market, by launching the V-Class and the Vito
there in 2016.

The Daimler Buses division with its brands Mercedes-Benz
and Setra is the undisputed industry leader for buses above
8 metric tons in its traditional core markets in the EU30 region,
Brazil, Turkey, Argentina and Mexico. The division’s product
range comprises city and intercity buses, coaches and bus
chassis. The largest of the division’s 14 production sites are
located in Germany, France, Spain, Turkey, Argentina, Brazil
and Mexico, and since 2015, in India as well. In 2016, Daimler
Buses generated 66% of its revenue in the EU30 region and 13%
in Latin America (excluding Mexico). While we mainly sell fully
equipped buses in Europe, our business in Latin America,
Mexico, Africa and Asia is focused on the production and
distribution of bus chassis.

94 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

The Daimler Financial Services division supports the sales of
the Daimler Group’s automotive brands in approximately 40
countries worldwide. Its product portfolio primarily consists of
tailored financing and leasing packages for customers and
dealers, but also insurance brokering, fleet management services,
investment products and credit cards, as well as various
mobility services such as the “moovel” mobility platform. With
the mytaxi app, following the merger with Hailo, we now reach
approximately 6 million customers in more than 50 cities. The
flexible mobility concept car2go is used by more than 2.2 million
customers worldwide. The main areas of the division’s activities
are Western Europe and North America, and increasingly China
as well. During the year under review, Daimler Financial Services
financed or leased about 50% of the vehicles sold by Daimler.
The division’s contract volume of €132.6 billion covers more
than 4.3 million vehicles. Daimler Financial Services also holds
a 45% interest in the Toll Collect consortium, which operates
an electronic road-charging system for trucks on highways in
Germany.

Daimler is active in the global automotive industry and related
sectors also through a broad network of subsidiaries, holdings
and partnerships. The statement of investments of Daimler AG
in accordance with Section 313 of the German Commercial
Code (HGB) can be found in E Note 40 of the Notes to the
Consolidated Financial Statements.

Portfolio changes and strategic partnerships

By means of targeted investments and future-oriented partner-
ships, we strengthened our core business and utilized additional
growth potential in 2016. At the same time, we focused on the
continuous further development of our business portfolio, as
well as on improving our competitiveness in our core business
areas.

In April 2016, the moovel Group, which is a wholly owned
Daimler subsidiary, reorganized its activities in North America:
Globe Sherpa was merged into RideScout and renamed as
moovel North America. The consolidation of our mobility services
under the management of moovel North America will
strengthen our business activities in this sector on the US
market. moovel Group offers customers moovel transit in the
United States and in Germany the moovel mobility app. Hamburg
has now become the first German city with more than one
million residents to receive one-stop urban mobility services via
moovel and its app, which now allows for the direct booking
and payment of services provided by car2go and mytaxi, as
well as train journeys and trips within the Hamburger Verkehrs–
verbund (HVV) regional transport network.

The Daimler subsidiary mytaxi and Hailo, two innovative and
leading app-based taxi ordering services, joined forces in the
reporting year. The merger has created Europe’s biggest company
in this sector, with 100,000 registered taxi drivers and 6 million
customers in more than 50 cities in nine European countries.
Daimler has a 69% interest in the merged company. The two
providers complement each other perfectly with their combined
geographical coverage: Hailo operates in the United Kingdom,
Ireland and Spain, while mytaxi offers services in Germany,
Italy, Austria, Poland, Portugal, Spain and Sweden.

Daimler has also increased its stake in the professional chauffeur
service portal Blacklane to 31%. Blacklane has received an
eight-digit investment that it will use to further expand its
global business. Blacklane has around 200 employees and is
represented in over 250 cities and 500 airports in more than
50 countries worldwide. Daimler has invested in Blacklane
since 2013. The global market for professional ride services is
currently estimated to have a volume of about US$30 billion
per year, and it continues to evolve and grow. Daimler also
holds an interest in Flixbus, a long-distance bus operator.

Daimler Financial Services acquires Athlon
Daimler Financial Services made strategic investments in its
fleet management business in the year under review. In June
2016, agreements were signed governing the acquisition of
Athlon Car Lease International B.V., a subsidiary of the Rabobank
Group in the Netherlands. Athlon is a leading provider of mobility
solutions in Europe, with a particular focus on commercial fleet
leasing and management. It is planned to operate Daimler’s
entire fleet-management business under the Athlon brand. This
new brand will mark the emergence of one of the leading
companies in the European fleet management sector, with a
portfolio consisting of approximately 360,000 cars and vans.
The transaction was completed in December 2016 following
approval by antitrust and other supervisory authorities.

Strengthening mobility services
Daimler has continually invested in the establishment and
expansion of mobility platforms and services in recent years.
In order to ensure that we occupy a position as a leading provider
of innovative mobility solutions, we strengthened and expanded
our activities in this area during the year under review.

Extensive investment in electric mobility
Construction of a second battery factory for our wholly owned
subsidiary Deutsche Accumotive began in Kamenz in October
2016. Daimler thus continues to move ahead systematically
with its strategy for electric mobility. With an investment of
approximately €500 million, the site in Kamenz will be one
of the biggest and most modern battery factories in Europe.
Daimler plans to invest a total of around €1 billion in the
expansion of its global battery production network. The Group
already offers a large number of electric vehicles and will continue
to expand that product range. Mercedes-Benz presented its
new electric mobility brand, EQ, at the 2016 Paris Motor Show.
EQ offers a comprehensive electric-mobility ecosystem of
products, services, technologies and innovations. The new
brand is heralded by the near-production Concept EQ, which
had its world premiere in Paris. The first series-produced EQ
model will be launched in the SUV segment before the end of this
decade. It will be followed by a model offensive that will gradually
expand the portfolio of Mercedes-Benz Cars to include even
more electric models. Deutsche Accumotive will supply the
batteries for the first EQ production cars. E pages 20 ff

B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE 95

Important events

Pension plan assets strengthened
The Board of Management of Daimler AG approved a measure
that went into effect on June 30, 2016 to add approximately
€1.8 billion to domestic plan assets in Germany in order to
strengthen the pension plan assets over the long term. This
was effected by transferring the 3.1% shareholdings in each of
Renault S. A. and Nissan Motor Co. Ltd. into the Daimler AG
pension fund. This improved the funded status of our pension
obligations and also led to a non-recurring positive EBIT item
of approximately €0.6 billion in 2016. Regardless of the share
transfer, we will continue our successful strategic partnership
with the Renault-Nissan Alliance.

EU antitrust proceedings
In a settlement reached on July 19, 2016, the European Com-
mission concluded the antitrust proceedings against Daimler and
other truck manufacturers that commenced in 2011. The Com–
mission imposed a fine on Daimler amounting to €1.0 billion.
Daimler cooperated closely with the authorities throughout the
proceedings, and the European Commission took this into
account in reducing the fine imposed. Daimler had recognized
a provision for the proceedings and paid the fine in September
2016.

Performance measurement system

Financial performance measure
The financial performance measures used at Daimler are
oriented toward our investors’ interests and expectations and
provide the foundation for our value-based management.

Value added
Value added is a key element of our performance measurement
system, which is applied at both Group and divisional levels.
It is calculated as the difference between operating profit and
the cost of capital of average net assets. Alternatively, the
value added of the industrial divisions can be determined by
using the main value drivers: return on sales (quotient of EBIT
and revenue) and net assets’ productivity (quotient of revenue
and net assets).  B.03

B.03
Calculation of value added

Value
added

Proﬁt
measure

–

Net assets

Cost of
capital (%)

Cost of capital

Value
added

Return
on sales

Net assets
productivity

–

Cost of
capital (%)

Net
assets

Development of a charging infrastructure for electric
vehicles
The development of an effective charging infrastructure is
a precondition for the success of electric mobility. Daimler
is cooperating with various partners in this area. In November
2016, it was announced that Daimler AG, the BMW Group, Ford
Motor Company and the Volkswagen Group with Audi and
Porsche are planning a joint venture to establish Europe’s biggest
charging network for electric vehicles. The partners have
signed a memorandum of understanding to this effect. Together,
they will quickly set up a substantial number of charging sta-
tions, thus considerably enhancing the long-distance practicality
of electric mobility. Also together with other partners in German
industry, Daimler holds a stake in the e-roaming platform Hubject,
a joint venture that is promoting the digital connectivity of
charging stations for electric vehicles throughout the industry.

Expansion of our business with stationary energy storage
Daimler AG systematically expanded its network of expertise for
lithium-ion battery applications in 2016. Mercedes-Benz Energy
GmbH, which was established in June, is now responsible for
the development and global sales of stationary energy-storage
units of the Mercedes-Benz brand. This move enables Daimler
to operate in a more targeted manner in the growing market
for stationary batteries. The production of the systems remains
the core area of expertise at our subsidiary Deutsche Accumotive
GmbH & Co. KG. By expanding this line of business to include
stationary batteries for private and industrial applications,
Deutsche Accumotive GmbH & Co. KG was able to open up
new growth opportunities in 2015. Deliveries of domestic storage
solutions for the German market began in April 2016, and work
has already started on setting up the first large-scale industrial
projects in the field of primary control power. With the estab-
lishment of Mercedes-Benz Energy GmbH in Kamenz, Germany,
the company is now taking another step toward expanding its
business with stationary energy storage. Here, Daimler is focusing
in particular on international expansion and collaboration with
new partners. For example, Mercedes-Benz Energy Americas,
LLC was established in October 2016 as a distributor of stationary
storage systems for private households and commercial and
industrial applications in the North American market.

Support for startups
Daimler pursues a variety of approaches designed to help the
company benefit from the creativity, speed and agility of startups
that are not part of the Group’s holdings. For example, Daimler
is working in the Start-up Autobahn project with the US venture
capital company Plug and Play, the University of Stuttgart and
various startup companies that develop innovative mobility
ideas. Daimler and its partners support the project by making
their expertise and infrastructure available. The specially selected
startups in the project are given three months to develop their
ideas further and to present them to investors, who then decide
whether or not they should receive funding.

Daimler also makes relatively small strategic investments in
venture capital funds in the United States, China and Israel via
Daimler Vermögens- und Beteiligungsgesellschaft mbH and
Daimler North America Corp. Strategic cooperation with these
funds enables us to gain access to innovative startup companies
and to benefit from new trends early on. In other words, the
venture capital funds help us identify investment opportunities
and new technologies and to develop business models that
support the objectives of various Daimler strategies.

96 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE

The use of a combination of return on sales and net assets’
productivity within the context of a strategy of profitable revenue
growth provides the basis for the positive development of
value added. Value added shows the extent to which the Group
and its divisions achieve or exceed the minimum return
requirements of shareholders and creditors, thus creating
additional value.

The quantitative development of value added and the other
financial performance measures is explained in the “Profitability”
chapter. E pages 103 ff

Profit measure
The measure of operating profit at the divisional level is EBIT
(earnings before interest and income taxes). EBIT thus reflects
the divisions’ responsibility for profit and loss. The measure of
operating profit used at the Group level is net operating profit.
It comprises the EBIT of the divisions as well as profit and loss
effects for which the divisions are not held responsible. The
latter include income taxes and other reconciliation items.
 B.12 on page 103

Net assets
Net assets are the basis of the investors’ required return. The
industrial divisions are accountable for the net operating assets;
all assets, liabilities and provisions which they are responsible
for in day-to-day operations are therefore allocated to them.
Performance measurement at Daimler Financial Services is on an
equity basis. Net assets at the Group level include the net
operating assets of the industrial divisions and the equity of
Daimler Financial Services, as well as assets and liabilities
from income taxes and other reconciliation items which cannot
be allocated to the divisions. Average annual net assets are
calculated from average quarterly net assets. E page 108

Cost of capital
The required rate of return on net assets, and hence the cost
of capital, is derived from the minimum rates of return that
investors expect on their invested capital. The cost of capital
of the Group and the industrial divisions comprises the cost of
equity as well as the costs of debt and net pension obligations
of the industrial business; the expected returns on liquidity of
the industrial business are considered with the opposite sign.
The cost of equity is calculated according to the capital asset

B.04
Cost of capital

In percent

2016

2015

Group, after taxes

Industrial business, before taxes

Daimler Financial Services, before taxes

pricing model (CAPM), using the interest rate for long-term risk-
free securities (such as German government bonds) plus a risk
premium reflecting the specific risks of an investment in Daimler
shares. While the cost of debt is derived from the required
rate of return for obligations entered into by the Group with
external lenders, the cost of capital for net pension obligations
is calculated on the basis of discount rates used in accordance
with IFRS. The expected return on liquidity is based on
money-market interest rates. The Group’s cost of capital is the
weighted average of the individually required or expected
rates of return. During the reporting period, the cost of capital
amounted to 8% after taxes. For the industrial divisions,
the cost of capital amounted to 12% before taxes; for Daimler
Financial Services, a cost of equity of 13% before taxes was
applied.  B.04

Return on sales
As one of the main factors influencing value added, return on
sales is of particular importance for assessing the industrial
divisions’ profitability. The combination of return on sales and
net assets’ productivity results in return on net assets (RONA).
If RONA exceeds the cost of capital, value is created for our
shareholders. The measure of profitability for Daimler Financial
Services is not return on sales, but return on equity.

Key performance indicators
The important financial indicators for measuring our operating
financial performance, in addition to EBIT and revenue, are the
free cash flow of the industrial business, investment, and re-
search and development expenditure. Along with the indicators
of financial performance, we also use various non-financial
indicators to help us manage the Group. Of particular importance
in this respect are the unit sales of our automotive divisions,
which we use as the basis for our capacity and human resources
planning and workforce numbers.

Furthermore, within the context of our sustainability man-
agement, we use other non-financial indicators such as the
CO2 emissions of our vehicle fleet and the energy and water
consumption of our production sites. Non-financial indicators
are also used to determine the remuneration of our Board
of Management members. In addition, integrity and compliance
are important criteria applied in the annual target agreements
for our executives, as well as in assessing the achievement of
those targets.

Details of the development of non-financial performance
indicators can be found in the chapters “Economic Conditions
and Business Development” and “Sustainability and Integrity.”
E pages 97 ff and pages 123 ff

Corporate governance statement

The corporate governance statement pursuant to Section 289a
and Section 315 Subsection 5 of the German Commercial
Code (HGB) is part of this combined management report.
It can be found in this annual report on pages E 207 ff and can
also be viewed on the Internet at w daimler.com/corpgov/en.
Pursuant to Section 317 Subsection 2 Sentence 4 of the German
Commercial Code (HGB), the contents of the statement pursuant
to Section 289a and Section 315 Subsection 5 of the HGB are
not included in the audit carried out by the external auditors.

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 97

Economic Conditions
and Business Development

The world economy

With real growth of about 2.5% in the year under review,
the world economy had its weakest growth performance since
the financial crisis in 2009.  B.05 Unlike in the previous year,
this was caused not only by the continuation of disappointing
economic developments in the emerging markets, but also
by a distinct slowdown of growth dynamism in the industrialized
countries. A particularly negative factor was the uncertainty
connected with geopolitical developments such as the outcome
of the British EU referendum, the attempted coup in Turkey
and the ongoing conflicts in Syria and Ukraine. After the weakest
start to the year for several decades, global stock markets
recovered as the year progressed, but with significant volatility.
Raw-material prices also increased slightly again following
an initial continuation of the downward trend.

In the generally rather difficult economic environment,
the economies of the industrialized countries posted growth
of approximately 1.5%, which is below the prior-year rate
of 2.2%. This applies also to the US economy, which with growth
in output of 1.6% was significantly below the rates of the
previous years. While private consumption was still relatively
firm, investment by companies stagnated. According to
recent estimates, the Japanese economy hardly contributed
towards global growth with an increase in gross domestic
product (GDP) of just under 1%.

Among the industrialized countries, it was only the economy
of the European Monetary Union that was able to develop in
line with its potential, demonstrating a high degree of resilience
despite ongoing political risks with GDP growth of approxi-
mately 1.5%. But with the continuation of unusually low inflation
rates and a hesitant recovery of lending activities, the Euro-
pean Central Bank supported the economic development by
once again increasing its already very expansive measures.
The German economy had another very successful year with
GDP growth of 1.9%. Although negative effects of the Brexit
referendum were already apparent in the second half of the year,
GDP growth in the United Kingdom remained generally solid
at about 2%.

The economic development of the emerging markets was once
again disappointing; with a rate of 3.5%, their growth was only
slightly higher than in the year of the financial crisis. This was
primarily due to the very unfavorable state of the economies of
South America, Russia and the Middle East. Although raw-
material prices recovered slightly during the year, countries
with significant exports of raw materials suffered from the
continuation of low prices. However, fears expressed at the
beginning of the year concerning the Chinese economy were not
confirmed; on the contrary, with support from fiscal and
monetary policies, the country’s economic situation improved,
and robust growth of approximately 6.7% was achieved.

In this partially very difficult global economic environment,
currency exchange rates were once again very volatile. Against
the US dollar, the euro moved during the year between $1.03
and $1.16. At the end of the year, however, the euro stood at
$1.05, which is only slightly lower than at the end of 2015
($1.09). The range of fluctuation of the Japanese yen against
the euro was distinctly wider, with a corridor of 111 to 133 yen
to the euro. At the end of the year, the euro had fallen against
the yen by about 6% compared with the end of 2015. Due to the
British referendum result in favor of leaving the European Union,
the British pound came under considerable pressure and
had fallen by about 14% against the euro by the end of the year.
Contrary to the previous year, currencies such as the Brazilian
real and the Russian ruble climbed by about 25% against the euro.

B.05
Economic growth

Gross domestic product, growth rates in %

2015
2016

-1

-2

-3

-4

Total

Europe

NAFTA

Asia

South
America

Source: IHS Global Insight, own calculations

98 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

Automotive markets

Despite the relatively weak world economy, global demand
for cars continued its favorable development in 2016. From
the starting point of last year’s record level, worldwide car
sales increased by just over 5%. However, this result was signif-
icantly boosted by the strong market growth in China. Other-
wise, global demand was rather mixed. The European market
posted significant growth, while the US market grew only
slightly. The development of demand in the major emerging
markets remained varied.  B.06

Once again, the Chinese market made by far the biggest contri-
bution to the growth of the world market. This was partially due
to the gradual acceleration of the country’s economic growth
during the year, as well as state tax incentives for purchasers
of cars with small engines, which boosted demand by approxi-
mately 18%. Especially in the later months, the planned reduction
in the incentives at year-end led to a sharp increase in sales
figures.

B.06
Global automotive markets

Unit sales growth rates 2016 in %

Passenger cars
Commercial vehicles

-5

-10

-15

-20

-25

-30

Total

Europe

NAFTA1,2

Asia

South
America1,2

1 Cars segment includes light trucks
2 Medium- and heavy-duty trucks

Source: German Association of the
Automotive Industry (VDA),
various institutions

Demand for cars in Western Europe continued its positive devel-
opment. Despite increasing political uncertainty, market
recovery continued with an increase of about 6%. This growth
took place on a broad basis. Demand in the core markets
of Germany and France remained very robust with increases of
4.5% and approximately 5% respectively. The British market
has so far been unaffected by the Brexit vote and with growth
of just over 2% reached a new record volume of approximately
2.7 million cars sold. The strongest growth of all Western Euro-
pean volume markets of 16% was recorded in Italy, although
this came from a relatively low level. The Russian car market
continued to be difficult and contracted again significantly.

The US market for cars and light trucks expanded slightly
compared with the previous year and reached a new record
volume of approximately 17.5 million vehicles. The SUV and
pickup segments developed significantly better than demand
for traditional sedans. The Japanese car market posted a
moderate correction, with contraction of about 1.5%. The Indian
market once again grew significantly. But demand for cars
in Brazil decreased again by a double-digit rate.

Worldwide demand for medium- and heavy-duty trucks was
affected much more by the rather weak world economy than
the car segment. In the sale markets relevant for us, demand
was in total significantly lower than in 2015.

The North American market suffered from weaker overall
investment. In weight classes 6-8, market volume contracted
by 12%. The drop in demand was especially severe in the
high-margin, heavy-duty segment (class 8) with a fall of approxi-
mately 20%, while the medium-duty segment (classes 6-7)
actually grew by about 5%.

The market of the EU30 region (European Union, Switzerland
and Norway) once again enjoyed strong growth of approxi-
mately 11%, but with significant deceleration towards the end
of the year. The large individual markets expanded, some
of them significantly. Although the British market weakened
somewhat following the Brexit referendum, it was still stronger
than in 2015 over the full year. Considerable political uncer-
tainty and the purchases brought forward due to the introduction
of the Euro VI emission standard on January 1, 2016 meant that
demand in Turkey slumped by more than 45% compared with
the previous year. The Brazilian market contracted significantly
once again. Starting from an already very low level, sales
decreased again by approximately 30%. Demand for trucks in
Russia stabilized during the year, however, and was slightly
above the low prior-year level. There was a strong market recov-
ery in China, where the number of trucks sold increased
by about 40%.

From Daimler’s perspective, the main Asian markets were rather
mixed. The Japanese market for light-, medium- and heavy-
duty trucks expanded slightly despite rather sluggish economic
growth, and therefore remained at a solid level. However,
demand in Indonesia was still weak and decreased by more than
10% from the previous year’s low level. The Indian market for
medium- and heavy-duty trucks expanded slightly compared
with 2015. While demand was 25% above the prior-year level
in the first half of the year, it weakened considerably in the
second half. This was mainly caused by uncertainty regarding
the planned reform of value-added tax, which could signifi-
cantly improve the tax conditions for truck purchases in India
in 2017.

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 99

Demand for vans in Western Europe continued to grow in
2016. The market volume increased for mid-size and large vans
by 14% and for small vans by 11%. The overall van market in
Germany grew by 12%. The US market for large vans also con-
tinued its very positive development with growth of 14%. In
China, however, there was significant contraction of the market
segment we address there. Due to the unfavorable economic
situation, the market for large vans in Latin America contracted
sharply once again.

The market volume for buses in the EU30 region expanded
by approximately 5% compared with the previous year. Due
to the continuation of difficult economic conditions, demand
in Brazil was significantly below the prior-year level, with
contraction of about 34%. As a result of the currently difficult
situation, domestic demand in Turkey decreased significantly
compared with 2015.

The growth was primarily driven by our SUVs; total unit sales
in that segment increased by 31% to 712,100 vehicles. Demand
was very strong also for our A- and B-Class models, with
an increase of 2%. Including the CLA and CLA Shooting Brake,
435,400 of those cars were delivered. Our C-Class models
enjoyed ongoing success, with a 4% increase in unit sales to a
total of 490,200 sedans, wagons, coupes and convertibles
in 2016. In the year of the model change, the E-Class almost
matched the prior-year volume, with the new model creating
strong sales impetus as of the third quarter. We sold a total of
304,200 vehicles in the E-Class segment, including 188,300
units of the new model. Although there was a decrease in sales
of the S-Class for lifecycle reasons to 84,300 units (2015:
106,200), it continues to be the world’s bestselling luxury sedan.
 B.07

Business development

B.07
Unit sales structure of Mercedes-Benz Cars

A-/B-Class

C-Class

E-Class

S-Class

SUVs*

Sports Cars

smart

* including GLA

Europe

NAFTA

Asia

Other markets

20%

22%

14%

32%

45%

18%

33%

Unit sales
Daimler increased its total unit sales in the year 2016 by 5%
to approximately 3 million vehicles, thus achieving its growth
target. The Mercedes-Benz Cars and Mercedes-Benz Vans
divisions confirmed the forecasts made at the beginning of the
year with significant growth (+10% and +12% respectively).
Daimler Trucks posted a significant decrease in unit sales of
17%. At the beginning of the year, the division had aimed for
unit sales in the magnitude of the previous year. That target had
to be successively adjusted as a result of the significantly less
favorable market development in the NAFTA region, the Middle
East and Turkey. Also at Daimler Buses, unit sales were signif-
icantly below the prior-year level (-7%) and did not reach the
originally anticipated volume, primarily due to repeated
significant market contraction in Brazil.

The Mercedes-Benz Cars division continued along its growth
path in the year under review. Unit sales increased by 10%
to the new record of 2,198,000 vehicles. The Mercedes-Benz
brand increased its unit sales by 9% to a best-ever figure of
2,053,500 vehicles. This means not only that Mercedes-Benz
grew faster than the worldwide car market, but also that it
delivered more vehicles in the premium segment than any other
manufacturer. We are the number one in the premium segment
in Germany and some other key European markets, as well
as in the United States, Canada and Japan. In addition, we signif-
icantly improved our position in China in 2016.

In Europe, Mercedes-Benz sold a total of 872,200 vehicles
(+12%). Double-digit growth rates were achieved above all
in the volume markets of the United Kingdom (+15%), France
(+18%), Italy (+16%) and Spain (+20%). And in Germany, we
increased our unit sales by 6% to 275,900 vehicles. In China,
we grew by 20% in 2016 – faster than the overall market
and important competitors. Total unit sales in the NAFTA region
were slightly lower than in the previous year. Growth was
achieved in Mexico, while our unit sales in the United States
and Canada decreased slightly. Unit sales in Japan were 6%
lower than in 2015 due to the general market development.
However, we achieved significant growth in South Korea
(+33%), Australia (+17%) and Taiwan (+12%).

100 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

B.08
Unit sales structure of Daimler Trucks

19%

35%

30%

EU30

Latin America

NAFTA

Asia

Other markets

B.09
Market share1

In %

Mercedes-Benz Cars

European Union

thereof Germany

United States

China

Japan

Daimler Trucks

Medium- and heavy-duty
trucks EU30 (excluding the UK)

thereof Germany

Heavy-duty trucks NAFTA
region (class 8)

Medium-duty trucks NAFTA
region (classes 6 and 7)

Medium- and heavy-duty
trucks Brazil

Trucks Japan

Trucks Indonesia

Medium- and heavy-duty
trucks India

Mercedes-Benz Vans

Mid-size and large vans
Western Europe

thereof Germany

Small vans Western Europe

Large vans United States

Daimler Buses

Buses over 8 tons EU30

thereof Germany

Buses over 8 tons Brazil

2016

2015

16/15

Change in
% points

6.2

10.4

2.0

2.1

1.7

21.6

37.2

40.0

37.9

29.8

20.4

46.7

6.8

18.4

27.3

3.1

7.6

29.7

50.1

58.4

5.8

10.1

2.0

1.9

1.6

22.4

36.9

39.3

39.7

26.7

20.8

48.0

7.3

18.4

27.1

3.2

8.7

29.5

49.3

52.5

+0.4

+0.3

+0.0

+0.2

+0.1

-0.8

+0.3

+0.7

-1.8

+3.1

-0.4

-1.3

-0.5

+0.2

-0.1

-1.1

+0.2

+0.8

+5.9

1 Based on estimates in certain markets.

The smart brand reached a sales milestone in September 2016,
with more than two million vehicles sold since its market
launch in 1998. Meanwhile, smart is represented in 46 markets
worldwide. In the year 2016, the brand’s unit sales increased
by 19% to the new record of 144,400 cars. E pages 182 ff

Unit sales by Daimler Trucks in 2016 were significantly
lower than in the previous year. In total, we delivered 415,100
heavy-, medium- and light-duty trucks as well as buses
of the Thomas Built Buses and FUSO brands (2015: 502,500).
Daimler Trucks continues to be the world’s biggest manu-
facturer of trucks above 6 tons.  B.08

Positive market impetus was delivered by the EU30 region
(European Union, Switzerland and Norway), although with
decreasing dynamism in the second half of the year. Our sales
in this region increased by 4% to 79,800 trucks. The Mercedes-
Benz brand remained the market leader in the medium- and
heavy-duty segment (excluding the United Kingdom) with a share
of 21.6% (2015: 22.4%). In Turkey, our unit sales fell by more
than half to 9,300 vehicles in the year under review (2015:
24,900). This drastic slump was caused by weak demand caused
by purchases being brought forward to 2015 due to the intro-
duction of the Euro VI emission standard at the beginning of 2016,
as well as the country’s difficult situation.  B.09

Unit sales in Latin America decreased significantly once again
to 27,500 vehicles, due in particular to the deep recession
in Brazil, our main market in that region (2015: 30,500). In this
environment, we were able to achieve market leadership
and increased our market share in the medium- and heavy-duty
segment in Brazil with trucks of the Mercedes-Benz brand
to 29.8% (2015: 26.7%). Irrespective of the currently difficult
situation, we believe in the long-term importance of the
Latin American market.

Also in the NAFTA region, we were unable to avoid the impact
of a sharply contracting market for class 8 trucks. Our unit
sales of 145,700 trucks were significantly below the unusually
high number sold in the previous year (2015: 191,900). But
in classes 6-8, we are the market leader by a significant margin
with a market share of 39.3% (2015: 39.4%). In class 8 for heavy
trucks, we increased our market share to 40.0% (2015: 39.3%).

We increased our sales in Japan to 46,400 units (2015: 45,600).
With the FUSO brand, we achieved a share of the overall truck
market in Japan of 20.4% (2015: 20.8%). In an Indonesian market
that once again contracted sharply, our unit sales fell to
28,000 vehicles (2015: 32,100). With a share of 46.7% of the
overall truck market, we continue to be the market leader
by a large margin (2015: 48.0%).

In India, our sales of 13,100 trucks were lower than in the
previous year (2015: 14,000); our market share was 6.8% (2015:
7.3%). Deliveries of the export vehicles produced in Chennai
to customers in Asia, Latin America and Africa more than doubled
to over 4,000 units in 2016. Meanwhile, more than 30 markets
are supplied with trucks from Chennai.

In the Middle East, our sales decreased substantially to 17,600
units (2015: 36,300). The main reasons for the low level of
investment there in 2016 were the low oil price and the ongo-
ing conflicts in the region.

B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT 101

Business at the Daimler Financial Services division devel-
oped positively in the year under review. As we had forecast
in Annual Report 2015, worldwide contract volume continued
to grow, reaching the new record level of €132.6 billion (+14%).
The acquisition of Athlon Car Lease International B.V. contrib-
uted €3.7 billion of the growth in contract volume. Adjusted for
exchange-rate effects and the Athlon acquisition, contract
volume grew by 10%. New business also increased in the mag-
nitude we had anticipated: by 7% to €61.8 billion. Significant
growth was recorded in Europe (+9%) while the prior-year level
was not quite reached in the Americas region (-2%). The growth
of new business in the Africa and Asia-Pacific region was once
again particularly dynamic at a rate of 18%. In the insurance busi-
ness, we brokered a total of 1.8 million policies, as in 2015.
Daimler Financial Services supported numerous companies with
the financing and management of their vehicles and fleets in
2016. At the end of the year, the division had a total of 361,000
vehicles on its books in Europe. With last year’s acquisition
of Athlon, we invested in the growth of the fleet-management
business and considerably strengthened our competitive
position. Athlon accounted for 268,000 contracts with fleet
customers. We further expanded the business with innovative
mobility services in 2016. car2go had more than 2.2 million
users at the end of the year and is thus the world’s leader for
flexible car sharing. We also further developed the moovel app,
with which customers in Germany can find the best way of
traveling from A to B using various modes of transport, and can
directly book and pay providers such as car2go, mytaxi and
Deutsche Bahn (German Railways). In April, Hamburg was the
first city with more than a million inhabitants to be integrated
into the moovel app. Since then, it has been possible to book
and pay for journeys in the entire Hamburg public transport
system. In addition, the moovel Group has consolidated its
activities in North America: GlobeSherpa has been merged
into RideScout and renamed as moovel North America. With
moovel transit, moovel North America is the leading provider
of mobile ticket solutions for the apps of public transport com-
panies in the United States. The company has more than
2.2 million users in Germany and the USA. In July, mytaxi and
Hailo, two leading app-based taxi providers, decided to
join forces and merge into one company. Based in Hamburg,
it operates under the mytaxi brand, and is the biggest Euro-
pean taxi network with 100,000 drivers and approximately
six million customers in more than 50 cities in nine countries.
E pages 199 ff

In China, the world’s biggest truck market, Daimler AG holds
a 50% interest in Beijing Foton Daimler Automotive Co. Ltd.
(BFDA), a joint venture with Beiqi Foton Motor Co. Ltd. Medium-
and heavy-duty trucks of the Auman brand have been pro-
duced there since mid-2012. With the recovery of the Chinese
truck market in 2016, the joint venture increased its sales
of Auman trucks to 77,800 units (2015: 69,200). E pages 188 ff

Mercedes-Benz Vans once again achieved record sales of
359,100 vehicles in 2016, surpassing the prior-year figure by
12%. While we primarily focus on commercial customers with
the Sprinter, Vito and Citan models, the V-Class is primarily
aimed at private users. In the EU30 region, our most important
market, we increased our unit sales by 13% to 249,900 vehicles,
and we continue to be the market leader for mid-size and large
vans with a share of 18.4% (2015: 18.4%). Significant growth
was achieved in the key European volume markets, and the
division achieved a new record in Germany with sales of
96,100 units (2015: 88,400). However, unit sales decreased signif-
icantly in Russia (-15%) and Turkey (-7%). Mercedes-Benz Vans
continued along its growth path in the NAFTA region; sales there
increased significantly to 43,400 units (2015: 40,500) and
the division’s market share for large vans in the United States
reached 7.6% (2015: 8.7%). The market environment in Latin
America remained difficult and sales therefore decreased by
21% to 12,500 units. In China, following the successful start
of our vans in the midsize segment (Vito and V-Class), unit sales
increased compared with the previous year by 90% to 13,600
vehicles. In total, we sold 193,400 Sprinter vans worldwide in
the reporting period (2015: 194,200). Sales of the Vito increased
by 24% to 92,100 units. The V-Class multipurpose vehicle was
particularly successful; sales of 48,700 units surpassed the
prior-year number by 58%. Sales of the Mercedes-Benz Citan
reached 24,900 units (2015: 21,700). E pages 193 ff

Daimler Buses sold 26,200 buses and bus chassis in 2016
(2015: 28,100). The significant decrease is due in particular to the
ongoing difficult economic situation in Brazil. Nonetheless,
the division maintained its clear market leadership in its tradi-
tional core markets of the EU30, Brazil, Turkey, Argentina and
Mexico. The business with complete buses in the EU30 region
developed positively. Sales here increased by 3% to 8,800
units and market share was once again at the very high level of
29.7% (2015: 29.5%). Due to strong demand for our Mercedes-
Benz and Setra buses, unit sales in Germany increased to 3,100
vehicles (2015: 2,800). As a result of the currently difficult
situation in Turkey, our sales of 600 units there were significantly
below the prior-year number (2015: 1,000). The situation in
Latin America (excluding Mexico) worsened again considerably
because of the ongoing difficult economy there, especially
in Brazil. Unit sales of Mercedes-Benz bus chassis once again
fell by a double-digit rate in Brazil (-32%) to 4,900 units.
Nonetheless, we were able to significantly strengthen our leading
market position in Brazil with a market share of 58.4% (2015:
52.5%). In Mexico, sales of 3,800 units were slightly lower than
in the previous year (2015: 4,000), whereby a stable market
share was maintained at the high level of the previous year.
E pages 196 ff

102 B | COMBINED MANAGEMENT REPORT | ECONOMIC CONDITIONS AND BUSINESS DEVELOPMENT

Order situation
The Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans
and Daimler Buses divisions produce vehicles predominantly
to order in accordance with customers’ specifications. In doing
so, we flexibly adjust production numbers to changing levels
of demand. Due in particular to strong demand in China and the
European markets, the number of orders placed with Mercedes-
Benz Cars was once again above the high level of orders recorded
in the previous year. This was driven on the product side primarily
by our very successful SUVs and, as of the second half of the
year, also by the new E-Class models. Due to the positive devel-
opment of demand, we significantly increased our production
volumes. Nonetheless, the order backlog at the end of 2016 was
higher than a year before. At Daimler Trucks, both orders
received and order backlog at year-end were significantly lower
than a year earlier. This primarily reflects the low demand
in the market for heavy-duty trucks in the NAFTA region and
the ongoing market weakness in the Middle East and Turkey.

Revenue
In the year 2016, Daimler generated revenue of €153.3 billion,
which is slightly above the prior-year level (2015: €149.5 billion);
adjusted for exchange-rate effects, revenue grew by 3%. This
means that our expectations at the beginning of the year were
fulfilled. Each of the divisions Mercedes-Benz Cars (+7%),
Mercedes-Benz Vans (+12%) and Daimler Financial Services (+9%)
significantly increased its volume of business. Whereas the
Daimler Trucks division posted a significant decrease in revenue
of 12%, primarily due to the very weak condition of some
major truck markets, which we had not anticipated at the begin-
ning of the year. At Daimler Buses, revenue was 2% higher
than in the previous year.

In regional terms, Daimler achieved revenue growth in Europe
(+9% to €63.4 billion) and in Asia (+5% to €35.6 billion) while
the prior-year level was not quite achieved in the NAFTA region
(-6% to €45.0 billion).

B.11
Revenue by division and region

2012
2013

2014
2015

2016

In millions of euros

% change

2016

2015

16/15

B.10
Consolidated revenue by region

In billions of euros

Germany

Europe
(without
Germany)

NAFTA region

Asia

Daimler Group

153,261

149,467

Divisions

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Regions

Europe

thereof Germany

NAFTA

thereof United States

Asia

thereof China

Other markets

89,284

33,187

12,835

4,176

20,660

63,417

23,509

44,960

39,169

35,562

15,984

9,322

83,809

37,578

11,473

4,113

18,962

58,247

22,001

47,653

41,920

33,744

14,684

9,823

-12

+12

-6

-7

-5

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 103

Profitability

EBIT adjusted for special items fundamentally constitutes
EBIT excluding the impact of any unusual factors. They can also
include such special items that have a significant effect on
the comparison of EBIT for the reporting period with EBIT for
the previous year, such as expenses from restructuring and
from impairments. The special items affecting earnings in the
years 2015 and 2016 are shown in table  B.14.

Due to the favorable business development in most divisions,
Daimler was able to exceed slightly its prior-year EBIT
adjusted for special items of €13.8 billion, achieving €14.2
billion in 2016, which is in line with our expectations as
stated in the Outlook section of Annual Report 2015.  B.12

EBIT

The Daimler Group achieved EBIT of €12.9 billion in 2016
(2015: €13.2 billion).  B.12  B.13

Despite higher expenses in connection with Takata airbags and
from the remeasurement of inventories, the Mercedes-Benz
Cars division slightly improved on its prior-year earnings. This
was the result of further growth in unit sales, especially in the
SUV segment. Daimler Trucks did not achieve its high earnings
of the previous year as a result of market-related decreases
in unit sales in some key markets. The Mercedes-Benz Vans
division increased its EBIT significantly as a result of higher
unit sales. The Daimler Buses division achieved EBIT signifi-
cantly above the prior-year level as well. At Daimler Financial
Services, earnings increased slightly primarily due to the growth
in contract volume.

The reconciliation of segment earnings to Group EBIT resulted
in significantly lower income than in the previous year. The
reconciliation was impacted in particular by expenses in connec-
tion with legal proceedings, by the impairment of the invest-
ment in BAIC Motor Corporation Ltd. (BAIC Motor) and by losses
from currency transactions which are not allocated to business
operations. The gain recognized on the contribution of 3.1%
of the shares of each of Renault and Nissan into the German
pension plan assets had a positive impact on earnings.

B.12
EBIT by segment

In millions of euros

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Reconciliation
Daimler Group1

2016

2015

8,112

1,948

1,170

249

1,739

-316

12,902

7,926

2,576

880

214

1,619

-29

13,186

EBIT

16/15
% change

-24

+33

+16

-2

EBIT adjusted for special items

2016

2015

16/15

% change

8,927

2,053

1,302

258

1,739

-36

14,243

8,343

2,742

952

202

1,619

-29

13,829

-25

+37

+28

1 EBIT, the indicator of operating performance, comprises earnings before interest income and corporate income taxes.

The reconciliation of the Daimler Group’s EBIT to earnings before income taxes is included in Note 33 of the Notes to the
Interim Consolidated Financial Statements.

104 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

B.13
Development of earnings

In billions of euros

EBIT
Net proﬁt (loss)

2012

2013

2014

2015

2016

B.14
Special items affecting EBIT

In millions of euros

Mercedes-Benz Cars

2016

2015

Expenses in connection with Takata airbags

-480

-300

Expenses in connection with
remeasurement of inventories

Settlement in connection with a patent dispute

Restructuring of own dealer network

Public-sector levies related to prior periods

Relocation of headquarters of MBUSA

Sale of real estate in the United States

Daimler Trucks

Workforce adjustments

Restructuring of own dealer network

Sale of Atlantis Foundries

Mercedes-Benz Vans

Expenses in connection with Takata airbags

Workforce adjustments in Germany

Restructuring of own dealer network

Relocation of headquarters of MBUSA

Daimler Buses

Workforce adjustments

Restructuring of own dealer network

Sale of investment in New MCI Holdings Inc.

Reconciliation

Expenses related to legal proceedings

Impairment of investment in BAIC Motor

Losses from currency transactions
(not allocated to business operations)

Contribution of shares in Renault and
Nissan to pension plan assets

-238

-64

-33

–

-91

-14

–

-83

-38

-11

–

-9

–

-400

-244

-241

+605

–

-64

-121

-19

+87

-58

-47

-61

-40

–

-29

-3

–

-4

+16

–

The Mercedes-Benz Cars division slightly increased its EBIT
adjusted for special items in 2016 and thus met the forecasts
made in Annual Report 2015. The Daimler Trucks division’s
EBIT in 2016 did not reach the prior-year level as forecast
in Annual Report 2015. We adjusted those assessments down-
wards as the year progressed, as the division’s unit sales
decreased faster than expected in some key markets. In addi-
tion, the European market situation featured very intense
competition. The earnings of Mercedes-Benz Vans developed
better than we had forecast at the beginning of the year.
We had anticipated a slight improvement compared with the
previous year. We adjusted those assessments upwards as
the year progressed in the context of our quarterly reporting,
as the division’s unit sales increased faster than expected.
Due to the strong business with complete buses in the EU30
region, Daimler Buses achieved significantly higher EBIT
than in the previous year and surpassed the forecast made
in Annual Report 2015. Daimler Financial Services slightly
increased its EBIT adjusted for special items and met the
forecasts made in Annual Report 2015.

Mercedes-Benz Cars posted EBIT of €8,112 million in 2016,
which is slightly above the prior-year figure of €7,926 million.
The division’s return on sales was 9.1% (2015: 9.5%)  B.15

This positive development primarily reflects the increased unit
sales of new vehicles. The main driver was the SUV segment.
Another positive effect on EBIT resulted from a better pricing.
Negative effects resulted from expenses for advance expen-
diture for new technologies and vehicles. EBIT also includes
expenses of €480 million in connection with Takata airbags.
Further expenses of €238 million were recognized from the
remeasurement of inventories and of €64 million for a settle-
ment in connection with a patent dispute.

The automotive divisions’ earnings were also reduced by a
total expense of €58 million from the restructuring of Daimler’s
own dealership network (2015: €144 million). In this context,
we refer to the information provided in Note 5 of the Notes to
the Consolidated Financial Statements.

Daimler Trucks achieved EBIT of €1,948 million (2015:
€2,576 million), which is significantly lower than the high prior-
year figure. The division’s return on sales was 5.9%
(2015: 6.9%).  B.15

The negative development of earnings was primarily the result
of sharply decreased unit sales in the NAFTA region, Turkey,
the Middle East, Latin America and Indonesia. Earnings were
also reduced by the intense competition in Europe. The
realization of efficiency and material-cost improvements and
exchange-rate effects had a positive impact on earnings.
EBIT also includes expenses of €91 million for workforce
adjustments in the context of the ongoing optimization
programs in Brazil.

Mercedes-Benz Vans achieved EBIT of €1,170 million in
the year 2016, significantly higher than its prior-year earnings
of €880 million. The division’s return on sales also increased
significantly, to 9.1% from 7.7% in 2015.  B.15

EBIT reflects the very positive development of unit sales,
especially in Europe, the NAFTA region and China, as well as
efficiency improvements. On the other hand, expenses arose
from advance expenditure for new technologies and vehicles.
Expenses of €83 million resulted in connection with Takata
airbags and of €38 million from a voluntary severance program
at the Düsseldorf plant.

The Daimler Buses division’s EBIT of €249 million in 2016
(2015: €214 million) was significantly above the high prior-year
figure; the division achieved a return on sales of 6.0% (2015:
5.2%).  B.15

The strong business with complete buses in the EU30 region,
a good product-mix and positive exchange-rate effects more
than offset the negative effects of weak demand for bus chassis
due to the ongoing difficult economic situation in Latin
America and lower unit sales in Turkey. Higher expenses from
advance expenditure for new technologies and vehicles and
cost inflation were partially offset by efficiency improvements.

Daimler Financial Services posted EBIT of €1,739 million
in 2016, thus slightly surpassing its prior-year earnings
(2015: €1,619 million). The division’s return on equity was
17.4% (2015: 18.3%).  B.16

This positive development was mainly the result of increased
contract volume, but earnings were reduced by negative
exchange-rate effects.

The reconciliation of the divisions’ EBIT to Group EBIT
comprises gains and/or losses at the corporate level and the
effects on earnings of eliminating intra-group transactions
between the divisions.

Items at the corporate level resulted in an overall expense
of €333 million (2015: €79 million). This includes expenses of
€400 million related to legal proceedings, the impairment of
Daimler’s investment in BAIC Motor of €244 million and losses
from currency transactions of €241 million (2015: €43 million).
The gain of €605 million recognized on the contribution of the
Renault and Nissan shares into the German pension plan
assets did not offset those expenses.

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 105

The elimination of intra-group transactions resulted in income
of €17 million in 2016 (2015: €50 million).

The reconciliation of Group EBIT to profit before income
taxes is shown in table  B.17.

2012
2013

2014
2015

2016

B.15
Return on Sales

In %

-3

-6

-9

Mercedes-Benz
Cars

Daimler
Trucks

Mercedes-Benz
Vans

Daimler
Buses

B.16
Return on Equity

Daimler Financial Services

In %

2012

2013

2014

2015

2016

B.17
Reconciliation of Group EBIT to profit before income taxes

In millions of euros

2016

2015

Group EBIT

12,902

13,186

Amortization of capitalized
borrowing costs1

Interest income

Interest expense

-12

230

-546

-10

170

-602

Profit before income taxes

12,574

12,744

1 Amortization of capitalized borrowing costs is not included

in the internal performance measure EBIT, but is a component
of cost of sales.

106 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

Consolidated statement of income

The Group’s total revenue increased by 2.5% to €153.3 billion
in 2016; adjusted for exchange rate effects, it increased by
3.3%. The revenue growth reflects the demand for our prod-
ucts at Mercedes-Benz Cars and Mercedes-Benz Vans, as
well as the increased contract volume at Daimler Financial
Services. Further information on the development of revenue
is provided in the E “Business development” section of this
Management Report.  B.18

Cost of sales amounted to €121.3 billion in 2016, increasing
by 2.8% compared with the previous year. The rise in cost
of sales was caused by higher business volumes and consequen-
tially higher material expenses. Personnel expenses and
depreciation of equipment on operating leases also increased.
Further information on cost of sales is provided in E Note 5
of the Notes to the Consolidated Financial Statements.  B.18

Gross profit therefore increased by 1.6% overall.

B.18
Consolidated statement of income

In millions of euros

Revenue
Cost of sales1

Gross profit

Selling expenses

General administrative
expenses1

Research and non-capitalized
development costs

Other operating income

Other operating expense

Share of profit from
equity-method investments, net

Other financial expense, net

Interest income

Interest expense

Profit before income taxes

Income taxes

Net profit

thereof attributable to
non-controlling interests

thereof attributable to
shareholders of Daimler AG

2016

2015

16/15

% change

153,261

149,467

-121,298

-118,017

31,963

-12,226

31,450

-12,147

-3,419

-3,363

-5,257

2,350

-1,298

502

275

230

-546

12,574

-3,790

8,784

-4,760

2,114

-555

464

-27

170

-602

12,744

-4,033

8,711

258

287

8,526

8,424

+10

+11

+134

+35

-9

-1

-6

-10

1 In the year 2015, €347 million was reclassified from general
administrative expenses into cost of sales (see Note 5 of the
Notes to the Consolidated Financial Statements).

Due to the growth in unit sales, selling expenses increased
by €0.1 billion to €12.2 billion. In addition, there were higher
expenses for marketing. As a percentage of revenue, selling
expenses decreased from 8.1% to 8.0%.  B.18

General administrative expenses of €3.4 billion were
at the same level as in the previous year (2015: €3.4 billion).
As a percentage of revenue, general administrative expenses
remained unchanged compared with the previous year at 2.2%.
 B.18

Research and non-capitalized development costs increased
by €0.5 billion to €5.3 billion in 2016. They were mainly related
to the development of new models, advance expenditure for the
renewal of existing models and the further development of
fuel-efficient and environmentally friendly drive systems, as well
as safety technologies, autonomous driving, and the digital
connectivity of our products. As a proportion of revenue, research
and non-capitalized development costs increased from 3.2%
to 3.4%. Further information on the Group’s research and
development costs is provided in the “Research and develop-
ment” section of the “Sustainability” chapter of this Manage-
ment Report.  B.18

Other operating income increased to €2.4 billion (2015:
€2.1 billion). Other operating expense increased significantly
in the year 2016 to €1.3 billion (2015: €0.6 billion), due
in particular to expenses connected with legal proceedings
of €0.4 billion. Further information on the composition of
other operating income and expense is provided in Note 6
of the Notes to the Consolidated Financial Statements.  B.18

In 2016, our share of profit from equity-method investments
amounted to €0.5 billion and was at the prior-year level (2015:
€0.5 billion). The negative impact on earnings of €0.2 billion
from the impairment of the shares in BAIC Motor was almost
fully offset by the improved earnings from Beijing Benz Auto-
motive Co., Ltd. (BBAC).  B.18

Other financial expense/income increased from an expense
of €27 million to income of €0.3 billion. This significant increase
is primarily the result of recognizing a gain of €0.6 billion from
the contribution of the equity interests in Renault and Nissan
at fair value into the pension-plan assets. Those gains were
previously presented within other comprehensive income/loss.
 B.18

Net interest expense improved by €0.1 billion to €0.3 billion
(2015: €0.4 billion).  B.18

The tax expense of €3.8 billion (2015: €4.0 billion) stated
under income tax expense decreased at a higher rate than
profit before income taxes. The effective tax rate for 2016
was 30.1% (2015: 31.6%). This was mainly due to the contribution
of our shares in Renault and Nissan into the pension-plan
assets. The gain resulting from the contribution was largely tax
free. Adjusted for this gain, profit subject to normal income
taxes decreased in 2016 compared with the previous year, which
is the reason for the lower tax expense.  B.18

B | COMBINED MANAGEMENT REPORT | PROFITABILITY 107

B.19
Dividend per share

In euros

2.20

2.25

2.45

3.25

3.50

3.00

2.50

2.00

1.50

1.00

0.50

2012

2013

2014

2015

2016

B.20
Reconciliation to net operating profit

In millions of euros

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

EBIT of the divisions

Income taxes1

Other reconciliation

Net operating profit

2016

2015

16/15

% change

8,112

1,948

1,170

249

1,739

13,218

-3,895

-316

9,007

7,926

2,576

880

214

1,619

13,215

-4,179

-29

9,007

-24

+33

+16

-7

1 Adjusted for income taxes on interest income/expense

and amortization of capitalized borrowing costs.

B.21
Value added

In millions of euros

2016

2015

16/15

% change

Daimler Group1

5,243

5,423

Mercedes-Benz Cars1
Daimler Trucks1
Mercedes-Benz Vans1
Daimler Buses1

Daimler Financial Services

5,431

935

962

143

439

5,552

1,595

678

105

467

1 Prior-year figures adjusted due to fine tuning the definition

of net assets.

-3

-2

-41

+42

+36

-6

Net profit for the year amounts to €8.8 billion (2015: €8.7
billion). Net profit of €0.3 billion is attributable to non-controlling
interests (2015: €0.3 billion). Net profit attributable to
the shareholders of Daimler AG amounts to €8.5 billion
(2015: €8.4 billion), representing earnings per share of €7.97
(2015: €7.87).  B.18

The calculation of earnings per share (basic) is based
on an unchanged average number of outstanding shares
of 1,069.8 million.

Dividend

We aim to achieve a sustainable dividend development also
in the coming years. In setting the dividend, our target is
to distribute approximately 40% of the net profit attributable
to Daimler shareholders. At the Annual Shareholders’
Meeting on March 29, 2017, the Board of Management and
the Supervisory Board will propose the payment of a dividend
of €3.25 per share, as in the prior year. This represents
a total distribution of €3.5 billion (prior year: €3.5 billion).
With this proposal, we are letting our shareholders participate
in the company’s success.  B.19

Net operating profit

Table  B.20 shows the reconciliation of the EBIT of
the divisions to net operating profit. In addition to the EBIT
of the divisions, net operating profit also includes earnings
effects for which the divisions are not accountable, such as
income taxes and other reconciliation items.

Value added

As described in the E “Performance measurement system”
section of the “Corporate Profile” chapter in chart  B.03, the
cost of capital is the result of net assets and cost of capital
expressed as a percentage, which is subtracted from earnings
in order to calculate value added. The tables  B.21 and
 B.22 show value added and net assets for the Group and for
the individual divisions. Table  B.23 shows how net assets
are derived from the consolidated statement of financial position.
In the context of fine tuning our performance measurement
system, the definition of the net assets was adjusted in the year
2016 with retrospective effect as of 2015, and no longer
includes hedging instruments, which are recognized in other
comprehensive income until maturity. As a result of the
adjustment, the amount of net assets in 2015 has been
increased by €2.4 billion.

The Group’s value added amounted to €5.2 billion in 2016
(2015: €5.4 billion), representing a return on net assets of
19.1% (2015: 20.1%). This was once again substantially higher
than the minimum required rate of return of 8%. The slight
decrease in value added was caused by the growth of average
net assets mainly as a result of higher investment in fixed
assets and higher inventory levels. The net operating profit
remained at the previous year’s level and was unable to
offset the rise in cost of capital.

108 B | COMBINED MANAGEMENT REPORT | PROFITABILITY

B.22
Net assets (average)

In millions of euros

Mercedes-Benz Cars1
Daimler Trucks1
Mercedes-Benz Vans1
Daimler Buses1
Daimler Financial Services2

Net assets of the divisions
Equity method investments3

Assets and liabilities from
income taxes4
Other reconciliation4

2016

2015

16/15

% change

22,345

19,788

8,448

1,739

887

10,000

43,419

555

3,372

-292

8,176

1,686

906

8,859

39,415

770

3,772

839

+13

-2

+13

+10

-28

-11

-135

Daimler Group1
1 Prior-year figures adjusted due to fine tuning the definition

47,054

44,796

of net assets.

2 Total equity.
3 To the extent not allocated to the segments.
4 Industrial business.

B.23
Net assets of the Daimler Group at year-end

In millions of euros

2016

2015

16/15

% change

Net assets of the industrial business

Intangible assets

Property, plant
and equipment

Leased assets

Inventories

Trade receivables

Less provisions
for other risks

Less trade payables

Less other assets
and liabilities1

Assets and liabilities
from income taxes

Total equity of
Daimler Financial Services

11,145

9,789

26,314

17,433

24,426

8,977

24,262

15,864

22,862

8,215

-15,325

-10,853

-15,198

-10,182

+14

+10

-26,727

-21,956

+22

2,935

3,055

10,448

9,872

Net Assets1
1 Prior-year figures adjusted due to fine tuning the definition

48,773

46,583

of net assets.

Value added at Mercedes-Benz Cars decreased slightly by
€0.1 billion to €5.4 billion. This was mainly the result of the
growth of average net assets to €22.3 billion, reflecting higher
investment in fixed assets and higher inventory levels. EBIT
increased slightly compared to the previous year’s level. This
development was driven by positive effects from higher sales
of new vehicles and better pricing, with negative effects from
expenses from advance expenditure for new technologies and
vehicles, and expenses in connection with Takata airbags.

As a result of the EBIT development, Daimler Trucks’ value
added amounted to €0.9 billion, which is significantly below the
high level of value added of the previous year (2015: €1.6 billion).
This development was primarily the result of strong decreases
in unit sales in the NAFTA region, Turkey, the Middle East, Latin
America and Indonesia. Earnings were also reduced by the
intense competition in Europe. In addition, the increase in average
net assets as a result of higher investment in property, plant
and equipment and higher inventories boosted the negative effect
on value added.

Mercedes-Benz Vans’ value added increased significantly
by €0.3 billion to €1.0 billion. This was the result of the
substantial improvement in EBIT, reflecting the very positive
development of unit sales in Europe, the NAFTA region and
China, as well as further efficiency improvements. Negative
effects on earnings mainly came from higher expenses
from advance expenditure for new technologies and vehicles
and from expenses in connection with Takata Airbags.
Average net assets were slightly higher than in the previous year.

The value added of the Daimler Buses division was substantially
higher than in the previous year, reaching €143 million (2015:
€105 million). This was primarily due to the development of EBIT.
Positive effects mainly resulting from the good business with
complete buses, a favorable product mix and positive exchange-
rate effects more than offset the negative impact from weak
demand for bus chassis in Latin America, lower unit sales in
Turkey and higher expenses from advance expenditure for new
technologies and vehicles. Average net assets remained nearly
constant compared to the previous year.

-4

Daimler Financial Services’ value added of €0.4 billion was
slightly under the level of 2015. The division’s return on
equity amounted to 17.4% (2015: 18.3%). The development
of value added primarily reflects the increase in average
equity of €1.1 billion. Offsetting effects came from the positive
development of EBIT as a result of further growth in contract
volume despite negative exchange-rate effects.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 109

Liquidity and Capital Resources

Principles and objectives of financial
management

Financial management at Daimler consists of capital structure
management, cash and liquidity management, pension asset
management, market-price risk management (foreign exchange
rates, interest rates, commodity prices) and credit and finan-
cial country risk management. Worldwide financial management
is performed within the framework of legal requirements con-
sistently for all Group entities by Treasury. Financial management
operates within a framework of guidelines, limits and bench-
marks, and on the operational level is organizationally separate
from other financial functions such as settlement, financial
controlling, reporting and accounting.

Capital structure management designs the capital structure
for the Group and its subsidiaries. Decisions regarding the
capitalization of financial services companies – as well as pro-
duction, sales and financing companies – are based on the
principles of cost-optimized and risk-optimized liquidity and
capital resources. In addition, it is necessary to comply
with restrictions on capital transactions and on the transfer
of capital and currencies.

Liquidity management ensures the Group’s ability to meet
its payment obligations at any time. For this purpose, the Group
records the cash flows from operating and financial activities
in a rolling plan. The resulting financial requirements are covered
by the use of appropriate instruments for liquidity management
(e.g. bank credits, commercial paper and notes); liquidity
surpluses are invested in the money market or the capital market
to optimize risk and return. The goal is to ensure the level
of liquidity regarded as necessary at optimal costs. Besides
operational liquidity, Daimler maintains additional liquidity
reserves, which are available in the short term. Those additional
financial resources include a pool of receivables from the
financial services business which are available for securitization
in the capital market, as well as a contractually confirmed
syndicated credit facility with a volume of €9 billion.

Cash management determines the Group’s cash requirements
and surpluses. The number of external bank transactions is
minimized by the Group’s internal netting of cash requirements
and surpluses. Netting is done by means of cash-concentration
or cash-pooling procedures. Daimler has established standard-
ized processes and systems to manage its bank accounts,
internal cash-clearing accounts and the execution of automated
payment transactions.

Management of market price risks aims to minimize the
impact of fluctuations in foreign exchange rates, interest rates
and commodity prices on the results of the divisions and
the Group. The Group’s overall exposure to these market-price
risks is determined to provide a basis for hedging decisions,
which include the definition of hedging volumes and corre-
sponding periods, as well as the selection of hedging instruments.
Decisions regarding the management of risks resulting from
fluctuations in foreign exchange rates and commodity prices,
as well as decisions on asset/liability management
(liquidity and interest rates), are regularly made by the
relevant committees.

Management of pension assets includes the investment of
pension assets to cover the corresponding pension obligations.
Pension assets are legally separated from the Group’s assets
and are invested primarily in funds; pension assets are not
available for general business purposes. The funds are allocated
to different asset classes such as equities, fixed-interest
securities, alternative investments and real estate, depending
on the expected development of pension obligations and
with the help of a process for risk-return optimization. The perfor-
mance of asset management is measured by comparing with
defined reference indices. Local custodians of the pension assets
are responsible for the risk management of the individual
pension assets. The Global Pension Committee limits these
risks by means of group-wide binding guidelines, whereby
applicable laws are given due consideration. Additional informa-
tion on pension plans and similar obligations is provided
in E Note 22 of the Notes to the Consolidated Financial
Statements.

110 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

The risk volume that is subject to credit risk management
includes all of Daimler’s worldwide creditor positions with
financial institutions, issuers of securities and customers in the
financial services business and the automotive business.
Credit risks with financial institutions and issuers of securities
arise primarily from investments executed as part of our
liquidity management and from trading in derivative financial
instruments. The management of these credit risks is mainly
based on an internal limit system that reflects the creditwor-
thiness of the respective financial institution or issuer. The
credit risk with customers of our automotive business relates
to contracted dealerships and general agencies, other cor-
porate customers and retail customers. In connection with the
export business, general agencies that according to our
creditworthiness analysis are not sufficiently creditworthy are
generally required to provide collateral such as first-class
bank guarantees. The credit risk with end-customers in the
financial services business is managed by Daimler Financial
Services on the basis of a standardized risk management
process. In this process, minimum requirements are defined
for the sales-financing and leasing business and standards
are set for credit processes as well as for the identification,
measurement and management of risks. Key elements for the
management of credit risks are appropriate creditworthiness
assessments, supported by statistical analyses and evaluation
methods, as well as structured portfolio analysis and
portfolio monitoring.

B.24
Condensed consolidated statement of cash flows

In millions of euros

2016

2015

16/15

Change

Cash and cash equivalents
at beginning of period

9,936

9,667

+269

Cash provided by
operating activities

Cash used for
investing activities

Cash provided by
financing activities

Effect of exchange-rate
changes on cash and cash
equivalents

Cash and cash equivalents
at end of period

3,711

222

+3,489

-14,666

-9,722

-4,944

12,009

9,631

+2,378

-9

138

-147

10,981

9,936

+1,045

Financial country risk management includes various
aspects: the risk from investments in subsidiaries and joint
ventures, the risk from the cross-border financing of Group
companies in risk countries and the risk from direct sales
to customers in those countries. Daimler has an internal rating
system that divides all countries in which it operates into
risk categories. Equity capital transactions in risk countries
are hedged against political risks with the use of investment
protection insurance such as the German government’s
investment guarantees. Some cross-border receivables due
from customers are protected with the use of export credit
insurance, first-class bank guarantees and letters of credit.
In addition, a committee sets and restricts the level of
hard-currency credits granted to financial services companies
in risk countries.

Further information on the management of market-price
risk, credit-default and liquidity risk is provided in E Note 32
of the Notes to the Consolidated Financial Statements.

Cash flows

Cash provided by operating activities  B.24 amounted
to €3.7 billion in 2016 (2015: €0.2 billion). The increase was
primarily due to effects from the leasing and sales-financing
business. In addition, a positive impact resulted from the
development of working capital. Compared to the previous year,
cash-effective contributions to pension funds were lower,
as the prior-year period was influenced by cash outflows
of €1.2 billion for extraordinary contributions in Germany and
the United States. An opposing effect resulted from the
payment of the fine of €1.0 billion imposed by the European
Commission in the context of the settlement in the truck
antitrust proceedings against Daimler AG. Furthermore, there
were higher tax payments in 2016, as the prior-year period
was influenced by tax refunds.

Cash used for investing activities  B.24 amounted
to €14.7 billion (2015: €9.7 billion). The change compared with
the prior-year period resulted primarily from higher cash
outflows for investments in shareholdings. In the reporting
period, the acquisition of 100% of the shares of Athlon Car Lease
International B.V. (Athlon) and the settlement of financing
liabilities of Athlon led to cash outflows. The prior-year period
was affected by the capital increases carried out at our
associated companies and joint ventures and the acquisition
of shares in the digital mapping business HERE. Cash used
for investing activities also reflects increased investments in
intangible assets and property, plant and equipment. Further-
more, negative effects resulted from acquisitions and disposals
of securities in the context of liquidity management. Those
transactions led to a higher net cash outflow than in the previ-
ous year.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 111

B.25
Free cash flow of the industrial business

In millions of euros

Cash provided by
operating activities

Cash used for
investing activities

Change in marketable
debt securities

Other adjustments

Free cash flow of the
industrial business

2016

2015

16/15

Change

12,643

11,735

+908

-10,903

-9,936

-967

2,311

-177

1,897

264

+414

-441

3,874

3,960

-86

Cash provided by financing activities  B.24 amounted
to €12.0 billion (2015: €9.6 billion). The increase was primarily
due to the higher net cash inflows from financing liabilities
in the context of refinancing the leasing and sales-financing
business and the acquisition of the shares of Athlon. There
was an opposing effect from the increased dividend payment
to the shareholders of Daimler AG.

Cash and cash equivalents increased by €1.0 billion compared
with December 31, 2015, after taking currency translation
effects into account. Total liquidity, which also includes market-
able debt securities, increased by €3.5 billion to €21.7 billion.

The parameter used by Daimler to measure the financial
capability of the Group’s industrial business is the free cash
flow of the industrial business  B.25, which is derived
from the reported cash flows from operating and investing
activities. The cash flows from the acquisition and sale of
marketable debt securities included in cash flows from investing
activities are deducted, as those securities are allocated
to liquidity and changes in them are thus not a part of the
free cash flow.

Other adjustments relate to additions to property, plant and
equipment that are allocated to the Group as their beneficial
owner due to the form of their underlying lease contracts.
Furthermore, adjustments are made for the effects of financing
dealerships within the Group. In addition, the calculation of
the free cash flow includes those cash flows to be shown under
cash from financing activities in connection with the acquisi-
tion or sale of interests in subsidiaries without loss of control.

The free cash flow of the industrial business amounted to
€3.9 billion in 2016 and was significantly higher than the
dividend payment, and therefore in line with the expectations
as stated in the Outlook section of Annual Report 2015.

The slight decrease in the free cash flow by 0.1 to €3.9 billion
was primarily due to following factors. Positive effects resulted
from the development of working capital. In addition, higher
cash outflows for the acquisition of shares in the digital mapping
business HERE influenced the free cash flow of the prior-year
period. Extraordinary payments in the context of pension and
health-care benefits in Germany and the United States also
had an impact in the prior year. However, payment of the fine
in the context of the settlement in the antitrust proceedings
and higher investments in intangible assets and property, plant
and equipment reduced the free cash flow.

112 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

B.26
Net liquidity of the industrial business

In millions of euros

Cash and cash equivalents

Marketable debt securities

Liquidity

Financing liabilities

Market valuation and
currency hedges
for financing liabilities

Financing liabilities
(nominal)

Net liquidity

Dec. 31,
2016

Dec. 31,
2015

8,751

9,498

18,249

1,451

8,369

6,999

15,368

2,612

16/15

Change

+382

+2,499

+2,881

-1,161

600

-563

1,488

19,737

3,212

18,580

-1,724

+1,157

B.27
Net debt of the Daimler Group

In millions of euros

Dec. 31,
2016

Dec. 31,
2015

Cash and cash equivalents

Marketable debt securities

Liquidity

10,981

10,748

21,729

9,936

8,273

18,209

16/15

Change

+1,045

+2,475

+3,520

Financing liabilities

-117,686

-101,142

-16,544

Market valuation and
currency hedges
for financing liabilities

Financing liabilities
(nominal)

Net debt

583

-522

-117,625

-100,559

-95,896

-82,350

-17,066

-13,546

The net liquidity of the industrial business  B.26
is calculated as the total amount as shown in the statement
of financial position of cash, cash equivalents and the market-
able debt securities included in liquidity management, less
the currency-hedged nominal amounts of financing liabilities.

To the extent that the Group’s internal refinancing of the financial
services business is provided by the companies of the indus-
trial business, this amount is deducted in the calculation of the
net debt of the industrial business. At December 31, 2016,
the Group’s internal refinancing was of a higher volume than
the financing liabilities originally taken on in the industrial
business due to the application of the industrial business’s own
financial resources. This resulted in a positive value for the
financing liabilities of the industrial business, thus increasing
net liquidity, so the net liquidity of the industrial business
exceeds the gross liquidity presented here.

Compared with December 31, 2015, the net liquidity of the
industrial business increased from €18.6 billion to €19.7 billion.
The increase mainly reflects the positive free cash flow of
€3.9 billion. In addition, cash inflows in connection with the
equity transactions with Daimler Financial Services had a
positive impact of €0.7 billion. An opposing effect of €3.5 billion
resulted from the dividend payment to the shareholders of
Daimler AG.

Net debt at Group level, which primarily results from
refinancing the leasing and sales-financing business, increased
compared with December 31, 2015 from €82.4 billion to
€95.9 billion.  B.27

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 113

Financial guarantees, contingent liabilities
and other financial obligations

Within the context of financial guarantees, Daimler generally
guarantees the settlement of the payment obligations of the
main debtor vis-à-vis the holder of the guarantee. The maximum
potential obligation resulting from these guarantees amounts
to €0.8 billion at December 31, 2016 (2015: €1.0 billion); the
liabilities recognized in this context amount to €0.2 billion at
the end of the year (2015: €0.1 billion). The financial guarantees
that the Group has issued relating to bank loans of Toll
Collect GmbH, the operator company for the electronic toll-
collection system in Germany, remain unchanged at €0.1 billion.
For information on risks arising from guarantees, we refer
to our Risk and Opportunity Report in the section “Risks from
guarantees, legal and tax risks.”

The contingent liabilities principally constitute buyback
obligations. At December 31, 2016, the best possible estimate
for the loss risk from these guarantees amounted to €1.7 billion
(2015: €1.6 billion). Warranty and goodwill commitments
(product guarantees) provided by the Group in connection with
its vehicle sales are not included in the contingent liabilities.
In addition, other contingent liabilities are included. The best
possible estimate for an obligation from the other contingent
liabilities is €0.3 billion (2015: €0.4 billion).

In the context of its ordinary business operations, the Group
has also entered into other financial obligations in addition
to the liabilities shown in the consolidated balance sheet at
December 31, 2016.

Detailed information on financial guarantees, contingent
liabilities and other financial obligations are provided
in E Note 30 of the Notes to the Consolidated Financial
Statements.

Investment

In the context of our growth strategy, we aim to make good
use of the opportunities presented by the global automotive
markets. At the same time, we intend to play a major role
in the fundamental technological change occurring in the auto-
motive industry, and to assume a leading role with digitization.
This requires substantial investment in innovative products and
new technologies, as well as in the expansion of our worldwide
production network. In 2016, we therefore once again increased
our investment in property, plant and equipment – as already
announced in Annual Report 2015 – from an already high level
to €5.9 billion (2015: €5.1 billion).

At December 31, 2016, financial obligations of €3.3 billion
exist in connection with future investments in property, plant
and equipment.

B.28
Investment in property, plant and equipment

In billions of euros

2012

2013

2014

2015

2016

B.29
Investment in property, plant and equipment by division

In millions of euros

% change

2016

2015

16/15

Daimler Group

in % of revenue

Mercedes-Benz Cars
in % of revenue

Daimler Trucks

in % of revenue

Mercedes-Benz Vans
in % of revenue

Daimler Buses

in % of revenue

Daimler Financial Services

in % of revenue

5,889
3.8

4,147
4.6

1,243
3.7

373
2.9

97
2.3

37
0.2

5,075
3.4

3,629
4.3

1,110
3.0

202
1.8

104
2.5

30
0.2

+16

+14

+12

+85

-7

+23

114 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

At Mercedes-Benz Cars, investment in property, plant and
equipment of €4.1 billion in 2016 was significantly above
the prior-year level (2015: €3.6 billion). The most important
projects included the product ramp-up of the new E-Class
models, preparations for the new GLE SUV and the successor
models in the compact class, as well as new combustion
engines and transmissions. We also made substantial investments
in the reorganization of our German production facilities as
competence centers and in the expansion of our international
production network. The main areas of investment at Daimler
Trucks in 2016 were successor generations for existing products,
new products, global component projects and the optimization
of the worldwide production network. Total investment in
property, plant and equipment at Daimler Trucks increased to
€1.2 billion (2015: €1.1 billion). At the Mercedes-Benz Vans
division, the focus of investment was on the next-generation
Sprinter, in particular for the expansion of production in the
United States. The main investments at Daimler Buses were
in new products and the modernization of production facilities.

Daimler Financial Services acquired Athlon Car Lease
International B.V in 2016, thus making a strategic investment
in the fleet-management business. Athlon is one of Europe’s
leading providers of mobility solutions, especially for commercial
fleet leasing and management. The entire fleet-management
business is to be operated under the Athlon brand in the future.
This will create one of the leading providers in the field of
European fleet management with a portfolio of approximately
360,000 cars and vans.

Furthermore, we capitalized development costs of €2.3 billion
in 2016 (2015: €1.8 billion); this is presented under intangible
assets.

Refinancing

The funds raised by Daimler in the year 2016 primarily served
to refinance the leasing and sales-financing business. For
that purpose, Daimler made use of a broad spectrum of various
financing instruments in various currencies and markets.
They include bank loans, commercial paper in the money market,
bonds with medium and long maturities, customer deposits
at Mercedes-Benz Bank and the securitization of receivables
from customers in the financial services business (asset
backed securities).

Various issuance programs are available for raising longer-term
funds in the capital market. They include the Euro Medium
Term Note program (EMTN) with a total volume of €50 billion,
under which Daimler AG and several subsidiaries can issue
bonds in various currencies. Other local capital-market programs
exist, which are significantly smaller than the EMTN program.
Capital-market programs allow flexible, repeated access to the
capital markets.

The continued expansive monetary policy of the central banks
also affected the situation in the bond markets in the reporting
period. The high volumes of available liquidity meant that risk
premiums for companies with investment-grade credit ratings
remained moderate.

In the reporting period, the Group covered its refinancing
requirements mainly through the issuance of bonds. A large
proportion of those bonds were placed in the form of so-called
benchmark emissions (bonds with high nominal volumes)
in the US dollar and euro markets.  B.31

In April and November 2016, Daimler AG placed bonds in
the domestic capital market of the People’s Republic of China,
so-called panda bonds, each with a volume of CNY4.0 billion.
In addition, a large number of smaller bonds were issued in
various currencies and markets.

Daimler also issued small volumes of commercial paper
in 2016.

Furthermore, several asset-backed securities (ABS)
transactions were carried out in the United States, Canada,
Germany and China. In the United States for example, six
emissions generated a refinancing volume totaling US$6.6 billion.
Bonds in a volume of C$0.5 billion were issued in Canada.
In addition, Mercedes-Benz Bank sold ABS bonds in a volume
of €1.0 billion to European investors through its Silver Arrow
Platform. For the first time, two ABS transactions were success-
fully placed in China with a total volume of CNY6.4 billion.
In addition, an existing ABS transaction in the amount of
€0.4 billion was taken over into the portfolio with the acquisi-
tion of Athlon on December 1, 2016.

B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES 115

Bank credit was another important source of refinancing
in 2016. Funds were provided not only by large, globally
active banks, but increasingly also by a number of local banks.
The lenders also included supranational banks such as the
European Investment Bank and the Brazilian Development
Bank (BNDES).

In order to secure sufficient financial flexibility, in September
2013, Daimler concluded a €9 billion syndicated credit facility
with a consortium of international banks with a maturity
of five years and two extension options of two years in total.
This provides the Group with financial flexibility until the
year 2020. More than 40 European, American and Asian banks
participated in the consortium. Daimler does not intend to
utilize the credit line.

At the end of 2016, Daimler had not utilized short- and
long-term credit lines totaling €18.1 billion (2015: €18.5 billion).
They include the syndicated credit facility arranged in
September 2013 with a consortium of international banks
with a volume of €9 billion.

The carrying values of the main refinancing instruments
and the weighted average interest rates are shown
in table  B.30. At December 31, 2016, they are mainly
denominated in the following currencies: 41% in euros,
30% in US dollars, 6% in Chinese renminbi, 4% in Canadian
dollars, 3% in British pounds and 3% in Japanese yen.

At December 31, 2016, the total of financial liabilities shown
in the consolidated statement of financial position amounted
to €117,686 million (2015: €101,142 million).

Detailed information on the amounts and terms of financing
liabilities is provided in E Notes 24 and 32 of the Notes
to the Consolidated Financial Statements. E Note 32 also
provides information on the maturities of the other financial
liabilities.

B.30
Refinancing instruments

Average interest rates

Carrying values

Dec. 31,
2016

Dec. 31,
2015

Dec. 31,
2016

Dec. 31,
2015

in %

In millions of euros

Notes/bonds and
liabilities from
ABS transactions

Commercial
paper

Liabilities
to financial
institutions

Deposits in the
direct banking
business

1.64

2.71

1.69

73,648

58,789

1.35

1,701

2,961

2.96

2.58

29,674

27,311

0.65

0.71

11,642

10,532

B.31
Benchmark issuances

Issuer

Daimler AG

Daimler Finance
North America LLC

Volume

Month of
emission

Maturity

€1,250 million

Jan. 2016

Jan. 2019

€1,000 million

Jan. 2016

Jan. 2021

€1,000 million

Jan. 2016

Jan. 2024

€1,000 million Mar. 2016 Mar. 2018

€1,500 million Mar. 2016

Sep. 2019

€1,000 million Mar. 2016 Mar. 2026

€1,250 million May 2016 May 2020

€750 million May 2016 May 2023

€1,250 million May 2016 May 2028

US$250 million

July 2016

July 2019

US$1,500 million

July 2016

July 2019

US$1,250 million

July 2016

July 2021

US$400 million

Oct. 2016

Oct. 2019

US$1,100 million

Oct. 2016

Oct. 2019

US$1,000 million

Oct. 2016

Oct. 2021

US$400 million

Jan. 2017

Jan. 2020

US$1,000 million

Jan. 2017

Jan. 2020

US$850 million

Jan. 2017

Jan. 2022

US$750 million

Jan. 2017

Jan. 2027

116 B | COMBINED MANAGEMENT REPORT | LIQUIDITY AND CAPITAL RESOURCES

Credit ratings

In the year 2016, the long-term credit rating of Daimler AG as
assessed by S&P Global Ratings was upgraded from A- to A.
At the same time, the short-term rating was raised from A-2 to
A-1. Our credit ratings with the other agencies remained
unchanged in 2016. At the end of the year, Daimler AG had
a positive ratings outlook at Moody’s. The outlook with
the other three rating agencies that Daimler has engaged
was assessed as “stable.”  B.32

B.32
Credit ratings

Long-term credit rating

Standard & Poor’s

Moody’s

Fitch

DBRS

Short-term credit rating

Standard & Poor’s

Moody’s

Fitch

DBRS

1 As of February 3, 2017

End of 2016

End of 2015

A
A21

A-

A (low)

A-1
P-11

A-2

P-2

R-1 (low)

Moody’s Investors Service (Moody’s) confirmed the existing A3
long-term rating with a positive outlook on August 2, 2016.
Moody’s justified that rating with the well-established and highly
valued Mercedes-Benz brand for premium cars and the strong
global positioning of the truck business.

On February 3, 2017, Moody’s raised its long-term credit rating
for Daimler AG from A3 to A2. At the same time, the short-term
rating was raised from P-2 to P-1. The outlook was assessed
as stable. With this upgrade, Moody’s is recognizing the Daimler
Group’s successful and stable business development of
recent years, which is also reflected in the strength of our
key financial metrics.

Fitch Ratings (Fitch) also affirmed its long-term issuer default
rating of A- with a stable outlook for Daimler AG. Fitch referred
to the Group’s solid business profile and robust credit metrics.
In addition, Fitch praised Daimler’s wide geographical and
business diversification as well as the improved profitability
of the automotive divisions in recent years. At the same time,
Fitch stated that the volatility of the trucks business remains
a constraint for the Group’s rating.

S&P Global Ratings (S&P) upgraded its long-term rating
for Daimler AG from A- to A on November 2. At the same time,
the short-term rating was raised from A-2 to A-1. The outlook
remained unchanged at “stable.” S&P explained the upgrade
with the Group’s stronger competitive position, especially
at Mercedes-Benz Cars with its successful launches of new
models. At the same time, S&P pointed out that the truck
business had weakened due to contracting markets in some
regions. The credit rating for Daimler AG is generally based
on an unchanged “satisfactory” business risk and a “minimal”
financial risk. One of the factors reflected by the business
risk is the cyclical development of the automotive markets. The
financial risk is an indicator of the Group’s financial strength.

The Canadian agency DBRS most recently confirmed the
long-term credit rating for Daimler AG at A (low) with a stable
outlook in November 2016. DBRS pointed out that Daimler’s
business risk had generally improved on the basis of the ongoing
momentum of Mercedes-Benz Cars in the premium segment.
At the same time, DBRS noted that Daimler’s credit metrics
had softened somewhat through the first three quarters of 2016
due to the higher gross debt levels of the industrial operations.

The short-term credit ratings remained unchanged at Moody’s,
Fitch and DBRS in 2016.

B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION 117

Financial Position

The balance sheet total increased compared with
December 31, 2015 from €217.2 billion to €243.0 billion;
adjusted for the effects of currency translation, the
increase amounted to €24.1 billion. Daimler Financial Services
accounts for €141.8 billion of the balance sheet total (2015:
€123.9 billion); this is equivalent to 58% of the Daimler Group’s
total assets (2015: 57%).

The increase in total assets is primarily due to the increased
volume of the financial services business and higher liquidity
(cash and cash equivalents and marketable debt securities).
In addition, the higher volume of capital expenditure led to
increased intangible assets and property, plant and equipment.
The increased refinancing requirement resulting from the port
folio growth led to increased financing liabilities. This includes
effects from the acquisition of Athlon Lease Car International B.V.
(Athlon) as of December 1, 2016. In addition, there was an
increase in shareholders’ equity. Current assets account for
42% of the balance sheet total, which is at the prioryear
level. Current liabilities account for 35% of the balance sheet
total, as at the end of previous year.

Intangible assets of €12.1 billion (2015: €10.1 billion) include
€8.8 billion of capitalized development costs (2015: €7.8 billion)
and €1.2 billion of goodwill (2015: €0.7 billion). MercedesBenz
Cars accounts for 76% (2015: 73%) and Daimler Trucks for
14% (2015: 18%) of development costs. Capitalized development
costs amounted to €2.3 billion (2015: €1.8 billion), and account
for 31% of the Group’s total research and development expendi
ture (2015: 27%) E see page 124. The increase in goodwill
results from the acquisition of Athlon.

Property, plant and equipment E see page 113 rose
to €26.4 billion (2015: €24.3 billion). In 2016, €5.9 billion was
invested worldwide (2015: €5.1 billion), in particular at our
production and assembly sites for new products and technolo
gies and for the expansion and modernization of production
facilities. The sites in Germany accounted for €3.6 billion of the
capital expenditure (2015: €3.3 billion).

B.33
Consolidated statement of financial position

Dec. 31,
2016

Dec. 31,
2015

16/15

% change

In millions of euros

Assets

Intangible assets

Property, plant
and equipment

Equipment on operating
leases and receivables
from financial services

Equitymethod investments

Inventories

Trade receivables

Cash and cash equivalents

Marketable debt securities

Other financial assets

Other assets

Total assets

Equity and liabilities

Equity

Provisions

Financing liabilities

Trade payables

Other financial liabilities

Other liabilities

12,098

10,069

26,381

24,322

127,449

112,456

4,098

25,384

10,614

10,981

10,748

5,736

9,499

3,633

23,760

9,054

9,936

8,273

7,454

8,209

242,988

217,166

59,133

26,810

54,624

26,145

117,686

101,142

11,567

12,869

14,923

10,548

12,360

12,347

Total equity and liabilities

242,988

217,166

+20

+13

+17

+11

+30

+16

+12

+16

+10

+21

+12

118 B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION

Equipment on operating leases and receivables from
financial services increased to a total of €127.4 billion
(2015: €112.5 billion). The increase adjusted for exchangerate
effects of €14.2 billion was primarily caused by the higher
level of new business at Daimler Financial Services, and by the
acquisition of Athlon. The operational growth reflects the
successful course of business, especially in Europe, the United
States and Asia. The growth in the salesfinancing business
was especially achieved in China and other Asian countries.
The leasing and salesfinancing business as a proportion
of total assets of 52% is at the prioryear level.

B.34
Balance sheet structure Daimler Group

In billions of euros

2015
2016

Assets

141

125

Equity and liabilities

Non-current assets

Current assets

of which: Liquidity

102

22
243

18
217

217

243

Equity

Non-current liabilities

Current liabilities

Equity-method investments of €4.1 billion (2015: €3.6 billion)
primarily comprise the carrying amounts of our equity interests
in Beijing Benz Automotive Co., Ltd. (BBAC), There Holding B.V.
(digital mapping provider HERE), BAIC Motor Corporation Ltd.
(BAIC) and Beijing Foton Daimler Automotive Co., Ltd. The
increase was caused by positive effects from the share of profit
at BBAC and the capital increase at that company. The
impairment of the investment in BAIC had a negative effect.

Inventories increased from €23.8 billion to €25.4 billion,
equivalent to 10% of total assets, which is below the level
of the prior year (11%). The increase was primarily at the
MercedesBenz Cars and MercedesBenz Vans divisions
in finished and unfinished goods, partially due to the launch
of new models and a wider range of model versions.

Trade receivables increased by €1.6 billion to €10.6 billion.
The MercedesBenz Cars division accounts for 46% of these
receivables and the Daimler Trucks division accounts for 26%.

Cash and cash equivalents increased compared with
the end of 2015 by €1.0 billion to €11.0 billion.

Marketable debt securities increased compared with
December 31, 2015 from €8.3 billion to €10.7 billion.
Those assets include the debt instruments that are allocated
to liquidity, most of which are traded in active markets.
They usually have an external rating of A or better.

Other financial assets decreased from €7.5 billion to
€5.7 billion. They primarily consist of derivative financial instru
ments, equity instruments in nonconsolidated subsidiaries
and other investments, as well as loans and other receivables
due from third parties. The decrease mainly reflects the
contribution of the shares in Renault S.A. (Renault) and Nissan
Motor Company Ltd. (Nissan) to the pensionplan assets.
There was an opposing effect from higher carrying values of
derivative financial instruments.

Other assets of €9.5 billion (2015: €8.2 billion) primarily
comprise deferred tax assets and tax refund claims. The
increase in deferred tax assets primarily relates to effects
from pensions and similar obligations not recognized
in profit and loss.

B | COMBINED MANAGEMENT REPORT | FINANCIAL POSITION 119

Trade payables increased to €11.6 billion due to the higher
volume of business (2015: €10.5 billion). The MercedesBenz
Cars division accounts for 64% of those payables and the
Daimler Trucks division accounts for 21%.

Other financial liabilities of €12.9 billion (2015: €12.4 billion)
mainly consist of liabilities from derivative financial instruments,
residual value guarantees, accrued interest on financing
liabilities, deposits received and liabilities from wages and
salaries.

Other liabilities of €14.9 billion (2015: €12.3 billion) primarily
comprise deferred income, tax liabilities and deferred taxes.
The rise was mainly the result of increases in deferred taxes
and deferred income, each of €1.3 billion, relating to the
growth in revenue from multiyear service and maintenance
contracts.

Further information on the assets presented in the statement
of financial position and on the Group’s equity and liabilities
is provided in the Consolidated Statement of Financial Position
E see page 220, the Consolidated Statement of Changes
in Equity E see page 222 and the related notes in the Notes
to the Consolidated Financial Statements.

The Group’s equity increased compared with December 31,
2015 from €54.6 billion to €59.1 billion. The increase in equity
was mainly due to net profit of €8.8 billion E see page 106
and the remeasurement of derivative financial instruments not
recognized in profit and loss of €1.1 billion, as well as positive
currency translation effects of €0.7 billion. Equity was reduced,
however, by the payment of the dividend for financial year 2015
to the shareholders of Daimler AG of €3.5 billion and actuarial
losses from defined benefit pension plans recognized in retained
earnings of €1.2 billion. In addition, the remeasurement
(€0.5 billion) and contribution of the shares in Renault and Nissan
to the pensionplan assets (€0.6 billion) led to a decrease in the
reserve of financial assets available for sale. Equity attributable
to the shareholders of Daimler AG increased to €58.0 billion
(2015: €53.6 billion).

Compared to the 12% increase in the balance sheet total,
there was a disproportionately low increase in equity of 8%.
Due to the effects described above, the Group’s equity ratio
of 22.9% was below the level at the end of 2015 (23.6%);
the equity ratio for the industrial business was 44.7% (2015:
44.2%). It is necessary to consider that the equity ratios
at the end of 2015 and 2016 are adjusted for the paid and
proposed dividend payments.

Provisions increased to €26.8 billion (2015: €26.1 billion);
as a proportion of the balance sheet total, they were below the
prioryear level at 11% (2015: 12%). They primarily comprise
provisions for pensions and similar obligations of €9.0 billion
(2015: €8.7 billion), which mainly consist of the difference
between the present value of defined benefit pension obligations
of €31.2 billion (2015: €27.6 billion) and the fair value of the
pensionplan assets applied to finance those obligations of
€23.4 billion (2015: €20.2 billion). The fall in discount rates,
especially for the German plans from 2.6% at December 31, 2015
to 1.9% at December 31, 2016, led to an increase in the present
value of defined benefit pension obligations. The contribution
of the shares in Renault and Nissan to the pensionplan assets
led to an increase in the fair value of pensionplan assets of
€1.8 billion. In addition, the positive development of the pension
plan assets led them to increase by €1.6 billion. Provisions
also relate to liabilities from income taxes of €1.7 billion (2015:
€1.7 billion), from product warranties of €6.1 billion (2015:
€5.7 billion) and from personnel and social costs of €4.3 billion
(2015: €4.4 billion), as well as other provisions of €5.7 billion
(2015: €5.8 billion).

Financing liabilities of €117.7 billion were above the level of
December 31, 2015 (€101.1 billion). The increase of €15.4 billion
adjusted for exchangerate effects primarily reflects the
refinancing of the growing leasing and salesfinancing business,
as well as the higher requirement in connection with the
purchase of Athlon. 54% of the financing liabilities are accounted
for by bonds, 25% by liabilities to financial institutions, 10%
by deposits in the direct banking business and 9% by liabilities
from ABS transactions.

120 B | COMBINED MANAGEMENT REPORT | DAIMLER AG

Daimler AG

Condensed version according to the German Commercial Code (HGB)

In addition to reporting on the Daimler Group, the development
of Daimler AG is also described in this section.

Daimler AG is the parent company of the Daimler Group and
is domiciled in Stuttgart. Its principal business activities
comprise the development, production and distribution of cars,
vans and trucks in Germany and the management of the
activities of the Daimler Group.

The vehicles are produced at the domestic plants of Daimler
AG, as well as under contract-manufacturing agreements by
domestic and foreign subsidiaries and by producers of special
vehicles. Daimler AG distributes its products through its own
sales-and-service network, which is organized in seven regional
centers for cars and seven for commercial vehicles, through
foreign sales subsidiaries and through third parties.

The annual financial statements of Daimler AG are prepared
in accordance with the German Commercial Code (HGB).
The consolidated financial statements are prepared in accor-
dance with the International Financial Reporting Standards
(IFRS), as adopted by the European Union (EU). This results
in some differences with regard to recognition and measure-
ment, primarily relating to intangible assets, provisions, financial
instruments, the leasing business and deferred taxes.

The main performance indicators for Daimler AG are
unit sales, revenue and net profit.

The earnings achieved by the car business were lower than
in the previous year, primarily due to increased expenditure for
new products and technologies. On the other hand, ongoing
growth of unit sales in Europe and China had a positive impact
on earnings. Unit sales in the car business increased by 5%
to 1,807,000 vehicles1. The SUV segment was particularly suc-
cessful in 2016, with a 24% increase in sales to 553,000 units1.
The C-Class segment recorded growth of 4% to 375,000 units1.
Due to the lifecycle of the S-Class, sales of 79,000 (2015:
110,000) units in this segment were lower than in the previous
year.

Earnings from trucks and vans were higher than in 2015.
Sales of trucks amounted to 101,000 (2015: 102,000) units1
and sales of vans increased by 15% to 339,000 units1.

Cost of sales increased by 5% to €96.3 billion. Increases in unit
sales and expenses for new products and technologies led
to higher cost of sales. Research and development expenses,
which are included in cost of sales, were higher than in the
previous year at €6.6 billion (2015: €5.6 billion); as a proportion
of revenue, they amounted to 6.1% (2015: 5.4%). Research
and development expenses were primarily related to the renewal
and expansion of the product portfolio, especially with regard
to the model series of the compact class, the SUVs and the suc-
cessor model of the Sprinter. In addition, work is continuing
on new generations of engines and alternative drive systems.
At the end of the year, approximately 19,000 people
were employed in the area of research and development.

1 Unit sales relate solely to new vehicles. The unit sales of Daimler AG
include vehicles invoiced to companies of the Group which have
not yet been sold on to external customers by those companies.
Vehicle sales by production companies of the Daimler Group to
external customers and subsidiaries of Daimler AG are not counted
in unit sales.

Profitability

The development of profitability was affected in financial
year 2016 by the decrease in operating profit by €0.7 billion
to €1.9 billion, as well as by the increase in financial income
by €3.4 billion to €5.4 billion.  B.36

Revenue increased due to higher unit sales of vehicles and
components by €4.2 billion to €107.2 billion and was thus
higher than our expectations as stated in the Outlook section
of last year’s Annual Report. For the reasons stated above,
revenue in the car business increased by 4% to €81.8 billion.
Also in the commercial-vehicles business, higher unit sales
of vehicles and components caused revenue to grow by 5%
to €25.4 billion. Daimler AG significantly increased its unit
sales in 2016, as forecast in the previous year.

Selling expenses decreased by €0.2 billion to €6.5 billion.
This was primarily due to lower personnel expenses in connec-
tion with restructuring the sales-and-service centers and the
associated workforce reductions. As a proportion of revenue,
selling expenses decreased from 6.5% to 6.0%.

General administrative expenses of €1.8 billion were
slightly above the prior-year level (2015: €1.6 billion).
In relation to revenue, they amounted to 1.7% (2015: 1.6%).

Other operating expense amounted to €0.7 billion (2015:
€0.0 billion). The change was mainly the result of expenses
of €0.4 billion relating to legal proceedings.  B.36

Financial income increased by €3.4 billion to €5.4 billion,
primarily due to improved interest income/expense, net.
This is mainly a reflection of a lower interest expense from
retirement benefit obligations, following a change in the
law on calculating the discount rate as the average market
interest rate for the past ten years instead of the past
seven years. Financial income was also affected by higher
income from special-purpose assets for the settlement
of pension obligations. There were opposing effects from
increased impairments of investments in subsidiaries and
associated companies. This relates in particular to Mercedes-
Benz do Brasil Ltda. and Daimler India Commercial Vehicles
Private Limited.

The income tax expense amounts to €1.4 billion (2015:
€0.9 billion). In 2015, the figure included high tax benefits
in connection with the tax assessment of previous years.
The increase in the tax expense compared with 2015 is due
in particular to the decrease in these tax benefits from
previous years.

Net profit increased from €3.8 billion to €5.9 billion, and
was thus in line with the expectations stated in the Outlook
section of last year’s Annual Report. The development
primarily reflects the improved financial income, which was
partially offset by lower operating profit.

The economic situation of Daimler primarily results from its
business operations and those of its subsidiaries. Daimler AG
participates in the operating results of its subsidiaries through
profit distributions. The economic situation of Daimler AG is
therefore fundamentally the same as that of the Daimler Group,
which is described in the chapter “Overall Assessment of the
Economic Situation.” E page 140.

B | COMBINED MANAGEMENT REPORT | DAIMLER AG 121

Financial position, liquidity and
capital resources

The balance sheet total of €98.2 billion is €9.9 billion higher
than at year-end 2015.  B.37

Non-current assets increased by €0.8 billion to €40.1 billion,
due to the higher amount of financial assets, fixed assets and
intangible assets. Investment in property, plant and equipment
(excluding leased assets, approximately €2.7 billion) mainly
comprises investments for the production of the new E-Class
models, the SUVs and the A-Class, as well as investments
in engine and transmission projects.

Inventories increased compared with December 31, 2015
by €0.6 billion to €9.1 billion. The increase is mainly related
to finished products and goods in connection with the higher
production volumes.

Receivables, securities and other assets increased compared
with December 31, 2015 by €7.8 billion to €46.1 billion. The
main reason for this development was growth of €6.6 billion in
receivables due from subsidiaries. Cash and cash equivalents
decreased by €0.3 billion to €1.7 billion.

Gross liquidity – defined as cash and cash equivalents
and other marketable securities – of €8.5 billion was higher
than a year earlier (2015: €7.8 billion).

Cash provided by operating activities amounted to
€8.5 billion in 2016 (2015: €6.6 billion). The increase primarily
reflects improved working capital as well as lower cash-effective
contributions to pension plan assets. The contribution of
Daimspain S.L. into the special-purpose assets for the sustained
strengthening of the German pension fund of Daimler AG
was not cash effective. Daimspain S.L. holds 3.1% of the shares
of each of Renault S.A. and Nissan Motor Company Ltd. On
the other hand, cash provided by operating activities was reduced
by higher utilization of provisions and by the lower operating
profit in 2016.

B.36
Condensed income statement of Daimler AG

In millions of euros

Revenue

Cost of sales (including R&D expenses)

Selling expenses

General administrative expenses

Other operating expense, net

Operating profit

Financial income, net

Income taxes

Net profit

2016

20151

107,178

-96,271

103,024

-92,080

-6,454

-1,844

-749

1,860

5,430

-1,422

5,868

-6,695

-1,622

-46

2,581

2,074

-900

3,755

Transfer to retained earnings

-2,391

-278

Distributable profit

3,477

1 Information on reclassifications in 2015 is presented
in the annual financial statements of Daimler AG.

122 B | COMBINED MANAGEMENT REPORT | DAIMLER AG

Cash flows from investing activities resulted in a net cash
outflow of €6.1 billion in 2016 (2015: €4.2 billion). The increase
is primarily a reflection of capital measures within financial
assets. Additional factors leading to increased cash outflows
were higher investments in securities, fixed assets and
intangible assets.

Cash flows from financing activities resulted in a net cash
outflow of €2.7 billion (2015: €3.9 billion). This is explained
by the increase in external financing liabilities compared with
the previous year. There was an opposing effect from the
increased cash outflows from the Group’s internal transactions
in connection with central finance and liquidity management.
Cash flows from financing activities include the payment of the
dividend for the year 2015 in an amount of €3.5 billion.

B.37
Balance sheet structure of Daimler AG

In millions of euros

Assets

Non-current assets

Inventories

Receivables, securities and other assets

Cash and cash equivalents

Current assets

Prepaid expenses

Assets arising from overfunding
of pension obligations

Equity and liabilities

Share capital

(conditional capital €500 million)

Capital reserve

Retained earnings

Distributable profit

Equity

Provisions for pensions and similar
obligations

Other provisions

Provisions

Trade payables

Other liabilities

Liabilities

Deferred income

Dec. 31,
2016

Dec. 31,
2015

40,107

9,071

46,120

1,660

56,851

339

891

39,259

8,503

38.341

1,925

48,769

257

–

98,188

88,285

3,070

11,480

22,560

3,477

40,587

–

11,847

6,077

38,935

45,012

742

98,188

11,480

20,169

3,477

38,196

1,931

11,811

13,742

5.098

30.654

35,752

595

88,285

Equity increased in 2016 by €2.4 billion to €40.6 billion.
This change primarily resulted from the net profit for 2016,
of which, in accordance with Section 58 Subsection 2
of the German Stock Corporation Act (AktG), €2.4 billion
was transferred to retained earnings. The equity ratio at
December 31, 2016 was 41.3% (December 31, 2015: 43.3%).
As explained in the notes to the annual financial statements
according to the German Commercial Code (HGB), Daimler AG
holds no treasury shares at December 31, 2016.

Provisions decreased compared with December 31, 2015
by €1.9 billion to €11.8 billion. This was primarily due to the
development of provisions for pensions and similar obligations.
As the fair value of the special-purpose assets exceed the settle-
ment amount of the pension obligations, Daimler AG reports
an asset of €0.9 billion from the overfunding of its pension obliga-
tion at December 31, 2016. The contribution of Daimspain S.L.
into the special-purpose assets of Daimler AG for the sustained
strengthening of the German pension plan assets had a
positive impact in this respect. There was also an effect from
the increased discount rate for retirement benefit obligations
resulting from the changed law on calculating such obligations.

Liabilities increased by €9.3 billion to €45.0 billion, primarily
due to financing liabilities.

Risks and opportunities

The business development of Daimler AG is fundamentally
subject to the same risks and opportunities as that of the
Daimler Group. Daimler AG generally participates in the risks
of its subsidiaries and associated companies in line with the
percentage of each holding. The risks and opportunities are
described in the “Risk and Opportunity Report.” E pages 158 ff
For Daimler AG, the probability of occurrence of the risks
and opportunities connected with pension plans is assessed
as high. These risks and opportunities increase along with a
change in the discount rate. Risks may additionally arise from
relations with subsidiaries and associated companies in con-
nection with statutory or contractual obligations (in particular
with regard to financing), as well as from the impairment
of investments in subsidiaries and associated companies.

Outlook

Due to the interrelations between Daimler AG and its subsidiaries
and the relative size of Daimler AG within the Group, we refer
to the statements in the “Outlook” chapter, which largely reflect
our expectations also for the parent company. This includes
the statements on unit sales and revenue. E pages 174 ff
For financial year 2017, we expect Daimler AG to achieve net
profit significantly lower than in 2016, primarily due to a
probable increase in interest expense. The year 2016 was influ-
enced by the positive effect from the changed legislation on
discount rates for retirement benefit obligations. Furthermore,
we anticipate lower income from special-purpose assets in 2017.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 123

Sustainability and Integrity

Sustainability at Daimler

Our view of sustainability
For us, sustainability means conducting business responsibly
to ensure long-term success in harmony with the environment
and society. We are moving toward our goals by making sus-
tainability an integral part of our operations in the organization
and by requiring and promoting a strong sense of responsibility
for sustainable operations among all of our managers and employ-
ees throughout the Group. We include our business partners in
this process and conduct a dialogue about these issues with
our stakeholders. Our management structures, processes and
systems are designed in accordance with this concept of sus-
tainability. All of our behavior is based on legality and integrity.
As one of the world’s foremost automakers, Daimler has a
clear claim to leadership in the field of sustainability.

Our sustainability strategy
We have developed a Group-wide sustainability strategy to enable
us to meet the requirements associated with sustainability,
and we systematically pursue the sustainability goals we have
set for ourselves. This strategy is embedded in our corporate
strategy, which is based on our four core values: passion,
discipline, respect and integrity. We can only ensure sustained
profitability and society’s acceptance of our business activities if
we take into account the impact all of our business processes
have on the environment and society, and if we align our business
targets with environmental and social requirements.

Our sustainability strategy has six core aspects (“dimensions
of responsibility”), to which relevant areas have been assigned
where action needs to be taken. We have linked them with targets
and target indicators, against which we can be measured and
which we use to document our progress. Our Target Program
also defines the areas in which we plan to take action in the
coming years. For example, we aim to further reduce pollutants
and emissions, further enhance the safety of our vehicles, further
advance our culture of integrity, and further expand and more
systematically structure our efforts to protect human rights, in
line with the “UN Guiding Principles on Human Rights.” We also
seek to improve our dialogue with our suppliers and dealers
and to further strengthen our social commitment.

Our business activities are also strongly guided by the ten
principles of the UN Global Compact, to which we are firmly
committed as a founding member. We are also a member of
the Global Compact LEAD Group. Our internal principles and
guidelines are based on this international reference framework
as well as on other international principles.

– We are committed to both legal and ethical standards and

we must ensure that these standards are adhered to around
the world – also by our business partners and suppliers.
– As an automobile manufacturer, we work to promote sustain-

able mobility solutions and have demonstrated our innovative
capability with regard to environmental protection, resource
conservation and safety.

– Our operations impact the environment, and this is especially
the case in vehicle production. We therefore employ
a consistent system of environmental management in order
to minimize that impact.

– As an employer, we have a responsibility to ensure fair

and attractive working conditions for our more than 282,000
employees worldwide.

– We seek to contribute to the common good beyond the level
of our business operations, and we utilize our special expertise
in order to achieve this goal.

Group-wide sustainability management
At Daimler, sustainability is thematically and organizationally
embedded in our Group-wide corporate governance activities.
E pages 207 ff The Corporate Sustainability Board (CSB) is
the central management body for all sustainability-related issues.
The operational work is conducted by the Corporate Sustain-
ability Office, which is staffed by representatives of the specialist
departments and divisions. Since 2011, we have been using
the Sustainability Scorecard as a tool for steering our efforts
to meet key sustainability targets. The scorecard uses a color-
coded system either to display the success of quantitative
indicators and qualitative objectives or to show that action
needs to be taken. This allows targeted measures to be taken
with the direct involvement of corporate management.

124 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Comprehensive reporting on sustainability
The new sustainability report on financial year 2016 will be
presented at Daimler’s Annual Shareholders’ Meeting at the end
of March 2017. The report will be published exclusively in digital
form, which means it will be available for viewing at any time
on the Daimler corporate website. The report provides a detailed
and comprehensive sustainability balance sheet for the previous
financial year. All of the key facts and figures related to sus-
tainability will also be published in a brochure.
w daimler.com/sustainability

Our sustainability report was drawn up in line with the Global
Reporting Initiative (GRI) guidelines “G4 – Comprehensive.”
In this context, Daimler specifically highlights all of the company’s
key sustainability-related issues. This applies in particular to
current focal topics such as our efforts to further reduce vehicle
emissions, our electric mobility roadmap and the extensive
participation of our employees and the company as a whole in
a large number of social and environmental projects. We also
focus on those issues that our materiality analysis has determined
to be of great importance to our stakeholders and ourselves.
These include our activities to protect human rights, our data
protection policies, our measures to further reduce the CO2
emissions of our vehicles and the development of innovative
vehicle technologies such as those enabling autonomous
driving.

Research and development

Research and development as key success factors
Research and development have always played a key role at
Daimler. Gottlieb Daimler and Carl Benz invented the automobile
more than 130 years ago. Today, we are shaping the future of
mobility. Our researchers anticipate trends, customers’ wishes
and the requirements of the mobility of the future, and our
development engineers systematically implement these ideas
in products that are ready for series production. Our goal is
to offer our customers fascinating products and customized
solutions for needs-oriented, safe and sustainable mobility.
Our technology portfolio and our key areas of expertise are
focused on this objective.

The expertise, creativity and drive of our employees in research
and development are key factors behind our vehicles’ market
success. At the end of 2016, Daimler employed 24,200 men
and women at its research and development units (2015: 23,300).
A total of 16,300 of those employees (2015: 15,500) worked
at Group Research & Mercedes-Benz Cars Development, 5,600
(2015: 5,500) at Daimler Trucks, 1,200 (2015: 1,100) at
Mercedes-Benz Vans and 1,200 (2015: 1,200) at Daimler Buses.
Approximately 5,400 researchers and development engineers
(2015: 5,100) worked outside Germany.

Our international research and development network
Our global research and development network comprises
35 locations in 15 countries. The biggest facilities are in Sin-
delfingen and Stuttgart-Untertürkheim in Germany. In November
2016, we opened our new technology center for vehicle safety
(TFS) in Sindelfingen. The center offers entirely new possibilities
for car and truck crash tests, the configuration of assistance
systems and PRE-SAFE®, and the validation of vehicle concepts
that use alternative drive systems. An ultramodern testing and
technology center is under construction in Immendingen and
is scheduled to be completed in 2018. This facility will be used
to refine and optimize combustion engines and alternative drive
systems for hybrid vehicles and electric vehicles powered by
batteries or fuel cells. Most of the test drives that now take
place on public roads will be shifted to the new proving grounds
in Immendingen after it is completed. Our most important
research locations in North America are Sunnyvale, California
(home of the headquarters of our research facilities); Long Beach,
California; Portland, Oregon; and Redford, Michigan. Our most
important locations in Asia are our facility in Bangalore, India;
the Global Hybrid Center in Kawasaki, Japan; and our research
and development center in Beijing. Mercedes-Benz Research
and Development India (MBRDI) with headquarters in Bangalore
is Daimler’s largest research and development center outside
Germany. Activities at MBRDI, which celebrated its 20th anniver-
sary in 2016, focus on digitization, simulations and data science.
Ten years after it opened, Mercedes-Benz Research & Develop-
ment China is now an integral part of the Daimler Group’s
research network and also plays a key role in understanding
Chinese customers’ expectations and local requirements.
This expertise directly gives us a sustained competitive edge
and the capability to develop tailored products for the local
market. Back in 2013, our van joint venture in China, Fujian Benz
Automotive Corporation, opened a new product development
center in Fuzhou. This facility, which is the first Mercedes-Benz
Vans product development center outside Germany, has a
design and calculation department, proving grounds, test
labs and component and complete-vehicle test rigs. In 2016
we also opened a new Technology Center in Tel Aviv that
focuses on research projects related to digitization.

Along with our internal activities, we also maintain close contacts
with external research institutions. For example, we cooperate
with various renowned research institutes around the world
and participate in international exchange programs for up-and-
coming scientists.

Targeted involvement of the supplier industry
In order to achieve our ambitious goals, we cooperate very
closely also with research and development units from the sup-
plier industry. Daimler must be closely intermeshed with supplier
companies in order to deal with the rapid pace of technological
change in the automotive industry and the need to quickly
bring new technologies to market maturity. Such cooperation
is all the more important in light of the increasing digitization
of processes throughout all stages of the value chain. Strong
partners from the supplier industry are also indispensable for
our efforts to develop and offer new concepts for future mobility.
As part of our joint research and development work, we make
sure the Group retains key technological expertise it needs to
maintain the uniqueness of our brands and to safeguard the
future of the automobile in general.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 125

Intellectual property rights secure our leadership
in technology and innovation
We invented the automobile: On January 29, 1886, Carl Benz
registered a patent for a “vehicle powered by a gas engine.”
In the 131 years since then, we have refined automobiles with
more than 110,000 patents and have set standards that point
the way towards emission-free, accident-free and autonomous
driving. We continued this tradition in 2016 by registering a total
of approximately 2,000 new ideas for patents, as we did also
in the previous year. These patents are important to the company
primarily for two reasons. First of all, they enable “exclusivity,”
whereby the goal is to establish exclusive positioning of selected
Daimler features on the market, thus setting ourselves apart
from the competition. Secondly, the patents secure Daimler a
certain amount of “freedom of action” that enables us to manu-
facture and sell our products around the world and avoid legal
conflicts with third parties. In addition to industrial property
rights, which safeguard our innovations for future mobility over
the long term, the unique visual aspects of our products are
protected with approximately 9,100 designs registered in 2016
(2015: 9,000). Furthermore, with a portfolio of more than
32,800 trademarks worldwide (2015: 31,300), we protect the
renowned and valuable Mercedes-Benz brand, the three-pointed
star and all of our other product brands in each relevant market.

€7.6 billion for research and development
We want to continue shaping mobility through our pioneering
innovations in the coming years while moving ahead with
digitization throughout the Group. Daimler seeks to play a
pioneering role in the future-oriented strategic fields of con-
nectivity (Connected), autonomous driving (Autonomous),
flexible use (Shared & Services) and electric drive systems
(Electric), as well as for systems that intelligently link these
fields. As announced in Annual Report 2015, we therefore
increased our very high level of investment in research and
development by 15% to €7.6 billion in 2016. Of that amount,
€2.3 billion (2015: €1.8 billion) was capitalized as development
costs, which amounts to a capitalization rate of 31% (2015: 27%).
The amortization of capitalized research and development
expenditure totaled €1.3 billion during the year under review
(2015: €1.2 billion). With a rate of 4.9% (2015: 4.4%), research
and development expenditure was also at a high level in com-
parison with revenue. Research in the year under review focused
on new vehicle models, extremely fuel-efficient and environ-
mentally friendly drive systems, new safety technologies,
autonomous driving systems and the digital connectivity of
our products.

Key areas at Mercedes-Benz Cars were the new models in
the compact class, the ongoing model updates of SUVs and
coupes, the new EQ electric brand and the new generation
of diesel and gasoline engines. We also invested in vehicle
connectivity, autonomous driving systems and the development
of additional innovative safety technologies. Mercedes-Benz Cars
spent a total of €5.7 billion on research and development in
2016, which once again marked a significant increase from
the prior year’s figure (€4.7 billion). Daimler Trucks invested
€1.3 billion in research and development projects (2015:
€1.3 billion). The division’s most important projects were in
the areas of emission standards and fuel efficiency, as well
as new products and the successor generations of existing
products such as the new Freightliner Cascadia. R & D expenditure
at Mercedes-Benz Vans focused mainly on ongoing product
updates, the new Sprinter generation and the expansion of
the portfolio with the new X-Class pickup. Daimler Buses
primarily focused its development activities on new products,
the fulfillment of new emissions standards and the creation
of alternative drive systems.  B.38  B.39

B.38
Research and development expenditure

In billions of euros

total
thereof capitalized

2012

2013

2014

2015

2016

B.39
Research and development expenditure by division

In millions of euros

Daimler Group

thereof capitalized

Mercedes-Benz Cars
thereof capitalized

Daimler Trucks

thereof capitalized

Mercedes-Benz Vans
thereof capitalized

Daimler Buses

thereof capitalized

2016

2015

16/15

% change

7,572
2,315

5,671
2,008

1,264
57

442
238

202
11

6,564
1,804

4,711
1,612

1,293
26

384
153

184
13

+15
+28

+20
+25

-2
+119

+15
+56

+10
-15

126 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Innovation and safety

Innovations for the mobility of the future
The greatest possible customer utility, the most stringent safety
standards, high levels of environmental compatibility and
efficiency – we rely on innovative concepts and environmentally
sound product development to help us achieve all of these
goals simultaneously. Our innovations range from pioneering
vehicle and drive-system technologies to intelligent light-
weight engineering concepts and sophisticated assistance
systems that can prevent accidents.

CASE – these four letters stand for the future-oriented strategic
fields of connectivity (Connected), autonomous driving
(Autonomous), flexible use and services (Shared & Services),
and electric drive systems (Electric). We are moving ahead
consistently in all of these areas at all of our divisions, and we
are also linking them in an intelligent way to create a compre-
hensive target concept for our vehicles, services and business
models. In this manner, we are underlining our claim to play
a dominant role in the mobility of the future. The projects
presented on the following pages are specific examples of a
large number of activities that show how Daimler is already
playing a leading role today in the development of solutions
for the mobility of tomorrow.

Our “road to emission-free driving”
Our “Road to Emission-free Driving” initiative defines the key
development approaches for creating new, extremely fuel-
efficient and environmentally friendly drive-system technologies
at all of our automotive divisions:

1. We continue to enhance our vehicles with state-of-the-art

internal-combustion engines to achieve further significantly
reductions in fuel consumption and emissions.

2. We are achieving further significant increases in efficiency

through customized hybridization, i.e. the combination of
combustion engines and electric motors.

3. Our electric vehicles, powered by batteries or fuel cells, are

making locally emission-free driving possible.  B.40

We are systematically pursuing our approach to emission-free
driving along the entire value chain. To this end, we are addressing
multiple aspects and exploiting potential at all development
units for everything from lightweight engineering to optimized
aerodynamics, the use of clean and efficient fuels, the creation
of electric drive systems and the implementation of sustainable
mobility concepts. We view emissions as a holistic issue and
are therefore examining ways to reduce other types of emissions
besides pollutants – e.g. noise.

In 2016 in particular, we made considerable progress in terms
of the road to emission-free driving. This is especially true with
regard to our diesel and gasoline engines. We believe that over
the medium term, 15% to 25% of all our new cars will be all-electric
models. However, this also means that combustion engines
will continue to form the backbone of individual mobility well into
the next decade. This is one of the main reasons why we
continue to invest heavily in the optimization of combustion
engine technology, and in this way we are making a key
contribution toward reducing fuel consumption and emissions
even further. At the same time, we launched a broad-based
electric mobility offensive at all of our divisions during the year
under review. With it, we are employing a holistic approach
that includes both the electric vehicles themselves and all the
services needed for electric mobility.

Outstanding efficiency and emissions: the new
diesel engines
The exemplary efficiency and emissions of our new premium
diesel engine already meet all of the known emission standards,
while underlining the key role to be played by diesel drive
systems in achieving challenging climate targets. The outstanding
fuel efficiency and emissions of the new diesel engines were
achieved with an integrated technological approach that includes
a new graduated bowl combustion system and a newly deve-
loped exhaust aftertreatment concept. The new engine design
makes it possible to install all exhaust aftertreatment compo-
nents in the direct vicinity of the engine rather than in the
underbody area, as was previously the case. This has led

B.40
Road to emission-free mobility

Optimizing our vehicles
with modern conventional
powertrains

Hybridization for further
increase in eﬃciency

Locally emission-free
driving with electric
vehicles powered by
batteries or fuel cells

Energy for the future

Clean fuels for internal combustion engines

Energy sources for locally emission-free driving

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 127

to a significant improvement in overall system performance –
and this performance is almost completely independent of ambi-
ent temperatures and driving styles. In its 143 kW version, the
first all-aluminum four-cylinder diesel engine from Mercedes-Benz
weighs 168.4 kg. That is 35.4 kg (17 percent) less than the
125 kW predecessor – and a new benchmark in the engine’s
output class. If instead of the DIN weight, one compares the
ready-to-run engine with all its auxiliary assemblies, the weight
reduction amounts to 46 kg, which translates into clear
benefits in terms of agility and fuel consumption.

The all-new OM 654 four-cylinder diesel engine had its market
launch in the new E-Class. The Mercedes-Benz E 220 d (fuel
consumption in l/100 km: urban 4.7–4.3, extra-urban 4.1–3.6,
combined 4.3–3.9; CO2 emissions in g/km: combined 112–102)
thus consumes much less fuel than the predecessor model,
despite its higher performance. However, the new diesel engine
family stands out not just by virtue of its excellent fuel economy;
it also boasts very low nitrogen-oxide emissions. This was also
confirmed by measurements conducted by the independent
DEKRA testing organization.

Biggest engine offensive in the history of Mercedes-Benz
The new four-cylinder diesel engine is the first member of a
modular engine family that will be utilized across the entire
product range of Mercedes-Benz Cars and also at Mercedes-Benz
Vans. Several different output ratings are planned for the
engine, which will be installed either longitudinally or transversely
in vehicles with front, rear or all-wheel drive. In this manner,
Mercedes-Benz will equip its entire range of diesel cars in Europe
with this new engine generation by 2019 at the latest. Next
year will see the debut of another four members of the all-new
engine family: an in-line six-cylinder engine in a diesel and a
gasoline variant, a new four-cylinder gasoline engine and a new
biturbo V8. Forward-looking new technologies such as the
integrated starter-generator (ISG), the 48-volt on-board power
system and the electric auxiliary compressor will also have
their world premieres next year.

Comprehensive electric-mobility offensive for cars
and commercial vehicles
Daimler launched a broad-based electric mobility offensive
at all of its divisions during the year under review. The models
include new plug-in hybrids from Mercedes-Benz Cars, new
electric smart models, the DENZA 400, which we developed
with our partner BYD for the Chinese market, the new FUSO
eCanter and a completely new fuel-cell vehicle based on the
GLC with plug-in technology. The electric mobility offensive
also includes the three concept vehicles Concept EQ, the heavy-
duty Mercedes-Benz Urban eTruck and the Mercedes-Benz
Vision Van, all of which offer a very detailed preview of electric
mobility in the future. E pages 20 ff and 42 ff

For the electrification of the drivetrain, we are employing a holistic
approach that includes both the electric vehicles themselves
and all the services needed for electric mobility. The latter range
from intelligent services to energy-storage units for private
and commercial customers, charging technologies (e.g. inductive
charging) and sustainable recycling solutions. In order to meet
the rising demand for top-quality high-voltage batteries, Daimler
is also investing a total of approximately €1 billion in the
establishment of a global battery production network.

Ten plug-in hybrid cars by 2017
The major benefit of plug-in hybrid vehicles is that they
combine the best aspects of combustion engines and electric
drive. Hybrids help reduce overall consumption and increase
performance, as the electric motor is used to take over from
or support the combustion engine in situations where the latter
is less efficient. In addition, our plug-in hybrids are equipped
with a powerful battery that enables an all-electric range of
approximately 30 km. The updated S-Class with hybrid drive,
which will be launched in the spring of 2017, actually has an
all-electric range of around 50 km, and we plan to increase
that range to as much as 100 km over the medium term. This
will enable our customers to drive locally emission-free to a
very large extent in everyday situations. In such a setup, the
combustion engine is used for longer distances; this guarantees
that our plug-in hybrids will be perfect for any driving require-
ment. We believe that plug-in hybrid technology will be extremely
successful as we move into the next decade, and that is why
hybridization is a key component of our drive-system strategy.
We will present a total of ten plug-in hybrid models by the
end of 2017.

We launched three new plug-in hybrid models in 2016. One of
them is the Mercedes-Benz E 350 e (fuel consumption in
l/100 km: combined 2.1; CO2 emissions in g/km: combined 49;
electricity consumption in kWh/100 km: combined 11.5). With
a system output of 210 kW (286 hp), this plug-in hybrid offers
the performance of a sports car and the certified fuel consump-
tion of a subcompact.

EQ – a new brand for electric mobility
Mercedes-Benz has consolidated all of its activities in the area
of electric mobility into a new product brand known as EQ.
EQ stands for Electric Intelligence, which in turn is derived from
the Mercedes-Benz brand values of Emotion and Intelligence.
The new brand addresses all aspects of customer-focused electric
mobility and therefore involves much more than just the
vehicles themselves: EQ offers a comprehensive electric-mobility
ecosystem of products, services, technologies and innovations.
The new brand is heralded by the near-production Concept EQ,
which had its world premiere at the Paris Motor Show in 2016.
E page 22 f

128 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

The first series-produced EQ model will be launched in the
SUV segment before the end of the decade. It will be followed
by a model offensive that will gradually expand the product
range of Mercedes-Benz Cars to include even more electric
models. By 2025, Daimler will be offering more than ten all-
electric models in the passenger-car segment alone.

With the Concept EQ, Mercedes Benz has demonstrated that
attractive electric vehicles delivering high performance might
soon be a very common sight on streets and highways. The
Concept EQ looks like a sporty SUV coupe and points the way
forward to an all-new generation of battery-electric vehicles.
These new electric vehicles will be based on an architecture
developed especially for battery-electric models. This architecture
is scalable in every respect and can be used in all model series,
including all types of car such as SUVs, sedans and coupes.

The Mercedes-Benz Vision Van: intelligent, connected
and electric
The Mercedes-Benz Vans division presented its all-electric Vision
Van in September 2016. This forward-looking concept van
features numerous innovative solutions for parcel deliveries in
urban and suburban settings. The Vision Van is the world’s
first van that digitally links all participants and processes in
the delivery chain from start to finish – from the goods
distribution center to the recipient. It is also the first van with
a fully automatic cargo area and integrated delivery drones.
This means, for example, that in the future, the van will be able
to stop in a residential area and use the drones for automatic
air deliveries even as the driver makes deliveries by hand in the
immediate vicinity. This will simplify operations for delivery
companies, reduce transport times and create entirely new
possibilities for end customers. All in all, use of the Vision Van
can increase the efficiency of last-mile delivery operations by
as much as 50%. E page 48 f

We believe that the future of urban delivery operations will largely
be an electric one, because the overall framework for electric
mobility and the associated technological possibilities are con-
tinually improving. For this reason, Mercedes-Benz Vans has
decided to once again launch series production of an electric
commercial van in 2018 after having introduced the world’s
first all-electric production van – the Vito E-CELL – back in 2011.
The fully electric drive system will be developed by the division
in line with specific applications and the exact requirements of
customers that provide delivery services in urban areas. Various
battery charging systems and battery sizes will thus be offered
in order to accommodate different customer requirements.
In some applications, the van’s electric drive system will result
in operating costs similar to those of a van with a combustion
engine.

All-electric trucks: FUSO eCanter and Urban eTruck
Since 2014, Daimler Trucks has been impressively demonstrat-
ing the everyday suitability of an all-electric truck for the light
distribution sector in customer trials with the FUSO Canter
E-Cell. In 2016, FUSO presented the eCanter – the third gener-
ation of the world’s first all-electric light-duty truck – at the
IAA Commercial Vehicles Show. This presentation marked the
start of a small series production run of vehicles that will be
delivered to customers in Europe, the United States and Japan
from 2017 on. The FUSO eCanter represents the systematic
further development of the FUSO Canter E-Cell, and it differs
from the predecessor model not just in visual terms but also
technologically.

With its locally zero-emission drive system, the eCanter not
only reduces the impact of exhaust and noise on city centers;
it also offers an economically attractive alternative to diesel
engines. Because of its lower costs for the battery and other
components, the eCanter can be offered at a competitive
price. In addition, the truck’s low operating costs compared to
an equivalent diesel model mean that customers can recoup
their expense in around three years.

In July 2016, Daimler Trucks presented the Mercedes-Benz
Urban eTruck, the first fully electric truck with a gross vehicle
weight of up to 26 metric tons. The Urban eTruck thus points
the way to a future in which heavy-duty trucks can also be used
for emission-free and low-noise urban distribution operations.
As things stand now, we could launch this technology at the
beginning of the next decade. E pages 42 f

Expansion of business with stationary energy storage
devices
As early as 2015, Daimler entered the market for stationary
energy-storage devices, and it has since then continually
expanded its activities in this growth sector. The systems devel-
oped by Daimler are scalable, which means that the lithium-ion
batteries can be utilized both in large-scale industrial applications
and private households. Three major projects that focus on
industrial energy-storage solutions are already being developed.
They include a 13 MWh second-use battery storage unit in
Lünen, Germany, E page 134 and a cooperation project with
enercity (Stadtwerke Hannover AG). In the latter project, some
3,000 battery modules reserved for the third-generation smart
electric drive vehicle fleet are being pooled to create a stationary
storage facility at the enercity site in Herrenhausen. With a
storage capacity totaling 15 MWh, the facility is one of the
largest in Europe. A battery normally requires regular cycling
(i.e. specific charging and discharging for the purpose of
preservation) during its storage period if it is to be used as a
replacement. The traditional and potentially long-term re-
placement battery storage solutions thus generate not only
warehousing costs but substantial operating costs as well.
However, the partner companies have succeeded in avoiding
those costs through the use of an innovative approach that offers
decisive benefits. Around 29 MW will be connected to the grid
after completion of the first projects. Daimler will team up with
specialized partners to market this power on Germany’s primary
energy market. The storage units will be used to balance energy
fluctuations in the German grid. Further projects are being
planned.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 129

In April 2016, Daimler began delivering Mercedes-Benz stationary
energy-storage units for use in private homes. The lithium-ion
batteries are manufactured by Daimler’s Deutsche Accumotive
subsidiary and distributed via selected sales and cooperation
partners. At present, the company is cooperating here with
various energy suppliers, solar-power specialists and whole-
salers. Their network of qualified specialist installers provide
end-customers with on-site advice, take care of planning,
draw up individual quotations for all components and perform
the actual installation.

World premiere of the partially autonomous
Mercedes-Benz Future Bus
During the year under review, Daimler Buses became the
world’s first manufacturer to present a city bus that can operate
in a partially autonomous mode in normal traffic. In July 2016,
the Mercedes-Benz Future Bus equipped with CityPilot drove
partially autonomously for the first time on a Bus Rapid Transit
(BRT) line approximately of 20 kilometers in Amsterdam. The
bus drove at speeds up to 70 km/h, stopped with centimeter
precision at bus stops and traffic lights, accelerated automatically,
drove through tunnels, braked for obstacles and pedestrians,
and communicated with traffic signals. Drivers remain on board
the Future Bus, but their job is made much easier.

For example, Future Bus can recognize if a stretch of road is
suitable for autonomous driving and then notifies the driver,
who can activate the CityPilot with just the push of a button.
After that, drivers must keep their feet off the gas and brake
pedals and their hands off the steering wheel. This is because
any such driving action will override and deactivate the CityPilot.
In other words, the driver always maintains full control over
the bus.

Our “road to accident-free driving”
Vehicle safety is one of our core areas of expertise and a key
component of our product strategy. The Mercedes-Benz brand
has been shaping the development of safety systems for several
decades. Many of the company’s innovations, especially those
for protecting vehicle occupants and other road users, have
saved countless lives. Even today, Daimler continues to set
standards for safety technology and autonomous driving. Our
vision of accident-free driving will continue to motivate us to
make mobility as safe as possible for everyone in the future.

Partially autonomous driving in the new E-Class
With the new E-Class, Mercedes-Benz has taken a further step
toward accident-free and autonomous driving. The model is the
world’s first production car to be issued with a test license for
autonomous driving in Nevada in the United States without
having to change any of the standard hardware – only the
software has been modified.

An extensive range of assistance systems, including Active Brake
Assist, ATTENTION ASSIST and Crosswind Assist, are standard
in the new E-Class, which is also available with an expanded
driver assistance package as an option. Basic features include
partially automated driving on highways, country roads and
even in cities, as well as assistance when changing lanes on
multi-lane roads, for example when overtaking. In more and
more situations, it can also autonomously brake the vehicle if
required and provide active assistance during evasive maneuvers.
The active distance assistant DISTRONIC can automatically
maintain the correct distance to vehicles in front by adjusting
the driver’s higher desired speed down to that of a slower-
moving vehicle ahead. It can then accelerate back to the set
speed once the road ahead is clear. With the Steering Pilot
sub-function, the system can also keep the E-Class in its lane
at speeds up to 210 km/h. This makes things easier for the
driver, who no longer needs to brake or accelerate in normal
driving situations and also receives plenty of steering assis-
tance – even in curves.

Impressive innovations in the new E-Class include an Active
Lane-change Assistant, which supports the driver when changing
lanes – e.g. when overtaking on multi-lane roads. Once the
driver has activated the turn signal for at least two seconds,
and thus indicated a lane change, the Active Lane-change
Assistant helps steer the vehicle into the desired adjacent lane,
provided it detects that the lane is not occupied. Here, the
driver merely monitors the lane change – and it makes no
difference whether the driver wants to move to the right lane
or to the left lane in order to pass another vehicle.

Car-to-X communication in series-production cars
During the year under review, Mercedes-Benz became the first
manufacturer to introduce Car-to-X connectivity technology
in series-production models, thus once again underscoring its
leading role as a pioneer in safety. An accident around the next
bend? A sudden traffic jam due to a temporary construction
site? Such situations are made less dangerous if drivers are
specifically warned about them in advance. Car-to-X communi-
cation significantly extends the range of existing vehicle sen-
sors, such as radar and camera systems. It allows information
about dangerous situations that are automatically detected
by a vehicle or reported by a driver to be sent to other vehicles,
and in this manner it allows drivers to “see around corners” or
“through obstacles,” so to speak. In other words, information
about potential hazards in road traffic can be sent to drivers at
an early stage. This allows drivers to prepare for them and
avoid critical situations altogether. Mercedes-Benz uses the
vehicle’s integrated communication device for Car-to-X communi-
cation. Data is sent to the Daimler Vehicle Backend system,
where it is aggregated, checked for plausibility and forwarded
to other similarly equipped vehicles in the relevant vicinity.
The system is designed to use third-party information as
well. Car-to-X communication operates in the background and
does not distract the driver’s attention. It simply provides
the driver with early and targeted information in safety-critical
situations and is therefore seamlessly integrated into the
“Mercedes-Benz Intelligent Drive” strategy.

130 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Environmental protection

A comprehensive approach to environmental protection
Protecting the environment is a primary corporate objective of
the Daimler Group. Environmental protection is not separate
from other objectives at Daimler; instead, it is an integral compo-
nent of a corporate strategy aimed at long-term value creation.
The environmental and energy-related guidelines approved by
the Board of Management define the environmental and energy-
related policy of the Daimler Group. This expresses our com-
mitment to integrated environmental protection, which begins
with the underlying factors that have an impact on the environ-
ment, assesses the environmental effects of production
processes and products in advance, and takes these findings
into account in corporate decision-making.

€3.2 billion for environmental protection
In 2016, we continued to energetically pursue the goal of con-
serving resources and reducing all relevant emissions. We
kept a close eye on the impact of all our processes, ranging from
vehicle development and production to recycling and
environmentally friendly disposal. Our expenditure for environ-
mental protection reached €3.2 billion in the year under review
(2015: €2.8 billion).

Car CO2 emissions of 123 g/km at the prior year’s level
Daimler makes great efforts to reduce the fuel consumption of
its vehicles while enhancing their performance – and thus in-
creasing driving enjoyment and safety reserves. As early as 2015,
we were able to reduce the CO2 emissions of newly registered
vehicles from Mercedes-Benz Cars in the European Union to
an average of 123 grams per kilometer. This means we
achieved our 2016 target of 125 g/km ahead of schedule.
We were able to maintain the figure of 123 g/km in 2016 as
well, despite a shift in our sales structure towards the upper-mid
and large segments. B.41 By means of technical innovations,
we succeeded in further reducing the CO2 emissions of our in-
dividual models. This was made possible by both the continual
optimization of our combustion engines and the great efficiency
offered by our hybrid drive systems. Our efforts are supported
here by new and very economical models with lightweight designs
and significantly improved aerodynamics that have enabled
us to exploit further fuel-saving potential. As a result, we have
reduced the CO2 emissions of our cars by more than 12% since
2012 – and by approximately 40% within 16 years or just two
vehicle generations. More than 65 Mercedes-Benz and smart
models emit less than 120 g CO2/km and over 100 models have
received A+ or A energy-efficiency labels. We plan to use
innovative technologies for locally emission-free mobility, and
in particular new hybrid models, in order to further reduce
the fuel consumption and CO2 emissions of our cars.

Connectivity for greater safety and lower fuel
consumption
In May 2015, Daimler Trucks was the first manufacturer
worldwide to receive a license to operate autonomously driving
trucks on public roads. Our intelligent trucks have the potential
to make the transport of goods more efficient, more sustainable
and safer in the years ahead. The key here is to connect trucks
with other vehicles and logistics participants. With its partici-
pation in the European Truck Platooning Challenge 2016 about
two weeks after the world premiere of its Highway Pilot Connect
system on the A52 autobahn near Düsseldorf in April 2016,
Daimler Trucks once again demonstrated its technology leader-
ship in the field of vehicle connectivity. In the European Truck
Platooning Challenge, three connected and autonomous
Mercedes-Benz Actros trucks participated in a cross-border
convoy drive from Stuttgart to Rotterdam in the Netherlands.
Vehicle-to-vehicle (V2V) connectivity makes it possible to elec-
tronically link trucks on highways and major secondary roads in
platoons. Each networked truck can maintain a distance of just 15
meters from the next, rather than the 50 meters normally
required. This significantly reduces aerodynamic drag, and a
platoon of three trucks can reduce fuel consumption and CO2
emissions by up to 7% each. The shorter distance between
vehicles in platoons also allows for much more efficient use of
road space. For example, a platoon of three linked trucks has
a length of only 80 meters, whereas three trucks that are not
electronically coupled require 150 meters of road space. At the
same time, platooning makes road traffic significantly safer.
Whereas a human behind the wheel has a reaction time of
1.4 seconds before an emergency braking maneuver, Highway
Pilot Connect transmits a braking signal to the vehicles behind
in less than a tenth of a second. This considerably shortened
reaction time can make a major contribution toward significantly
reducing the number of rear-end collisions that occur at the
tail end of traffic jams on highways, for example. However, even
with all the technological possibilities offered by V2V, the
driver always maintains ultimate responsibility for monitoring
all of the assistance systems.

First time ever in a truck: Sideguard Assist and
Active Brake Assist with pedestrian detection
Until now, assistance systems in trucks have primarily been
used to avoid serious accidents on highways, although the
number of trucks on the roads is continually increasing. With
Sideguard Assist and Active Brake Assist 4 (ABA 4), Mercedes-
Benz Trucks is transferring this state-of-the-art safety technol-
ogy to urban traffic settings and helping to protect the most
vulnerable road users – pedestrians and cyclists. Sideguard
Assist is the first assistance system available in the industry
that draws the truck driver’s attention to pedestrians and cyclists
in turning situations; this means it can significantly increase
safety in urban traffic situations. The German Insurance Asso-
ciation (GDV) believes that Sideguard Assist can prevent
around half of all accidents between trucks and pedestrians/
cyclists in the future. ABA 4 is the first emergency braking
system for trucks that can significantly reduce the risk of acci-
dents with pedestrians in cities. Whereas Active Brake Assist 3
is already able to initiate braking fully automatically in response
to stationary and moving obstacles such as slow-moving vehicles
and cars at the end of a traffic jam, the new ABA 4 now also
detects pedestrians who walk onto streets from between parked
cars. In this case, the system will autonomously initiate
partial braking.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 131

We have also continuously reduced the pollutant emissions
of our cars in recent years and have been able to meet new
emission requirements in advance. For example, in 2009,
Mercedes-Benz was one of the first manufacturers to begin
introducing EURO 6 technology, which was not obligatory
until September 2015. In 2016, Mercedes-Benz became the first
manufacturer to offer diesel vehicles that already meet the
more stringent Real Driving Emissions (RDE) limits that are
scheduled to go into effect in the EU in September 2017.
This achievement was made possible by a completely new four-
cylinder diesel engine. This diesel engine is the first member
of an extremely clean and efficient modular family of diesel and
gasoline engines that will be utilized across the entire product
range of Mercedes-Benz Cars, and also at Mercedes-Benz Vans.

Economical and low-emission trucks
In recent years, we have also continuously reduced the fuel
consumption of our commercial vehicles, as well as their emis-
sions of CO2 and pollutants. Daimler was the first manufacturer
to switch its entire European product range to Euro VI before
the new emissions standard went into effect in January 2014.
We have succeeded in lowering the fuel consumption of the
Actros by as much as 6% through the introduction of the latest
generation of the Mercedes-Benz OM 471 and OM 470 heavy-
duty truck engines and the implementation of optimization
measures for the entire vehicle. The new engines are being used
in the heavy-duty Actros, Antos and Arocs trucks, and make
all of those models among the most efficient trucks in their
respective segments. Since the generational changeover in 2011,
Mercedes-Benz has succeeded in continually reducing the fuel
consumption of the Mercedes-Benz Actros by making numerous
improvements to the drivetrain. In conjunction with the opti-
mized 12-speed Mercedes PowerShift 3 transmissions, new
low-friction engine oils, Predictive Powertrain Control (PPC) and
aerodynamic measures, Actros customers in 2016 benefited
from up to 15% lower fuel consumption in comparison with the
predecessor model.

Mercedes-Benz has kept its promise to provide its customers
with the most fuel-efficient vehicles on the market, as has
been demonstrated in more than 3,000 comparison drives known
as “fuel duels” that have been carried out by customers
across Europe in recent years. Approximately 1,150 fuel duels
were carried out in 2016. In these comparison drives, customers
tested Mercedes-Benz trucks in their fleet against vehicles manu-
factured by leading competitors. The results speak for them-
selves: The Mercedes-Benz trucks came out on top in the fuel
duels more than 90% of the time.

Our trucks also set the standards for fuel efficiency in North
America, where we presented the new Freightliner Cascadia in
September 2016. The Cascadia is the best-selling Class 8 truck
in the NAFTA region. Development work on the new truck focused
mainly on achieving further significant reductions in fuel
consumption. The truck’s aerodynamic shape and state-of-the-
art drivetrain components have played a major role in reducing
fuel consumption by up to 8% compared to the 2016 Cascadia
Evolution, which was already an extremely economical vehicle.

The consumption of diesel fuel can be greatly reduced also by
hybrid technology – especially in commercial vehicles used for
distribution transportation. For example, the latest FUSO Canter
Eco Hybrid consumes up to 23% less fuel than a comparable
diesel truck, depending on use, and the Freightliner M2e Hybrid
consumes up to 30% less fuel than a conventional diesel-powered
M2 106. Hardly any other commercial vehicle manufacturer
has broader experience in the areas of alternative drive systems
and electric mobility – ranging from vans and trucks to buses.

In Europe, we plan to reduce the fuel consumption of our truck
fleet by an average of 20% over the period of 2005 to 2020.
We are confident that we will achieve this ambitious target, and
we took a further step in that direction with the introduction of
the new generation of the OM 471 heavy-duty truck engine in
2015 and the slightly smaller OM 470 in 2016.

Efficiency Run 2016: Up to 20% lower fuel consumption
and emissions
Mercedes-Benz Trucks and the trailer manufacturer Krone worked
together to turn the concept of an “integrated approach”
to reduce CO2 emissions into reality in less than 12 months.
The integrated approach incorporates every player in the
haulage sector into efforts to reduce fuel consumption – i.e.
commercial vehicle manufacturers, bodybuilders, tire suppliers,
logistics companies and, last but not least, political decision-
makers. The two companies’ development efforts within the
framework of the integrated approach offer real benefits to
customers. The Mercedes-Benz Actros presented at the 2016
IAA Commercial Vehicles show featured an efficiency package
and the latest generation of the OM 471 six-cylinder inline
engine, as well as the anticipatory Predictive Drivetrain Control
system and A-label low rolling-resistance tires. When all of this
is combined with the new Krone Profi Liner Efficiency trailer,
the result promises to be a reduction in fuel consumption and
CO2 emissions of up to 20% compared to previous tractor-trailer
combinations. The comparison is based on a standard semi-
trailer-tractor combination from 2014. Thanks to the Efficiency
Run, Mercedes-Benz Trucks and Krone were able to quickly
transform the package of measures presented at the IAA to
reduce fuel consumption and CO2 emissions into specific
standard products that can now be ordered.

B.41
Average CO2 emissions of the new car ﬂeet
of Mercedes-Benz Cars in the EU

g/km

160

150

140

130

120

110

100

140

134

129

123

2012

2013

2014

2015

2016

132 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

car2go improves the quality of life in big cities
The flexible car sharing model car2go offers clear benefits not
only to customers but also to cities and their residents. This
was actually demonstrated in a three-year study published in
2016 and conducted by the University of California, Berkeley,
in Washington, D.C., Vancouver, San Diego, Seattle and Calgary.
According to the university’s Transportation Sustainability Re-
search Center (TSRC), every car2go vehicle can remove several
private cars from the road, thus helping to reduce the traffic
congestion in urban areas. Car sharing also significantly improves
vehicle utilization. For example, whereas a private vehicle is
only used for around one hour on average every day, car2go
vehicles are driven for a period of about three hours daily,
depending on the city in question. More than 70% of the private
vehicles sold off by car2go members are at least ten years old –
which means car2go removes thousands of cars with outdated
exhaust gas systems from the road. In this sense, use of the
extremely fuel-efficient, low-emission vehicles from car2go
helps improve air quality. car2go vehicles are also often used
for car-pooling purposes.

Extensive recyclability of old vehicles
To make our vehicles more environmentally friendly, we are
reducing our automobiles’ emissions and the resources they
consume over their entire lifecycle. We therefore pay close
attention to creating a recycling-friendly design already at
the development stage. Up to 85% of the material in all
Mercedes-Benz models is recyclable and as much as 95% of
the material is reusable.

Other proven elements of our recycling concept are the resale
of inspected and certified used parts, the remanufacturing of
parts and the MeRSy Recycling Management workshop disposal
system.

Avoiding waste
In the area of waste management, Daimler believes that recy-
cling and the prevention of waste are better than disposal.
Accordingly, the reconditioning and reuse of raw, process and
operating materials has been standard practice at our plants
for many years. In order to avoid the creation of waste from
the outset, we use innovative technological processes and
environmentally focused production planning. Waste materials
that are unavoidable are generally recycled. As a result, the
recycling rate for waste at our plants is over 91% on average.
At some plants, almost 100% of the waste is now recycled,
meaning that waste destined for landfills has been almost
completely eliminated.

As we systematically pursue our environmental protection
activities, we rely on comprehensive environmental management
systems. Today, more than 98% of our employees worldwide
work in plants whose environmental management systems
have been certified as conforming to the ISO 14001 or EMAS
environmental standards.

Clean and efficient drive system technology for buses
Daimler is also leading the way in terms of the introduction of
the latest exhaust technology for the bus sector. For example,
all Mercedes-Benz and Setra model series were made available
with Euro VI technology at a very early stage. A further reduction
in the fuel consumption of our already efficient buses was
achieved through the use of the new Mercedes-Benz engines.
For example, the introduction of the new OM 471 diesel engine
as well as various vehicle optimization measures has led to a
further fuel-consumption reduction of around 4% in Setra
coaches and the Mercedes-Benz Travego, despite higher per-
formance and greater overall robustness. Assuming mileage
of 100,000 kilometers per year and consumption of approximately
24 liters of diesel fuel per 100 kilometers, every coach
equipped with a new-generation OM 471 engine saves around
1,000 liters of fuel and reduces CO2 emissions by 2.5 tons per
year. The Citaro NGT with natural gas drive is even cleaner and
quieter than the conventional Citaros equipped with state-of-
the-art Euro VI diesel engines. Moreover, the Citaro NGT’s
all-new M 936 natural-gas engine makes the bus the benchmark
in its segment. The Citaro NGT is up to 10% more efficient
than the predecessor model – and when organic natural gas is
used, the vehicle is virtually CO2 neutral. In parallel with the
further optimization of the combustion engine, the next step along
the path into the future is the battery-electric Citaro, which
Daimler Buses plans to launch as a series-production model on
the basis of the e-mobility platform in 2018.

Improved environmental performance of electric mobility
The first system batch of a second-use battery-energy storage
unit went on line in Lünen, Westphalia, in September 2016 after
less than a year of construction time. A total of 1,000 battery
systems from second-generation smart fortwo electric drive
cars have been grouped into a stationary battery-energy storage
unit with a capacity of 13 MWh.

The efficient management of energy and material resources also
applies to all components used in electric mobility applica-
tions. With this second-use battery storage unit, the joint venture
between Daimler AG, The Mobility House AG and GETEC has
a forward-looking answer to the key question regarding the
reuse of electric vehicle battery systems. That’s because the
lifecycle of a plug-in or electric vehicle battery does not end
after its automotive application. When used for stationary power
storage, the systems remain fully operational, even after
the service life guaranteed by the manufacturer; slight capacity
losses are only of secondary importance here. It is estimated
that such a unit can operate profitably in a stationary application
for at least another ten years. Reusing modules from electric
vehicles in a battery storage unit doubles their economic utility
and also significantly improves their environmental performance.

The joint venture partners cover the entire battery value creation
and recycling chain with their project in Lünen – from the manu-
facture and processing of battery systems at the Daimler sub-
sidiary Deutsche ACCUMOTIVE and the corresponding range
of electric and plug-in hybrid vehicles from Daimler AG, to the
installation and marketing of stationary battery storage units
in the energy markets by The Mobility House and GETEC, the
recycling of the battery systems at the end of their lifecycle,
and the return of the valuable raw materials back into the pro-
duction cycle, which REMONDIS will be responsible for in the
future.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 133

Environmental protection in production
In recent years we have been able to limit the energy consump-
tion, CO2 emissions, production-related solvent emissions and
noise at our plants with the help of environmentally friendly
production processes. As a result, energy consumption during
the period 2012–2016 increased by only 1.2% to 10.9 million
megawatt-hours, which was well below the rate of production
growth. During the same period, CO2 emissions actually de-
creased by 11.9% to 2.9 million metric tons. Our production-
related CO2 reporting follows the so-called Greenhouse Standard.
This standard requires changed accounting as of reporting
year 2016. We have decided to apply the so-called market-based
method. Calculated on a basis comparable with the year 2012,
CO2 emissions would be 3.1 million tons in 2016, which is a
reduction of 5.7% over a five-year period. As was the case in
the prior year, our ongoing energy-saving projects enabled us
to counteract the additional energy consumption and increase
in CO2 emissions that resulted from the rise in production in
2016. Energy consumption per manufactured vehicle (car) in
the year under review decreased by 2.3% from the prior year,
and CO2 emissions were down by 5.6%. With resource-conserving
technology such as circulation systems, water consumption
despite production growth decreased by 1.5% between 2012
and 2016. In relation to the number of cars we manufactured,
we were able to reduce water consumption by 5.0% compared
with the previous year.

The Group’s total workforce also does not include the employees
of companies that we manage together with Chinese partners; at
December 31, 2016, they numbered approximately 19,500 people
(2015: 19,000).

Attractive compensation
Our employees receive market-rate wages and salaries and
additional benefits such as company pension plans that also
conform to market practice. We also let our employees share
in the success of their respective companies. For example, in
April 2017, eligible employees of Daimler AG will receive a
profit-sharing payout of up to €5,400 for financial year 2016 –
the second-highest such payout in the company’s history.
In April 2016, we issued a profit-sharing payout of €5,650 for
financial year 2015.

Number of years at Daimler
During the year under review, the average period of time that
our employees had been working for Daimler increased slightly
compared to the prior-year level to 16.3 years (2015: 16.0 years).
In Germany, employees had worked for the Group for an average
of 19.5 years at the end of 2016 (2015: 19.4 years). The compara-
tive figure for Daimler AG was 20.1 years (2015: 19.9 years).
Daimler employees outside Germany had worked for the Group
for an average of 11.3 years (2015: 10.9 years).

B.42
Employees at 12/31/2016

By region

Germany

Europe, excluding Germany

USA

Brazil

Japan

China*

Other

60.2%

14.4%

7.7%

3.5%

3.7%

1.3%

9.2%

* excluding non-consolidated associated companies and joint ventures

B.43
Employees by division

Employees (December 31)

% change

2016

2015

16/15

Daimler Group

Mercedes-Benz Cars

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Other

282,488

139,947

284,015

136,941

78,642

24,029

17,899

12,062

9,909

86,391

22,639

18,147

9,975

9,922

-1

-9

-1

+21

-0

The workforce

Slight decrease in the number of employees
On December 31, 2016, the Daimler Group employed a total of
282,488 men and women (2015: 284,015). Contrary to the fore-
cast included in Annual Report 2015, the number of employees
decreased by 1% despite an overall increase in production.
This was primarily caused by the headcount reduction at Daimler
Trucks due to weak demand in major markets. The number
of 170,034 employees in Germany remained at the prior-year level
(2015: 170,454). Employee numbers in the United States
decreased to 21,857 in 2016 (2015: 24,607), and the number of
employees in Brazil decreased to 9,782 (2015: 11,669). At the
end of 2016, Daimler employed a total of 10,535 men and women
in Japan (2015: 11,002).  B.42 Our consolidated subsidiaries in
China had a total headcount of 3,696 at the end of the year
(2015: 3,155). At the end of the year under review, Daimler AG
employed a total of 148,704 men and women (2015: 151,183).

Workforce numbers at the Mercedes-Benz Cars and
Mercedes-Benz Vans divisions increased in 2016. The acqui-
sition of Athlon by Daimler Financial Services led to a sharp
increase in workforce numbers at that division. Daimler Trucks
experienced a decline in workforce numbers in the year under
review. The number of employees at Daimler Buses was just
below the prior-year level.  B.43

Around the world, we have combined in-house services, such
as those for financial processes, HR, IT and development
tasks, sales functions and certain location-specific services,
into shared service centers. Some of the shared service centers
are not consolidated because they do not affect our financial
position, cash flow or profitability; those companies employed
approximately 6,800 men and women at the end of 2016, like a
year earlier.

134 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Slight increase in average age of our employees
The average age of our global workforce in 2016 was 42.7 years
(2015: 42.5). Our employees in Germany were 44.2 years old
on average (2015: 44.0). Employees who are 50 years old or
older currently make up about 39% of our permanent work-
force at Daimler AG. On the basis of current assumptions, this
proportion will rise to about 50% over the next seven years.

Leadership 2020
Our business is changing at an unprecedented speed. This
development is affecting not only technology, the legal frame-
work and customer requirements, but also the way we work and
communicate with one another, as well as forms of manage-
ment. In order to remain as successful in the future as we have
been over the past 130 years, we need to undergo an internal
cultural transformation and develop a new management
culture. This is why we launched the Leadership 2020 initiative
in January 2016.

To get the program started, we selected 144 managers from
24 countries and all management levels and asked them to de-
velop proposals for a new management culture at Daimler.
After being divided into eight teams around the world, the par-
ticipants worked separately on developing new management
approaches, but were given no specific instructions for this
task. They ended up defining eight thematic areas – referred
to as game changers. These game changers take the form of
processes and procedures that question, alter or even break
down established structures in order to facilitate a new man-
agement culture. We also defined eight leadership principles
that will form the basis of our future management approach
and guide the actions of both employees and managers.

The initial results from the working groups are now being im-
plemented. For example, decision processes were standardized
and simplified; this demonstrates that we are placing greater
trust in our employees. In addition, a Daimler Campus Community
innovation network has been created to establish an exchange
between numerous existing institutions, processes and initiatives
related to innovation, and to strengthen the networks between
them. In this way, we are nurturing our most important asset –
our pioneering spirit.

Within the framework of Leadership 2020, members of the
management staff will have additional opportunities for further
development. The objective is that the right employees are
working in the right positions at the right time at Daimler. A new,
digital and global job platform offers interested parties access
to all vacant positions worldwide. The remuneration system
is also being revised. In the future, bonuses are to be oriented
to the success of the Group, and no longer dependent on individ-
ual target achievement. This is intended to make senior
executives feel more responsible for Daimler’s success, and to
measure their success less in terms of personal goals.

For more information about Leadership 2020, see E pages 56 f.

Successful employee survey
We conducted a Group-wide employee survey once again in
2016. The survey is a key indicator of where we currently stand
from the point of view of our employees, and of what we need
to do to improve the Group in the future. In September, nearly
263,000 employees in more than 40 countries were invited
to participate in the survey and express their opinions to us.
The outstanding participation rate of 76% underscores our
employees’ interest and their willingness to actively help shape
Daimler’s further development. Overall, the results of the
survey were much better than those from previous years.
For example, employee commitment is above average in
comparison with external benchmarks. The careful and detailed
analysis of the results began in early December. The analysis
will identify areas where action needs to be taken in order
to achieve sustained improvements for the benefit of the
Group and our employees.

Mobile working
Employees are increasingly demanding more flexible working
hours in line with the requirements of a modern lifestyle.
In response to this development, Daimler’s top management
launched an initiative in 2015 together with the Group’s
General Works Council, the IG Metall trade union and the
Fraunhofer Institute. This initiative featured surveys and
brought together executives and employees for a broad dialogue
that addressed employees’ experience with mobile work and
identified the associated regulatory requirements and limitations.
The process led to the creation of a new forward-looking Group-
wide agreement that went into effect on December 1, 2016.
The agreement stipulates a right to mobile working, provided
the tasks in question permit it. In general, greater flexibility
and autonomy for employees, as well as an extensive culture
of trust, enhance the attractiveness of Daimler as an employer.

Work and family
We help both male and female employees to manage career
and family responsibilities in line with their individual situations
through the implementation of numerous company agree-
ments, flexible working conditions and working-time models,
and the provision of daycare services and services for caring
for family members. We also give employees the opportunity to
take time off for continuing education, the pursuit of personal
interests or the care of family members by offering sabbaticals,
nursing leave and similar programs that go beyond legal
requirements.

Diversity management
The statement “Diversity shapes our future” underscores the
importance of diversity management as a strategic factor for
success at Daimler. The various skills and talents of our work-
force enable us as a global company to effectively reflect the
diversity of our customers, suppliers and investors around
the world.

Increased proportion of women in management positions
As early as 2006, Daimler committed itself to raising the pro-
portion of women in senior management positions at the
Group to 20% by the year 2020. The proportion of women in
such positions has continually risen in recent years to reach
16.7% at the end of 2016 (2015: 15.4%). Our instruments for
supporting the targeted promotion of women include mentor-
ships, special events and training measures, as well as employee
networks.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 135

In order to fulfill the requirements of new legislation on the equal
participation of women and men in management positions, the
Board of Management has set targets for the proportion of
women at the two executive levels below the Board of Manage-
ment, and a deadline for achieving those targets. In setting all
targets, we have taken industry-specific circumstances into
consideration. Further details are provided in the Corporate
Governance Report on E pages 214 f of this Annual Report.

Securing young talent
Daimler takes a holistic approach to securing young talent.
Our “Genius” initiative gives children and teenagers valuable
insights into future technologies and information about jobs in
the automotive industry. Along with technical and commercial
apprenticeships and courses of study at the Cooperative
University, we also conduct various activities that address
young talents. In addition, we offer extensive possibilities to
personally interact with the company via social media, hack-
athons, competitions and internships. After completing their
college degrees, graduates can directly join our company or
launch their careers at Daimler by taking part in our global
CAReer training program.

We had 7,960 trainees worldwide at the end of 2016 (2015: 8,307).
A total of 1,883 young people began their vocational training at
Daimler in Germany during the year under review (2015: 1,871).
The number of people we train and subsequently hire is based
solely on the Group’s needs and its future development. In 2016,
88% of Daimler trainees in Germany were hired after completing
their apprenticeships (2015: 84%).

Employee qualification
We provide our staff with training and continuing education
opportunities throughout their careers in order to safeguard the
long-term innovative capability and outstanding performance
of our workforce. Our range of qualification measures includes
practical training courses, seminars, workshops, specialist
conferences and financial support for employees who conduct
a course of study while continuing to work. In Germany alone,
we spent €131 million on the training and qualification of our
employees in the year under review (2015: €126 million).
On average, every employee spent three days on qualification
courses in 2016 (2015: four days).

Assistance for refugees
Since 2015, Daimler has been offering “bridge internships” for
refugees who have good prospects of staying in the country
in order to support their professional integration into the
German labor market. The process of selecting refugees for
the program is carried out in close cooperation with the
Federal Employment Agency and local job centers in Germany.
More than 500 refugees have completed or are currently
participating in bridge internships at all Group locations in
Germany. The 14-week internships include alternating days
of German language instruction and production work. Experience
to date has shown that the internships can lead to jobs in
Germany but that additional language skills often need to be
acquired as well. Daimler has also created 50 additional
trainee positions for young refugees with a good knowledge
of German. These positions are being gradually filled.
For information on other assistance for refugees, E page 136.

Social responsibility

Contributing to the development of society
For us, business success and social responsibility go hand in
hand. As a company with a global presence, we seek to help
shape the social environment and to promote an intercultural
dialogue worldwide. To this end, we support education, science,
the arts and culture, as well as efforts to improve environmental
protection. We also support initiatives for greater traffic safety
and promote charitable commitment among our employees.
 B.44

In 2016, we spent around €60 million on donations to non-
profit institutions and on sponsorships of socially beneficial
projects. This does not include our foundations and corporate
volunteering activities or self-initiated projects.

As was the case in previous years, we once again supported
democratic parties in Germany in 2016, donating a total of
€320,000. As in 2015, the CDU and SPD parties each received
€100,000 while the FDP, the CSU and BÜNDNIS 90/DIE GRÜNEN
each received €40,000.

Science funding
Sustainable development cannot be achieved without the
targeted funding of science, research and technology worldwide.
The international exchange of knowledge and the funding of
innovations are key drivers of developments in these areas.
We therefore support universities, research institutes and in-
terdisciplinary science projects around the globe. We have
consolidated these activities in foundations.

Environmental protection and technical safety are two key scien-
tific areas supported by the Daimler and Benz Foundation.
Endowed with €125 million, the foundation promotes research
that can have a major impact on the development of society.
That includes research on autonomous driving. To this end, we
have established a mobility think tank to examine the impact
and socially relevant aspects of autonomous driving. The Daimler
and Benz Foundation has also invested around €1.5 million in
the “Villa Ladenburg” project, which studies the effect of auton-
omous driving on normal road traffic. w daimler-benz-stiftung.de

The German Future Prize is one of the most prestigious
awards conferred for innovation and technology in Germany
and is presented by the President of Germany. The Daimler
fund works within the framework of the Donors’ Association
for the Promotion of German Science to support this annual
award for outstanding achievement in technology, engineering
and the natural sciences. w stifterverband.org

Education
Providing more people with access to education is one of the
most lasting investments for the benefit of society and also our
company. The numerous education projects we fund around
the world promote interest in and passion for science and
technology, as well as the ability to look beyond the working
world and remain open to new ideas. The projects we support
also promote equal opportunities.

136 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

More curiosity – more future: This is the motto of the education
initiative “Genius – Daimler’s young knowledge community.”
The initiative is targeted at children and teenagers and their
teachers. The latter are given special training and provided
with teaching materials that introduce children to new automotive
technologies in an entertaining and practical way, and which
also get them interested in technology and research.
w genius-community.com

The “Each Girl is a Star” project at Mercedes-Benz Turkey
has now provided training and financial grants to more than
3,900 girls and young women in 56 Turkish cities. The project
gives underprivileged girls and young women the opportunity
to attend a vocational college and enter professions traditionally
occupied by men.

Traffic safety
As we move along the “road to accident-free driving,” we are
utilizing assistance systems to ease the burden on drivers and
to protect and support them in dangerous situations. More
importantly, we also seek to ensure that everyone on streets
and roads remains safe. We pursue this goal with traffic-
education projects for schoolchildren and safety training
programs for adults, for example.

In 2016, our “MobileKids” program celebrated 15 years of suc-
cessful traffic-safety training. To date, MobileKids has made
more than two million children fit for road traffic in Germany
and around the world. w mobilekids.net

Daimler’s local subsidiaries in India have also launched a
new traffic safety campaign known as “Safe Road Project –
A Safety Initiative” in order to help reduce the large number
of traffic fatalities in the country. The goal here is to make
people in India more aware of traffic safety issues and the pos-
sibilities for utilizing vehicle safety systems.

B.44
Donations and sponsoring in 2016

Charity & Community

Arts & Culture

Education

Science & Technology &
Environment

Political dialog

67%

10%

15%

Nature conservation
We share responsibility for preserving the diversity of natural
habitats for future generations. That is why we have been sup-
porting the projects and initiatives of environmental organiza-
tions around the world for many years now, as we help to make
sure the earth remains a place worth living in.

In India, Brazil and Mozambique, we are carrying out projects
with Caritas International that promote the sustainable use of
water resources. Climate change is threatening to make entire
tracts of land uninhabitable in those countries. Here, project
workers are creating reliable water supply systems and provid-
ing training and knowledge to local farmers.

The arts and culture
A rich cultural life and a vibrant art scene foster creativity and
innovation. It is therefore very important to us to support the
arts and culture.

As a patron of the International Bachakademie Stuttgart, we
support the MUSIKFESTUTTGART music festival, and we also
served as the main sponsor for the BACHBEWEGT!SINGEN!
project in 2016. Johann Sebastian Bach’s “Christmas Oratorio”
was featured in a family concert held for people of all ages in
which around 250 pupils performed in a professional setting
with the Bachakademie ensemble.

Mercedes-Benz supports the functional fashion concepts for
people with disabilities created by the Bezgraniz Couture
(“Fashion without Borders”) organization, which was established
in 2010. The “wearABLE Future” collection, for example, stands
out through adaptable high-tech features especially designed
for people with physical disabilities. The Bezgraniz fashion
brand has put on special fashion shows during Mercedes-Benz
Fashion Week Moscow in the past, and in October 2016, it
staged presentations during Fashion Week Los Angeles for the
first time.

Communities and charitable projects
For us, being a global company means we have a global re-
sponsibility. That is why we support the social environment
at our locations as well as a wide variety of aid projects around
the world. Our efforts here go beyond assistance in the after-
math of natural or man-made disasters. We also set up longer-
term projects aimed at helping people to help themselves.

Haiti was recently devastated once again by a natural disaster:
After experiencing a severe earthquake in 2010, the country
was hit hard by Hurricane Matthew in October 2016. Hundreds
of people died in the storm. In the aftermath, Daimler and
Germany’s Foreign Office funded aid projects carried out by
the German Red Cross. The projects focused mainly on securing
access to clean water and conducting a broad-based cholera
vaccination campaign. Tools and materials for cleanup work
and restoring the country’s severely damaged agriculture were
also supplied.

As a company, we also take our social responsibility very seri-
ously. This is why we are helping migrants integrate into the
German workforce and society. Our “bridge internship” especially
helps pave the way for refugees to enter the German labor
market without major bureaucratic hurdles. For more information
on this topic, E page 135.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 137

Many of our employees also support refugees through numerous
donation campaigns or the performance of volunteer work.
In 2016, for example, staff members helped renovate refugee
shelters and build playgrounds for children. Daimler paid for
all the required materials and ensured the work was carried out
under professional supervision. The company also regularly
makes an “Aid Fleet” of Mercedes-Benz vehicles available to
several aid organizations.

Employee commitment
The efforts of our employees to help communities and promote
the common good around the globe manifest themselves in
initiatives that go beyond the refugee assistance campaigns.
These initiatives demonstrate just how seriously our employees
take their responsibility, and how willing they are to offer
opportunities to people at the very fringes of society.

In the ProCent initiative, for example, Daimler employees
voluntarily donate the cent amounts of their net salaries to
socially beneficial projects. The company matches every cent
donated. Approximately €1 million was collected in this
manner in 2016.

For example, the proceeds from the ProCent initiative were
donated to a canine rescue squad at ASB – the Workers’
Samaritan Federation, which needed a new trailer to transport
materials. Donations were also given to the Verein zur Förde -
rung der Kinder- und Jugendhilfe e. V. Zeiskam, a children and
youth aid organization, which used the funds to build an out-
door playground and a garden for children to work and learn in.

Dialogue and understanding
As a company that operates around the world, we support
projects and institutions that promote intercultural dialogue
in the interest of mutual understanding and the peaceful
coexistence of cultures. We also support initiatives for the
strengthening of democracy.

For example, Daimler supports grants for 15 to 18-year-old Ger-
man students that allow them to spend a year in the United
States under the auspices of the Daimler-Byrnes Scholarship.
The program is designed to get students interested in the
transatlantic relationship. The students receive extensive inter-
cultural training to prepare them for their role as ambassadors
of their country.

More information on the projects promoted by the Group and
the activities related to our social commitment can be found in
the Daimler Sustainability Report and on our website under
“Sustainability.” w daimler.com/sustainability

A culture of integrity

Integrity is one of the four corporate values that form the
foundation for our business activities. A culture of integrity is
the prerequisite for remaining successful in the future. That
is because only those who act responsibly can achieve sustained
business success over the long term. Integrity and compliance
are therefore an integral part of our daily business activities.
This goes beyond complying with the law. It also includes align-
ing our actions with shared values. This shared understanding
of values enables us to make the right decisions also in difficult
situations.

In order to further advance our culture of integrity, we conduct
an ongoing and open dialog with our employees. We regularly
address integrity issues in our internal media and make a wide
range of materials available to our business units. We also
value personal discussion. That is why we regularly conduct
dialog events with employees at all levels of the hierarchy, as
well as with external stakeholders. Such events are held in our
markets abroad as well.

Integrity Code
Our Integrity Code is one of the most important results of the
employee dialogs we have been conducting since 2011. The
Code is based on a shared understanding of values agreed
upon with our employees and lays out the principles for our
everyday business conduct. These principles include fairness,
responsibility, mutual respect, transparency, openness and
compliance with laws. The Code is valid throughout the Group
and is available in 23 languages. A guide is available on the
Group’s intranet to support the employees in the application of
the Code in everyday situations, providing answers to frequently
asked questions.

Requirements for managers
Our Integrity Code also defines requirements for managers, who
are expected to serve as role models in terms of ethical
behavior and to provide employees with orientation. All training
seminars for new managers therefore include integrity mod-
ules that help them fulfill their responsibilities.

In addition, integrity and compliance requirements are important
criteria in the target agreements and in assessing the annual
target achievement of our managers. They are also part of the
agreed-upon objectives for the remuneration of the Board of
Management.

Contact and advice center
Our “Infopoint Integrity” serves as a central contact and advice
center for our employees. The Infopoint team offers advice on
integrity-related issues in the daily work environment and puts
employees in touch with the right contact partner if necessary.

138 B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY

Communicating with employees
Further measures from our integrity strategy complement the
range of information and advice offered on issues related to
integrity. We use various event formats to approach these issues
from different viewpoints and encourage the participants to
think about integrity. For example, we conduct business simu-
lations that enable employees to experience and discuss the
relevance of integrity to daily business operations from a new
viewpoint. We also have a network of integrity contact persons
who help the business units address their specific issues in a
targeted manner. In addition, we produce target-group-specific
materials for managers who wish to raise awareness of integrity
and potential ethical dilemma situations in their departments.

Extensive training program
The Integrity Code forms the basis for the extensive range of
training courses we offer. Our integrated training program is
defined on the basis of an annual planning cycle that starts
with a needs analysis, extends through the implementation of
the program and ends with a monitoring process. Among other
things, the program covers the topics of integrity, compliance,
data protection and antitrust law. Depending on the risk and
the target group, we use classroom training or digital learning
techniques such as web-based training courses. Basic web-based
training courses on integrity, compliance and legal issues are
offered to all employees with e-mail access. Every Daimler
employee, regardless of position, professional field or location,
must complete this training session as part of a “Welcome
Package” when joining the company. The session also has to
be repeated at regular intervals later on. In 2016, a total of
approximately 73,000 employees from various hierarchy levels
attended training courses or participated in web-based
training courses.

Advisory Board for Integrity and Corporate Responsibility
The Advisory Board for Integrity and Corporate Responsibility
has been an important source of input for Daimler since 2012.
The Advisory Board consists of independent external experts
from the fields of science, business and politics and from non-
governmental organizations. These experts support the integrity
process at Daimler critically and constructively from an external
perspective. The members of the Advisory Board have exten-
sive experience in addressing ethical issues and contribute
their different points of view to the discussion of integrity.

Compliance programs

We aim to act in accordance with ethical principles and to
comply with all applicable laws, internal regulations and voluntary
commitments. We pay particular attention to complying with
all applicable anti-corruption regulations and to ensuring the
maintenance and promotion of fair competition, as set out in
binding form in our Integrity Code.

Effective Compliance and Legal department structures
Our effective Compliance and Legal department structures play
a key role in ensuring that all rules and regulations are adhered
to throughout the Group. Our Compliance organization is
structured in a divisional and regional way, while our Legal
department is organized along the value chain and regionally.
This structure enables us to offer optimal support and advice
to our divisions. For this purpose, a contact person is assigned
to each function, division and region. In addition, local contact
persons around the world make sure that our standards are
observed. The divisional compliance officers and the regional
compliance officer report directly to the Chief Compliance
Officer. This ensures the divisional and regional compliance
officers’ independence from the divisions. The Chief Compli-
ance Officer and the Group General Counsel report directly to
the member of the Board of Management responsible for Integrity
and Legal Affairs. The Chief Compliance Officer also reports to
the Audit Committee of the Supervisory Board.

We offer target-group-specific qualification courses within
our integrated training program in order to make sure our
employees in the Compliance organization and Legal depart-
ment are up to date on changes made to laws and regulations.
All new Compliance and Legal department employees also
receive a comprehensive introduction to their functions in a
special practice-oriented seminar.

Compliance Management System
Our compliance management system is based on national and
international standards and supports us in ensuring compliant
behavior in daily operations at all of our business units. We
regularly review the effectiveness of the system and adjust it
to worldwide developments, changed risks and new legal re-
quirements. Thus, we continuously improve its effectiveness
and efficiency, also with regard to compliance with technical
regulations relating to our products. In particular, this is a matter
of identifying regulatory risks in the product-creation process,
in order to protect the Daimler Group, its employees and its
brands. Our various compliance programs are based on our
compliance management system (CMS). We would like to present
the following areas by way of example:

Whistleblower system BPO (Business Practices Office)
The whistleblower system BPO enables Daimler employees
and external whistleblowers to report misconduct anywhere in
the world. The office is available to receive information around
the clock. This information can be sent by e-mail or normal
mail, and it can also be provided by calling an external toll-free
hotline or by filling out a reporting form. The information can
be submitted anonymously if local law permits. In Germany,
reports to the BPO can also be submitted via a neutral inter-
mediary – in this case, an independent external attorney. The
BPO system enables us to learn about potential risks and spe-
cific violations, thus preventing damage to the company and its
reputation. Our globally valid corporate policy ensures a fair
and transparent approach that takes into consideration the
principle of proportionality for affected parties, while also
giving protection to whistleblowers.

B | COMBINED MANAGEMENT REPORT | SUSTAINABILITY AND INTEGRITY 139

Sharing experience of compliance in practice
Sharing experience in the area of compliance policies and
measures is very important to us, and we have therefore created
the Daimler Compliance Academy in order to establish a plat-
form for such sharing. The academy’s annual practical seminar
is designed for compliance experts from all business sectors,
managing directors, and other individuals who are interested in
compliance issues. The seminar focuses on a discussion of
compliance trends and challenges. The Daimler Compliance
Academy was held for the third time in 2016. During the report-
ing year, we also held our first conference on combating
money laundering in the trade with goods.

Systematic minimization of compliance risks
We systematically minimize compliance risks. We analyze and
assess the compliance risks of all our business units every
year. The results of this analysis form the basis of our risk man-
agement. One focus of our risk minimization activities is on
sales companies in high-risk countries. The responsibility for
implementing and monitoring the associated measures lies
with each company’s management, which cooperates closely
with the relevant departments within Integrity and Legal
Affairs.

Compliance at our business partners
We also require our business partners to adhere to clear com-
pliance stipulations, because we regard our business partners’
integrity and behavior in conformity with regulations as an
indispensable precondition for cooperation based on trust.
In the selection of our direct business partners, we therefore
make sure that they comply with the law and observe ethical
principles. Within the framework of our integrated training pro-
gram, we also offer our business partners special training
courses on integrity and compliance in line with the specific
risks they face. In 2016, we published a “Compliance Aware-
ness Module” that can be made available to our business part-
ners on request and is designed to increase awareness of the
latest compliance requirements. We also reserve the right to
terminate our cooperation with business partners who fail to
conform to our standards. For the expectations we place on
our business partners, see also w daimler.com/sus/obr.

Anti-corruption compliance
Anti-corruption compliance is ensured with a system applied
worldwide that primarily comprises integrated risk assess-
ment, risk-based measures for the avoidance of corruption in
all business activities (such as reviews of business partners
and transactions) and special care in contacts with public offi-
cials. We have achieved a recognized high standard in the
avoidance of corruption and place the same strict requirements
on all of our activities around the world. We are continually
further developing our methods and processes.

Antitrust compliance
Our Group-wide antitrust compliance program is oriented to
national and international standards. The program establishes
a binding, globally valid Daimler standard that defines how
matters of competition law are to be assessed. The Daimler
standard is based on the strict standards of the European anti-
trust authorities and courts. Its existence ensures a uniform
level of compliance and advice in all countries.

By means of training courses, an advisory hotline specially set
up by our Legal department, guidelines and practical support,
we help our employees to recognize situations that might be
critical from an antitrust perspective and to act in compliance
with regulations in their daily work.

The results of our compliance risk analysis form the basis of
our risk management and of the definition of measures to be
taken to counteract any risks related to antitrust law. We also
carry out monitoring activities in our corporate units. They help
us to continually improve the effectiveness of our antitrust
compliance program and to adjust it to worldwide developments
and new legal requirements.

In order to ensure an independent external assessment of our
antitrust compliance program, the KPMG Wirtschaftsprüfungs-
gesellschaft audited the compliance management system for
antitrust law in accordance with the 980 standard of the Insti-
tute of Public Auditors in Germany. This audit, which was based
on the principles of appropriateness and effective implemen-
tation, was successfully completed at the end of 2016.

Data protection compliance
The Corporate Data Protection department provides world-
wide support to all Group companies and helps to ensure com-
pliance with data protection requirements. The Chief Officer
Corporate Data Protection is independent und reports directly
to the Board of Management Member for Integrity and Legal
Affairs. The annual data protection report is submitted to the
Supervisory Board. Our Data Protection Policy creates a uniform
standard applicable worldwide for handling data of employees,
customers and business partners, and meets the requirements
of the European Data Protection Directive. The Corporate Data
Protection Department is the contact point for data protection
complaints, carries out checks and audits, ensures employees’
awareness of data protection and advises the relevant depart-
ments. The focus of product-related advice is data protection
for connected vehicles and autonomous driving functions, as
well as mobility services.

Anti-money laundering compliance
Our anti-money laundering policy is designed to prevent money
laundering and the financing of terrorism in the trade with
goods. It forms the basis for ensuring that legislation in various
countries is complied with throughout the Group. The Chief
Compliance Officer serves as the anti-money laundering officer
of Daimler AG. A center of competence supports the Chief
Compliance Officer in the management and coordination of
money laundering prevention measures in the goods trade.

Sanction lists compliance
We consistently comply with sanction lists and thus ensure
that the legal sanctions specified by legislation are observed.
We have introduced a risk-focused, system-based global
process in order to ensure that this compliance is effective
and efficient.

140 B | COMBINED MANAGEMENT REPORT | OVERALL ASSESSMENT OF THE ECONOMIC SITUATION

Overall Assessment of the Economic Situation

In the opinion of the Board of Management, the Daimler
Group’s economic situation continues to be very satisfactory
at the time of publication of this Annual Report. In recent
years, we have implemented our strategy effectively and with
great determination. This already led us onto a stable and
profitable growth path in the year 2014, along which we pro-
gressed further in 2015 and 2016. Revenue and unit sales
surpassed the prior-year levels, and the Daimler Group’s EBIT
adjusted for special items was also higher than in the previous
year, as we had already forecast in Annual Report 2015. It is
noteworthy that we achieved this profitability target although
the economic conditions for our truck business developed
very unfavorably in various markets. This shows that we have
adapted our business model so that we can generate reason-
able earnings also in a difficult environment. In this regard,
we have made great progress in recent years, and we will con-
tinue working on it in the future. This is one of the main rea-
sons why our profitability is sound, and for this reason we have
the resources to focus our business activities on the future:
with outstanding vehicles, innovative services and tailored
solutions for the mobility of tomorrow.

In the year under review, we increased our unit sales to a total
of 3.0 million cars and commercial vehicles (2015: 2.9 million).
Thanks to numerous new and successful products, Mercedes-
Benz Cars and Mercedes-Benz Vans set new records for unit
sales. Daimler Trucks’ an Daimler Buses’ unit sales decreased
significantly due to the extreme weakness of some major
markets. Driven primarily by the positive development of the car
and van business, the Daimler Financial Services division also
continued to grow in 2016. The Daimler Group’s revenue there-
fore also increased – by 3% to €153.3 billion. Adjusted for
exchange-rate effects, revenue also grew by 3%.

The Daimler Group’s operating profit (EBIT) adjusted for special
items of €14.2 billion was higher than in 2015 (€13.8 billion).
Each of the Mercedes-Benz Cars, Mercedes Benz Vans, Daimler
Buses and Daimler Financial Services divisions increased its
EBIT, while Daimler Trucks posted lower EBIT in line with the
development of its unit sales. But in the automotive business
overall, we once again achieved our target for return on sales
adjusted for special items of 9%, and Daimler Financial Services’
return on equity was also at the targeted level of 17%.

As a result of the positive development of earnings, we once
again achieved a very good return on net assets of 19.2% (2015:
20.1%). We therefore once again earned substantially more
than our targeted minimum return on capital employed (8%).
This is reflected by our value added of €5.3 billion, which
almost equaled the prior-year figure (2015: €5.4 billion).

In line with the ongoing high level of earnings, we continue to
have very sound key financial metrics. This is confirmed also
by the rating agencies Standard & Poor’s Global Ratings (S&P)
and Moody’s Investors Services (Moody’s). S&P upgraded
the long-term credit rating of Daimler AG from A- to A in
November 2016. In early February 2017, Moody’s also raised
Daimler’s long-term credit rating A3 to A2. In both cases,
the short-term ratings were raised as well: from A-2 to A-1
and from P-2 to P-1 respectively.

The Group’s overall equity ratio and the equity ratio of the
industrial business remained at the high levels of 22.9%
and 44.7% respectively (2015: 23.6% and 44.2%). The net
liquidity of the industrial business increased to €19.7 billion
at the end of 2016 (2015: €18.6 billion). The free cash flow
of the industrial business – the parameter we use to measure
financial strength – was once again significantly higher than
the dividend distribution at €3.9 billion (2015: €4.0 billion). This
was achieved although we significantly increased our investment
in intangible assets and property, plant and equipment.

We want our shareholders to participate appropriately in the
very good level of earnings achieved by Daimler once again in
2016. At the Annual Shareholders’ Meeting on March 29, 2017,
the Board of Management and the Supervisory Board will there-
fore propose a dividend of €3.25 per share (prior year: €3.25).
The dividend distribution will be unchanged from the previous
year at €3.5 billion.

In order to implement our growth strategy with new products,
innovative technologies and modern production capacities,
we increased the expenditure for securing our future in 2016
from an already very high level by a total of €1.8 billion to
€13.5 billion: €7.6 billion for research and development (2015:
€6.6 billion) and €5.9 billion for investment in property,
plant and equipment (2015: €5.1 billion).

B | COMBINED MANAGEMENT REPORT | EVENTS AFTER THE REPORTING PERIOD 141

To make sure that we successfully undergo the transformation
from automobile manufacturer into a full-range provider of
innovative mobility solutions, we need new patterns of thought
and action. Our goal is to combine the flexibility and risk
culture of the digital industry with the perfection and innovative
skills of our company. So together with the workforce, we
are developing a new management culture under the roof of
“Leadership 2020,” which will ensure our success also in
the future. In this way, we are fulfilling the requirements of the
digital world and creating space for cultural changes.

We are very well positioned for the upcoming challenges with
our growth strategy, the digitalization offensive, innovative
products and mobility solutions, high levels of investment
in the future of the Group and the renewal of the corporate
culture. We are on a stable growth path, which we will continue
to follow systematically. We therefore look to the future with
great confidence and continue to aim for further profitable
growth.

Events after the
Reporting Period

On January 31, 2017, Mitsubishi Fuso Truck and Bus Corporation
sold land and buildings for a price of €336 million. This results
in income at the Daimler Trucks segment of approximately
€250 million in 2017.

Since the end of the 2016 financial year, there have been no
further occurrences that are of major significance for Daimler.
The course of business in the first weeks of 2017 confirms
the statements made in the “Outlook” section of this Annual
Report.

This substantial expenditure is necessary because the automo-
tive industry is facing a fundamental transformation. And as
the inventor of the automobile, we intend to play a major role
in shaping the mobility of the future. In this context, we are
increasingly focusing on strategic areas for the future: con-
nected, autonomous, shared & services and electric. We
plan to occupy a pioneering position in these areas - in each
of them individually as well as by linking them up intelligently.
Our innovative vehicles and services are already trendsetters
for future mobility. For example, our new E-Class is extensively
connected and available to our customers in partially auto-
mated mode, and we are at the forefront in truck technology
with the Freightliner Inspiration Truck and the Actros with
Highway Pilot. And with the Mercedes-Benz Future Bus in
2016, we were the first manufacturer worldwide to present
a city bus that drives in partially automated mode in real
traffic on a Bus Rapid Transit route (BRT).

In addition, Daimler started a broad offensive in the field of
electric mobility in all its divisions in the year under review.
This includes the new plug-in hybrids from Mercedes-Benz
Cars as well as the new electric smart models, the DENZA 400,
which we have developed for the Chinese market together
with our partner BYD, the new FUSO eCanter and also a com-
pletely new fuel-cell vehicle on the basis of the GLC with
plug-in technology. The offensive also includes the concept
vehicles Concept EQ, Mercedes-Benz Urban eTruck and
Mercedes-Benz Vision Van, with which we are providing a very
concrete view of the connected mobility of the future.

A key component of our growth strategy is systematic digitiza-
tion. It is leading to far-reaching changes in society, in
competition, with customers, and ultimately in everything
we do. It is changing our products, our services, our customer
contacts and the way in which we act within our company.
It is also a trailblazer for new mobility concepts and allows
the creation of new business models in connection with
mobility and transport. In order to be at the forefront of this
fundamental transformation, we are pushing forward with
digitization at all levels, in all stages of the value chain, and
with a clear focus on our customers. On the one hand, this
is about the ever increasing connectivity of our products:
with customer-oriented digital services, new business models
and digital communication with customers – from the initial
contact and through the entire customer relationship.
Through the digitization of the entire value chain, we are able
to shorten development processes and to make production
more flexible and sales and marketing more direct. By making
intelligent use of growing quantities of data and connecting all
levels of value added, we are creating efficiency advantages,
enhancing quality and facilitating further flexibility of the
entire production process.

142 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Remuneration Report

The Remuneration Report summarizes the principles that are
applied to determine the remuneration of the Board of Manage-
ment of Daimler AG, and explains both the level and the
structure of its members’ remuneration. It also describes the
principles and level of remuneration of the Supervisory Board.

The vertical comparison focuses on the ratio of Board of Man-
agement remuneration to the remuneration of the senior
executives and the entire workforce of Daimler AG in Germany,
also in terms of development over time. The Supervisory Board
has defined the group of senior executives for this purpose.

In carrying out this review, the Presidential Committee and
the Supervisory Board consult independent external advisors
to help determine the appropriateness of remuneration at
the company.

If the review results in a need for changes to the remuneration
system for the Board of Management, the Presidential Commit-
tee submits the relevant proposals to the entire Supervisory
Board for its approval.

On the basis of the approved remuneration system, the Super-
visory Board decides at the beginning of the year on the base
and target remuneration for the individual members of the
Board of Management as well as on total remuneration limits.
It also decides on the relevant success parameters for the
upcoming financial year. Furthermore, individual goals are
decided upon for each member of the Board of Management
for the respective areas of personal responsibility; those goals
are then taken into consideration after the end of the financial
year when the annual bonus is decided upon by the Supervi-
sory Board.

For the long-term variable component of remuneration, which
is referred to as the Performance Phantom Share Plan (PPSP),
the Supervisory Board sets an amount to be granted for the
upcoming financial year in the form of an absolute amount
in euros and sets the related performance targets.

After the end of each year, target achievement is measured
and the actual remuneration is calculated by the Presidential
Committee and is submitted to the Supervisory Board for
its approval.

Principles of Board of Management
remuneration

Goals
The remuneration system for the Board of Management aims
to remunerate its members commensurately with their areas
of activity and responsibility and in compliance with applicable
law. The adequate combination of non-performance-related
and performance-related components of remuneration is
designed to create an incentive to secure the Group’s long-term
success. The fixed component of remuneration is paid as a
base salary; the variable components are intended to reflect,
clearly and directly, the joint and individual performance of
the members of the Board of Management as well as the long-
term performance of the Group. The interests of all stakehold-
ers, in particular those of the shareholders as the owners
of the Company and those of the employees, are harmonized
through the focus on the Group’s long-term success.

Practical implementation
For each upcoming financial year, the Presidential Committee
at first prepares a review by the Supervisory Board of the
system and level of remuneration on the basis of a comparison
with competitors. The main focus is on checking for appropri-
ateness, based on a horizontal and vertical comparison. In the
horizontal comparison, the following aspects are given particular
attention in relation to a group of comparable companies in
Germany:
– the effects of the individual fixed and variable components,

that is, the methods behind them and their reference
parameters;

– the relative weighting of the components, that is, the rela-
tionship between the fixed base salary and the short-term
and long-term variable components; and

– the target remuneration consisting of base salary, annual

bonus and long-term variable remuneration, also with consid-
eration of entitlement to a retirement pension and fringe
benefits.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 143

The system of Board of Management remuneration in 2016
The fixed base salary and the annual bonus each continue to
comprise approximately 29% of the target remuneration, while
the variable component of remuneration with a long-term
incentive effect (PPSP) makes up approximately 42% of the
target remuneration.  B.45

As before, only 50% of the annual bonus is paid out in the
March of the following financial year. The other 50% is paid out
a year later (deferral) with the application of a bonus-malus
rule, depending on the development of the Daimler share price
compared with an automotive index (Dow Jones STOXX Auto
Index) E pages 80 f., which Daimler AG uses as a benchmark
for the relative share-price development. Both the delayed
payout of the portion of the annual bonus (with the use of the
bonus-malus rule) and the variable component of remuneration
from the PPSP with its link to additional, ambitious comparative
parameters and to the share price reflect the recommendations
of the German Corporate Governance Code and give due
consideration to both positive and negative business
developments.

With regard to the PPSP, an additional limitation of the target
achievement for the reference parameter return on sales
remains in place for plans from 2015 onwards, if the strategic
target for return on sales (currently 9%) is not achieved.

The maximum amounts of remuneration of the members of
the Board of Management are limited, both overall and with
regard to the variable components.

As in the prior year, the maximum amounts of remuneration
of the members of the Board of Management were set for
financial year 2016 at 1.9 times the target remuneration for its
members and 1.5 times the target remuneration for its Chair-
man. The target remuneration consists of the base salary, the
target annual bonus and the grant value of the PPSP, excluding
fringe benefits and retirement benefit commitments. With
the inclusion of fringe benefits and retirement benefit commit-
ments from the respective financial year, the maximum limit
of total remuneration increases by these amounts. The possible
cap on the amount exceeding the maximum limit takes place
with the payment of the PPSP issued in the relevant financial
year, i.e. for the year 2016, with payment of the PPSP in 2020.
 B.46

The individual components of the remuneration system are
as follows:

The base salary is fixed remuneration relating to the entire
year, oriented towards the area of responsibility of each Board
of Management member and paid out in twelve monthly
installments.  B.47

B.45
Remuneration structure

Target remuneration consists of non-performance-related
and performance-related components:

base salary
(non-performance-related) approx. 29%

short- and medium-term
performance-related
components

approx. 29%

long-term performance-related
components

approx. 42%

B.46
Maximum limit of total remuneration1 2016

Chairman of the Board of Management

Members of the Board of Management

1.5 times the target
remuneration1

1.9 times the target
remuneration1

Base salary in 2016
+ target bonus = 100% of the 2016 base salary
+ PPSP value when granted for 2016

Target remuneration1 in 2016

Base salary in 2016
+ annual bonus for 2016

(50% paid out in 2017 + 50% in 2018)

+ PPSP payment for 2016 (in 2020)
incl. dividend equivalent payments

Total remuneration1 in 2016

The possible cap on the amount exceeding the maximum limit
takes place with the payment of the PPSP for 2016 in 2020.

1 Excluding fringe benefits and retirement benefit

commitments in all cases.

B.47
Base salary – ﬁxed E page 143
base salary – ﬁxed – oriented towards the area of responsibility

base salary
(non-performance-related) approx. 29%
paid out in twelve monthly
installments

144 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

B.48
Annual bonus – short- and medium-term
performance-related remuneration E page 144

B.49
Annual bonus in 2016

dependent upon

short- and medium-term
performance-related
components

approx. 29%

annual bonus 2016 = target bonus x overall target achievement

target achievement EBIT

target bonus
= 100 % of
base salary +/- target achievement “non-ﬁnancial targets”
2016

+/- target achievement “individual targets”

- non-achievement “compliance targets”

overall target achievement

time of payment of annual bonus 2016
50% of annual bonus = in March of the year after the reporting year (2017)

50% of annual bonus (deferral) = in March of the second year after the

amount paid out = 50% of annual bonus x “relative share performance”1

reporting year (2018)

1 Depending on the development of the Daimler share price compared with the
Dow Jones STOXX Auto Index.

The annual bonus is a variable remuneration, the level of
which is primarily linked to the operating profit of the Daimler
Group (EBIT). For the past financial year, the annual bonus
was also linked to the target for the financial year determined
by the Supervisory Board (derived from the level of return
targeted for the medium term and the growth targets), the actual
result compared with the prior year, the individual performance
of the Board of Management members and the non-achieve-
ment of compliance targets. In addition, qualitative targets
are defined and included. With the actual-actual comparison,
achievement of EBIT at the prior year level constitutes target
achievement of 100%. With the target-actual comparison, the
particularly ambitious definition of the targeted EBIT that is
oriented towards the competition constitutes target achieve-
ment of 150%.  B.48  B.49

Primary reference parameters:
– 50% relates to a comparison of actual EBIT in 2016 with

EBIT targeted for 2016.

– 50% relates to a comparison of actual EBIT in 2016 with

actual EBIT in 2015.

Amount with 100% target achievement
(target annual bonus):
In 2016, this is equivalent to the respective base salary.

Range of possible target achievement:
0 to 200%, that is, the annual bonus due to EBIT achievement
has an upper limit of double the base salary and may also be
zero. Both primary reference parameters, each of which relates
to half of the annual bonus, can vary between 0% and 200%.
For the primary reference parameter relating to half of the
annual bonus, “comparison of actual EBIT in the financial year
with the EBIT targeted for the financial year,” the limits of
the unchanged possible range of 0 to 200% are defined as
a deviation of +/- 3% of the prior-year revenue.

EBIT target achievement
Range of possible target achievement:
0% – 200%

– 50% relates to a comparison
of actual EBIT in 2016 with
EBIT targeted for 2016

– 50% relates to a comparison
of actual EBIT in 2016 with
actual EBIT in 2015

Individual target
agreements in 2016

For 2016: Further development
and permanent establishment
of the corporate value of
integrity, as well as diversity
and the maintenance and
enhancement of a high level
of employee satisfaction and
product quality.

Compliance
agreements in 2016

235% of the target bonus

Target achievement:
“individual targets”
Range of possible target achievement:
-25% – +25%

Target achievement:
“non-financial targets”
Range of possible target achievement:
-10% – +10%

Non-achievement:
“compliance targets”
Range of possible target achievement:
-25% – 0%

Maximum target achievement
(total cap):

For the other primary reference parameter, which also relates
to half of the annual bonus, “comparison of actual EBIT in
the financial year with actual EBIT in the prior year,” the limits
of the unchanged possible range of 0 to 200% are defined
as a deviation of +/- 2% of the prior-year revenue.

The Supervisory Board may take account of the personal
performance of the individual Board of Management members
with an addition or deduction of up to 25% on the basis of the
agreed individual targets, with the degree of target achieve-
ment calculated from the primary reference parameters.
In addition, an amount of up to 10 percent can be added or
deducted, depending on the key figures/assessment basis
determined in advance. Non-financial targets are used as
a basis for assessment of the latter component. For the past
financial year, those targets were the further development and
permanent establishment of the corporate value of integrity,
as well as diversity and the maintenance and enhancement
of a high level of employee satisfaction and product quality.

Once again in 2016, further qualitative targets were agreed
upon with the individual members of the Board of Management
with regard to sustained functioning of the compliance manage-
ment system. The complete or partial non-achievement of
individual compliance targets can be reflected by a deduction
of up to 25% from the individual target achievement. However,
the compliance targets cannot result in any increase in individual
target achievement, even in the case of full accomplishment.

The total amount to be paid out from the annual bonus is
limited to 2.35 times the base salary of the respective financial
year.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 145

B.51
PPSP 2016

dependent upon

Development of
performance factors

Development of the
Daimler share price

– 50% relates to the “return on sales”

achieved in a three-year comparison with
the defined group of competitors
E page 146
Bandwidth of possible target
achievement: 0% – 200%1

– 50% relates to the “relative share

performance,” i.e. the development
of Daimler’s share price in a three-year
comparison with the development
of a share-price index for the defined
group of competitors.
Bandwidth of possible target achievement:
0% – 200%

Price when issued and price at the end
of the plan period
Bandwidth of possible price development:
maximum of 2.5 times the issue price

Maximum performance development (total cap):
2.5 times the amount granted
(including dividend equivalent payments throughout the plan period)

Stock ownership guidelines
Share purchase obligation of up to 25% of the gross remuneration
until the defined number of shares (between 20,000 and 75,000) have
been purchased (shares to be held until the end of term of service)

1 Maximum of 195% if, in the event of target achievement

of 195% – 200%, the strategic return target of 9% has not
been reached.

After another plan year has elapsed, the amount to be paid out
is calculated from this final number of phantom shares and
the applicable share price at that time. The share price relevant
to the payout under this plan is also relevant to allocating
the preliminary number of phantom shares for the plan newly
issued in the respective year.
 B.50  B.51

B.50
Performance Phantom Share Plan (PPSP)
– long-term performance-related remuneration E page 145

long-term performance-related
remuneration

approx. 42%

amount when granted in euros E page 145
price of Daimler shares when issued

= preliminary number
of phantom shares
(virtual shares)
three-year dividend entitlement

after expiry of third plan year

preliminary number of phantom shares x performance factor
= ﬁnal number of phantom shares, dividend entitlement in fourth year

after expiry of fourth plan year

ﬁnal number of phantom shares x Daimler share price at end of plan
= amount paid out

Time of payment of Performance Phantom Share Plan 2016
in February of the year 2020

The Performance Phantom Share Plan (PPSP) is a variable
element of remuneration with long-term incentive effects.
At the beginning of the plan, the Supervisory Board specifies
a grant value (absolute amount in euros) in the context of
setting the individual annual target remuneration. This amount
is divided by the relevant average price of Daimler shares
calculated over a predefined long period of time, which results
in the preliminary number of phantom shares allocated. Also
at the beginning of the plan, performance targets are set for
a period of three years (performance period). Depending on
the achievement of these performance targets with a possible
range of 0% to 200%, after three years, the phantom shares
allocated at the beginning of the plan are converted into the
final number of phantom shares allocated.

146 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Reference parameters for Plan 2016:
– 50% relates to the Group’s return on sales in a three-year

comparison with a group of competitors comprising all listed
vehicle manufacturers with an automotive proportion of
more than 70% by revenue and an investment-grade credit
rating (BMW, Ford, Fuji Heavy, Honda, Hyundai, Isuzu,
Mazda, Nissan, Paccar, Suzuki, Toyota, Volvo and Volks-
wagen). For the measurement of this success criterion,
the competitors’ average return on sales is calculated over
a period of three years. Target achievement occurs to
the extent to which Daimler’s return on sales deviates by
a maximum of +/- 2 percentage points from 105% of the
calculated average of the competitors.

– Target achievement of 100% only occurs when the aver-
age return on sales of the Daimler Group reaches 105%
of the average return on sales of the group of competi-
tors. Target achievement of 200% occurs if Daimler’s
return on sales exceeds 105% of the average of the
competitors by 2 percentage points or more. An addi-
tional limitation was implemented starting with PPSP
2015: If a target achievement of between 195% and
200% occurs in the third year of the performance
period, the maximum target achievement calculated
from the reference parameter of return on sales com-
pared to the reference group will only be deemed
to be 200% if the actual return on sales for Daimler’s
automotive business reaches at least the strategic
target
for return on sales (currently 9%). Otherwise, target
achievement will be limited to 195%.

– Target achievement of 0% occurs if Daimler’s return
on sales is 2 percentage points or more lower. In
the deviation range of +/- 2 percentage points, target
achievement varies in proportion to the deviation.

– 50% relates to “relative share performance,” i.e. the develop-
ment of Daimler’s share price in a three-year comparison
with the development of a share-price index for the defined
group of competitors. If the development of Daimler’s share
price (in percent) is the same as that of the index (in per-
cent), target achievement is deemed to be 100%. If the devel-
opment of Daimler’s share price (in percent) is 50 percent-
age points or more below (above) the development of
the index, target achievement is deemed to be 0% (200%).
In the deviation range of +/- 50 percentage points, target
achievement varies in proportion to the deviation.

Value upon allocation:
Determined annually by the Supervisory Board; for 2016,
approximately 1.3 to 1.5 times the base salary.

Range of possible target achievement:
0 to 200%, that is, the plan has an upper limit. It may also
be zero.

Value of the phantom shares on payout:
During the four-year period between the allocation of the pre-
liminary phantom shares and the payout of the plan proceeds,
the phantom shares earn a dividend equivalent in the amount
of the actual dividend paid on ordinary Daimler shares.

The value of the phantom shares to be paid out depends
on target achievement measured according to the criteria
described above and on the share price relevant to the payout.
This share price is limited to 2.5 times the share price at the
beginning of the plan. In addition, the amount to be paid out
is limited to 2.5 times the absolute euro amount specified at
the beginning of the plan, which is relevant to the preliminary
number of phantom shares allocated. This maximum amount
includes the dividend equivalent paid out during the four-year
plan period.

Guidelines for share ownership
As a supplement to these three components of remuneration,
“Stock Ownership Guidelines” exist for the Board of Manage-
ment. These guidelines require the members of the Board
of Management to invest a portion of their private assets in
Daimler shares over several years and to hold those shares
until the end of their Board of Management membership.
The number of shares to be held is set between 20,000 and
75,000. In fulfillment of the guidelines, up to 25% of the
gross remuneration out of each Performance Phantom Share
Plan is generally to be used to acquire ordinary shares in
the Company, but the required shares can also be acquired
in other ways.

Appropriateness of Board of Management remuneration
In accordance with Section 87 of the German Stock Corporation
Act (AktG), the Supervisory Board of Daimler AG once again
had an assessment of the system of Board of Management
remuneration carried out by an independent remuneration
expert in 2016. The result was that the remuneration system
as described above was confirmed as being in conformance
with the requirements of applicable law. The remuneration sys-
tem was approved as described by the Annual Shareholders’
Meeting in 2014 with an approval ratio of 96.8%.

Board of Management remuneration
in the financial year 2016

Board of Management remuneration in 2016 pursuant to
Section 314 Subsection 1 No. 6 of the German Commercial
Code (HGB)
The total remuneration granted by Group companies (excluding
retirement benefit commitments) to the members of the
Board of Management of Daimler AG is calculated as the total
of the amounts of
– the base salary in 2016,
– the half of the annual bonus for 2016 payable in 2017 and

measured as of the end of the reporting period,

– the half of the medium-term share-based component of
the annual bonus for 2016 payable in 2018 with its value
at the end of the reporting period (entitlement depending
on the development of Daimler’s share price compared
with the Dow Jones STOXX Auto Index),

– the value of the long-term share-based remuneration (PPSP)

at the time when granted in 2016, and
– the taxable non-cash benefits in 2016.

For both of the share-based components – the second 50%
of the annual bonus and the PPSP with a long-term orientation –
the amounts actually paid out can deviate significantly from the
values described depending on the development of the Daimler
share price and on the achievement of the relevant target param-
eters. Upward deviation is possible only as far as the maxi-
mum limits described above. Both components can also be zero.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 147

The granting of non-cash benefits in kind, primarily the reim-
bursement of expenses for security precautions and the
provision of company cars, resulted in taxable benefits for
the members of the Board of Management in 2016 as
shown in table  B.53.

The remuneration of the Board of Management for the financial
year 2016 amounts to €31.8 million (2015: €38.8 million).
Of that total, €10.0 million was fixed, that is, non-performance-
related remuneration (2015: €9.1 million), €11.6 million (2015:
€17.4 million) was short-term and medium-term variable per-
formance-related remuneration (annual bonus with deferral),
and €10.2 million was variable performance-related remunera-
tion granted in the financial year 2016 with a long-term incen-
tive effect (2015: €12.3 million).  B.52

B.52

Board of Management remuneration in 2016

Base salary

Short and medium-term variable
remuneration (annual bonus)
Short-term Medium-term

Long-term variable remuneration
(PPSP)
Number Value when granted
(2016: at share price €62.94)
(2015: at share price €83.35)

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard

Dr. Christine Hohmann-Dennhardt

Renata Jungo Brüngger

Ola Källenius

Wilfried Porth

Hubertus Troska

Bodo Uebber

Prof. Dr. Thomas Weber

Total

2016
2015

2,008
2,008

1,516
2,289

824
824

–
781

781
–

781
781

928
928

781
781

7,665
7,665

622
939

–
851

590
–

590
890

701
1,058

590
890

5,789
8,697

622
939

–
851

590
–

590
890

701
1,058

590
890

5,789
8,697

40,838
37,092

18,236
16,564

–
14,837

16,336
–

16,336
14,837

17,078
15,512

16,336
14,837

19,528
17,737

17,345
15,754

2,570
3,092

1,148
1,381

–
1,237

1,028
–

1,028
1,237

1,075
1,293

1,028
1,237

1,229
1,478

1,092
1,313

Total

7,610
9,678

3,216
4,083

–
3,720

2,989
–

2,989
3,798

3,036
3,854

2,989
3,798

3,559
4,522

3,053
3,874

162,033
147,170

10,198
12,268

29,441
37,327

B.53
Taxable non-cash benefits and other fringe benefits

In thousands of euros

Dr. Dieter Zetsche1

Dr. Wolfgang Bernhard

Dr. Christine Hohmann-Dennhardt

Renata Jungo Brüngger

Ola Källenius

Wilfried Porth
Hubertus Troska2

Bodo Uebber

Prof. Dr. Thomas Weber

2016

2015

618

131

–

107

393

171

635

163

129

148

–

189

107

493

188

127

Total

2,347

1,439

1 Including an anniversary bonus of €418,464. (That entire amount

was donated to non-profit organizations.)

2 For the fulfillment of disclosure obligations pursuant to Section 285
No. 9a of the German Commercial Code (HGB), this amount is
reduced by €208,136 for the year 2016 (2015: €170,820). The
corresponding fringe benefits were granted and borne by a subsi-
diary and are thus not included in the amounts to be disclosed in
the annual financial statements of the parent company, Daimler AG.

The contracts specify that if a Board of Management member
passes away before retiring for reason of age, the spouse /
registered partner or dependent children is/are entitled to the
full committed amount in the case of the Pension Capital
system, and to the credit amount reached plus an imputed
amount until the age of 62 in the case of the Daimler Pensions
Plan. If a Board of Management member passes away after
retiring for reason of age, in the case of payment of twelve
annual installments, the heirs are entitled to the remaining
present value. In the case of a pension with benefits for surviving
dependents, the spouse/registered partner or dependent chil-
dren is/are entitled to 60% of the discounted terminal value
(Pension Capital), or the spouse/registered partner is
entitled to 60% of the actual pension (Daimler Pensions Plan).

Up until the end of 2005, the pension agreements of Board
of Management members included a commitment to an annual
retirement pension, calculated as a proportion of the former
base salary and depending on the number of years of service;
an analogous implementation of this commitment for the
corresponding hierarchical level applied to Wilfried Porth for
the period prior to his serving as a member of the Board
of Management. Such pension claims remained in effect after
the conversion to the Pension Capital system but were
frozen at the level reached at the beginning of 2006.

Payments of these retirement pensions start upon request
when the term of service ends at or after the age of 60, or are
paid as disability pensions if the term of service ends before
the age of 60 due to disability. The respective agreements pro-
vide for 3.5% annual increases starting when benefits are
received (with the exception that Wilfried Porth’s benefits are
adjusted in accordance with applicable law). The agreements
include a provision by which a spouse of a deceased Board
of Management member is entitled to 60% of that member’s
pension. That amount can increase by up to 30 percentage
points depending on the number of dependent children.

Departing Board of Management members with pension agree-
ments modified as of the beginning of 2006 receive, for the
period between the end of the last contract period and reach-
ing the age of 60, payments in the amounts of the pension
commitments granted as described in the previous section.
Departing Board of Management members are also provided
with a company car, in some cases for a defined period.
These payments are made until the age of 60, possibly reduced
due to other sources of income, and are subject to the annual
percentage increases described above in the explanation of
these pension agreements.

148 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Commitments upon termination of service

Retirement provision
In 2012, Daimler introduced a new company retirement benefit
plan for new entrants and new appointments for employees
paid according to collective bargaining wage tariffs as well as
for executives: the “Daimler Pensions Plan.” This retirement
benefit system features the payment of annual contributions
by Daimler, but is oriented toward the capital market. Daimler
makes a commitment to guarantee the total of contributions
paid, which are invested in the capital market according to a
precautionary investment concept.

The Supervisory Board of Daimler AG has approved the appli-
cation of this system for all members of the Board of Manage-
ment newly appointed since 2012. The amount of the annual
contributions results from a fixed percentage of the base
salary and the total annual bonus for the respective financial
year calculated as of the balance sheet date. This percentage
is 15%. This calculation takes into consideration the targeted
level of retirement provision for each Board of Management
member – also according to the period of membership – and
the resulting annual and long-term expense for the Company.
The contributions to retirement provision are granted until
the age of 62. The benefit from the pension plan is payable
to surviving Board of Management members at the earliest
at the age of 62, irrespective of their age upon retirement.
If a member of the Board of Management retires due to
disability, the benefit is paid as a disability pension, irrespec-
tive of his or her age upon retirement.

The Pension Capital system was used from the beginning of
2006 until the end of 2011. The pension agreements of active
Board of Management members that were valid up until
that time were modified accordingly. All Board of Management
members newly appointed during that period were subject
exclusively to the Pension Capital system.

Under this system, each Board of Management member is
credited with a capital component each year. This capital com-
ponent comprises an amount equal to 15% of the sum of
the Board of Management member’s fixed base salary and the
total annual bonus for the respective financial year on the
balance sheet date, multiplied by an age factor equivalent to
a rate of return of 6% until 2015 and 5% as of 2016 (Wolfgang
Bernhard and Wilfried Porth: 5% for all years). These contribu-
tions to pension plans are granted only until the age of 60.
The benefit from the pension plan is payable to surviving Board
of Management members at the earliest at the age of 60,
irrespective of their age upon retirement. If a member of the
Board of Management retires due to disability, the benefit
is paid as a disability pension, even before the age of 60.

Payments under the Pension Capital system and the Daimler
Pensions Plan can be made in three ways:
– as a single amount;
– in twelve annual installments, whereby interest accrues

on each partial amount from the time payments commence
until the payout is complete (Pension Capital 6% or 5%;
Daimler Pensions Plan in accordance with applicable law);
– as an annuity with annual increases (Pension Capital 3.5%
or in accordance with applicable law; Daimler Pensions
Plan in accordance with applicable law).

Service costs for pension obligations according to IFRS amounted
to €2.8 million in the financial year 2016 (2015: €3.5 million).
The present value of the total defined benefit obligation
according to IFRS amounted to €95.7 million as of December
31, 2016 (December 31, 2015: €80.1 million). Taking age
and period of service into account, the individual entitlements,
service costs and present values are shown in the table.
 B.54

Commitments upon early termination of service
In the case of early termination without an important reason,
Board of Management service contracts include commitments
to payment of the base salary and provision of a company
car until the end of the original service period at a maximum.
Such persons are only entitled to payment of the annual
bonus pro rata for the period until the end of the contract
of service or of the Board of Management membership takes
effect. Entitlement to payment of the performance-related
component of remuneration with a long-term incentive effect
that has already been allocated is defined by the conditions
of the respective plans. To the extent that the payments
described above are subject to the provisions of the so-called
severance cap of the German Corporate Governance Code,
their total including fringe benefits is limited to double the
annual remuneration and may not exceed the total remunera-
tion for the remaining period of the service contract.

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 149

Sideline activities of Board of Management members
The members of the Board of Management should accept
management board or supervisory board positions and/or any
other administrative or honorary functions outside the Group
only to a limited extent. Furthermore, they require the consent
of the Supervisory Board before commencing any sideline
activities. This ensures that neither the time required nor the
remuneration paid for such activities leads to any conflict
with the members’ duties to the Group. Insofar as such side-
line activities are memberships of other statutory supervisory
boards or comparable boards of business enterprises, they
are disclosed in the notes to the annual financial statements
of Daimler AG, which is published on our website. In general,
Board of Management members have no right to separate
remuneration for board positions held at other companies
of the Group.

Loans to members of the Board of Management
In 2016, no advances or loans were made to members of the
Board of Management of Daimler AG.

Payments made to former members of the Board of
Management of Daimler AG and their survivors
Payments made in 2016 to former members of the Board
of Management of Daimler AG and their survivors amounted
to €15.6 million (2015: €15.5 million). Pension provisions
according to IFRS for former members of the Board of Manage-
ment and their survivors amounted to €252.9 million as of
December 31, 2016 (2015: €235.2 million).

B.54
Individual entitlements, service costs and present values for members of the Board of Management

Annual pension
(as regulated until 2005)
as of age 60

Service cost
(for pension,
pension capital and
Daimler Pensions Plan)

Present value1 of
obligations
(for pension,
pension capital and
Daimler Pensions Plan)

In thousands of euros

Dr. Dieter Zetsche

Dr. Wolfgang Bernhard

Renata Jungo Brüngger

Ola Källenius

Wilfried Porth

Hubertus Troska

Bodo Uebber

Prof. Dr. Thomas Weber

Total

2016
2015

1,050
1,050

–
–

156
156

–
–

275
275

300
300

1,781
1,781

708
1,044

367
448

117
–

235
117

247
281

239
342

649
834

264
419

2,826
3,485

43,533
37,925

3,230
2,491

654
–

2,345
1,690

9,597
8,070

4,611
3,159

17,007
14,538

14,716
12,178

95,693
80,051

1 The amounts of the present values are primarily due to the low level of the relevant discount rate.

Dr. Hohmann-Dennhardt has no entitlement to a company retirement benefit.

150 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Details of Board of Management remuneration in 2016
pursuant to the requirements of the German Corporate
Governance Code
The following tables show for each individual member of the
Board of Management on the one hand the benefits granted
for the financial year and on the other hand the payments made
in or for the reporting year and the retirement pension
expense in or for the year under review in accordance with
the recommendations of Clause 4.2.5 paragraph 3 of the
German Corporate Governance Code.

The total of “benefits granted” for financial year 2015
is calculated from
– the base salary in 2015,
– the taxable non-cash benefits and other fringe benefits

in 2015,

– the half of the annual bonus payable in 2016 for 2015

at the value for target achievement of 100%,

– the half of the share-based annual bonus payable in 2017

for 2015 at the value for target achievement of 100%,

B.55
Benefits granted

In thousands of euros

Base salary

Taxable non-cash benefits
and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Total remuneration
Total limit1 for components of remuneration
granted in the reporting year
Excluding

– Taxable non-cash benefits and other fringe benefits
– Retirement pension expense (service costs)

Dr. Dieter Zetsche
Chairman of the Board of Management,
Head of Mercedes-Benz Cars

Dr. Wolfgang Bernhard
Daimler Trucks & Buses

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

2016

2,008

824

148

618

2,156

2,626

1,004

3,092

5,100

1,044

2,570

4,578

708

2,360

6,875

0 11,595

708

914

412

131

955

412

1,381

2,205

448

1,148

1,972

367

131

955

367

131

955

968

3,070

5,006

367

8,300

7,912

3,334 14,929

3,567

3,294

1,322

6,328

10,149

5,464

Dr. Christine
Hohmann-Dennhardt
Integrity & Legal Affairs
Jan. 1 – Dec. 31,
2015

Renata Jungo Brüngger
Integrity & Legal Affairs

Ola Källenius
Mercedes-Benz Cars Marketing & Sales

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

2016

In thousands of euros

Base salary

Taxable non-cash benefits
and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Total remuneration
Total limit1 for components of remuneration
granted in the reporting year
Excluding

781

878

391

1,237

2,019

–

2,897

5,058

– Taxable non-cash benefits and other fringe benefits
– Retirement pension expense (service costs)

–

781

107

888

391

1,028

1,810

117

107

888

117

107

888

919

2,750

4,588

117

393

1,174

189

970

391

1,237

2,019

117

1,028

1,810

235

919

2,750

4,588

235

2,815

1,005

5,593

3,106

3,219

1,409

5,997

5,058

1 Total limit = maximum amount 1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe benefits and retirement pension commitments).

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 151

– the value of the long-term share-based remuneration (PPSP)

– the half of the annual bonus payable in 2017 for 2016

at the time when granted in 2015 (payable in 2019), and
– the retirement pension expense in 2015 (service costs in

2015).

The total of “benefits granted” for financial year 2016
is calculated from
– the base salary in 2016,
– the taxable non-cash benefits and other fringe benefits

in 2016,

at the value for target achievement of 100%,

– the half of the share-based annual bonus payable in 2018

for 2016 at the value for target achievement of 100%,
– the value when granted in 2016 (payable in 2020) of the

long-term share-based remuneration (PPSP), and

– the retirement pension expense in 2016 (service costs

in 2016).

Benefits granted

Wilfried Porth
HR and Labor Relations Director,
IT & Mercedes-Benz Vans

Hubertus Troska
Greater China

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

2016

In thousands of euros

Base salary

Taxable non-cash benefits
and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Total remuneration
Total limit1 for components of remuneration
granted in the reporting year
Excluding

– Taxable non-cash benefits and other fringe benefits
– Retirement pension expense (service costs)

781

107

888

391

781

171

952

391

1,293

2,075

281

1,075

1,857

247

781

171

952

247

171

952

919

2,875

4,713

247

781

493

781

635

781

635

1,274

1,416

391

1,237

2,019

342

391

1,028

1,810

239

919

2,750

4,588

239

3,244

3,056

1,199

5,912

3,635

3,465

1,655

6,243

5,153

5,058

Bodo Uebber
Finance & Controlling,
Daimler Financial Services

Prof. Dr. Thomas Weber
Group Research &
Mercedes-Benz Cars Development

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
max.

min.

2016

In thousands of euros

Base salary

Taxable non-cash benefits
and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration
(plan period of 4 years)

Total

Retirement pension expense (service costs)

Total remuneration
Total limit1 for components of remuneration
granted in the reporting year
Excluding

– Taxable non-cash benefits and other fringe benefits
– Retirement pension expense (service costs)

928

188

928

163

928

163

1,116

1,091

464

1,478

2,406

834

464

1,229

2,157

649

1,090

3,288

5,468

649

781

127

908

391

781

129

910

391

1,313

2,095

419

1,092

1,874

264

781

129

910

264

129

910

919

2,920

4,758

264

4,356

3,897

1,740

7,208

3,422

3,048

1,174

5,932

6,025

5,187

1 Total limit = maximum amount  1.5 times (Dr. Zetsche)/1.9 times target remuneration

(base salary, target annual bonus, value when granted of PPSP, excluding fringe benefits and retirement pension commitments).

152 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

The total of “payments made” for financial year 2015
is calculated from:
– the base salary in 2015,
– the taxable non-cash benefits and other fringe benefits

in 2015,

– the half of the annual bonus payable in 2016 for 2015 at the

value as of the end of the reporting period in financial year 2015,

– the half of the share-based annual bonus paid in 2015 for

2013 (deferral),

– the value of the long-term share-based remuneration

(PPSP 2011) paid in 2015,

– the dividend equivalent of the current PPSP (2012, 2013,

2014 and 2015) paid in 2015, and

– the retirement pension expense in 2015 (service costs

in 2015).

The caps possible to ensure the total maximum amount shown
in the table of benefits granted in the financial year 2015 are
implemented with the payout of PPSP 2015, which constitutes
the last payment to be made of the components of remunera-
tion granted in the financial year 2015. For the financial year
2015, therefore, the possible cap would take place in 2019,
the year that PPSP 2015 is paid out.

B.56
Payments made

In thousands of euros

Base salary

Taxable non-cash benefits and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2011

Payment of PPSP 2012

Dividend equivalent PPSP 2012

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Total

Retirement pension expense (service costs)

Total remuneration

Dr. Dieter Zetsche
Chairman of the Board of Management,
Head of Mercedes-Benz Cars

Dr. Wolfgang Bernhard
Daimler Trucks & Buses

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

2,008

148

2,156

2,289

1,809

6,416

–

304

156

106

–

2,008

618

2,626

1,516

1,727

–

6,417

–

395

141

121

133

11,171

1,044

10,450

708

14,371

13,784

824

914

939

626

2,566

–

122

–

4,401

448

5,763

824

131

955

622

670

–

2,567

–

158

4,190

367

5,512

Dr. Christine
Hohmann-Dennhardt
Integrity & Legal Affairs
Jan. 1 – Dec. 31,
2015

Renata Jungo Brüngger
Integrity & Legal Affairs

Ola Källenius
Mercedes-Benz Cars
Marketing & Sales

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

In thousands of euros

Base salary

Taxable non-cash benefits and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2011

Payment of PPSP 2012

Dividend equivalent PPSP 2012

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Total

Retirement pension expense (service costs)

Total remuneration

781

878

851

626

2,246

–

122

–

3,986

–

4,864

–

781

107

888

590

–

320

–

1,000

117

2,005

781

189

970

890

–

268

–

1,229

117

2,316

781

393

1,174

590

–

411

–

1,138

235

2,547

B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT 153

The total of “payments made” for financial year 2016
is calculated from:
– the base salary in 2016,
– the taxable non-cash benefits and other fringe benefits in 2016,
– the half of the annual bonus payable in 2017 for 2016

at the value as of the end of the reporting period,

– the half of the share-based annual bonus paid in 2016

for 2014 (deferral),

– the amount of the long-term share-based remuneration

(PPSP 2012) paid in 2016,

– the dividend equivalent of the current PPSP (2013, 2014,

2015 and 2016) paid in 2016, and

– the retirement pension expense in 2016 (service costs in 2016).
The caps possible to ensure the total maximum amount shown
in the table of benefits granted in the year 2016 are imple-
mented with the payout of PPSP 2016, which constitutes
the last payment to be made of the components of remunera-
tion granted in the financial year 2016. For the financial year
2016, therefore, the possible cap would take place in 2020,
the year that PPSP 2016 is paid out.

Payments made

In thousands of euros

Base salary

Taxable non-cash benefits and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2011

Payment of PPSP 2012

Dividend equivalent PPSP 2012

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Total

Retirement pension expense (service costs)

Total remuneration

In thousands of euros

Base salary

Taxable non-cash benefits and other fringe benefits

Total

Annual variable remuneration
(50% of annual bonus, short-term)

Deferral (50% of annual bonus, medium-term)

Long-term variable remuneration

Payment of PPSP 2011

Payment of PPSP 2012

Dividend equivalent PPSP 2012

Dividend equivalent PPSP 2013

Dividend equivalent PPSP 2014

Dividend equivalent PPSP 2015

Dividend equivalent PPSP 2016

Total

Retirement pension expense (service costs)

Total remuneration

Wilfried Porth
HR and Labor Relations Director,
IT & Mercedes-Benz Vans

Hubertus Troska
Greater China

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

781

107

888

890

645

2,566

–

122

–

4,367

281

5,536

781

171

952

590

652

–

2,567

–

158

4,132

247

5,331

781

493

1,274

890

626

1,050

–

2,757

342

4,373

781

635

1,416

590

652

–

1,369

–

158

2,926

239

4,581

Bodo Uebber
Finance & Controlling,
Daimler Financial Services

Prof. Dr. Thomas Weber
Group Research &
Mercedes-Benz Cars Development

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

Jan. 1 – Dec. 31,
2015

Jan. 1 – Dec. 31,
2016

928

188

1,116

1,058

781

3,068

–

146

–

5,222

834

7,172

928

163

1,091

701

775

–

3,068

–

189

4,921

649

6,661

781

127

908

890

664

2,725

–

129

–

4,558

419

5,885

781

129

910

590

652

–

2,725

–

168

4,302

264

5,476

154 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT

Remuneration of the Supervisory Board

Supervisory Board remuneration in 2016
The remuneration of the Supervisory Board is determined
by the Shareholders’ Meeting of Daimler AG and is governed
by the Company’s Articles of Incorporation. The new regulations
for Supervisory Board remuneration approved by the Annual
Shareholders’ Meeting in April 2014 and effective for the finan-
cial year beginning on January 1, 2014 specify that the mem-
bers of the Supervisory Board receive, in addition to the refund
of their expenses and the cost of any value-added tax incurred
by them in performance of their office, fixed remuneration
of €120,000 after the conclusion of the financial year. The
Chairman of the Supervisory Board receives an additional
€240,000 and the Deputy Chairman of the Supervisory Board
receives an additional €120,000. The members of the Audit
Committee are paid an additional €60,000, the members of
the Presidential Committee are paid an additional €48,000
and the members of the other committees of the Supervisory
Board are paid an additional €24,000; an exception is the
Chairman of the Audit Committee, who is paid an additional
€120,000. Additional payments are made for activities in a
maximum of three committees; any persons who are members
of more than three such committees receive additional pay-
ments for the three most highly paid functions. Members of
a Supervisory Board committee are only entitled to remuneration
for such membership if the committee has actually convened
to fulfill its duties in the respective year.

The members of the Supervisory Board and its committees
receive a meeting fee of €1,100 for each Supervisory Board
meeting and committee meeting that they attend.

The individual remuneration of the members of the
Supervisory Board is shown in table.  B.57

In financial year 2016, no remuneration was paid for services
provided personally beyond the aforementioned board and
committee activities, in particular for advisory or agency
services, except for the remuneration paid to the members
of the Supervisory Board representing the employees in
accordance with their contracts of employment.

The remuneration of all the activities of the members of the
Supervisory Board of Daimler AG in the year 2016 was thus
€3.5 million (2015: €3.5 million).

Loans to members of the Supervisory Board
No advances or loans were made to members of the Supervi-
sory Board of Daimler AG in 2016.

Function(s) remunerated

Total in 2016

B.57
Supervisory Board remuneration

Name

In euros

Dr. Manfred Bischoff

Michael Brecht1

Dr. Paul Achleitner

Sari Baldauf
Michael Bettag1

Dr. Clemens Börsig

Chairman of the Supervisory Board, the Presidential Committee and
the Nomination Committee

Deputy Chairman of the Supervisory Board, the Presidential Committee and
the Audit Committee

Member of the Supervisory Board and the Nomination Committee

Member of the Supervisory Board

Member of the Supervisory Board and the Audit Committee
(Chairman of the Audit Committee)

Dr. Bernd Bohr

Member of the Supervisory Board

Dr. Jürgen Hambrecht

Member of the Supervisory Board and of the Presidential Committee

Petraea Heynike

Andrea Jung

Joe Kaeser
Ergun Lümali1
Dr. Sabine Maaßen1
Wolfgang Nieke1

Dr. Bernd Pischetsrieder
Valter Sanches2
Jörg Spies1
Elke Tönjes-Werner1
Sibylle Wankel1

Dr. Frank Weber
Roman Zitzelsberger1

Member of the Supervisory Board

Member of the Supervisory Board and the Audit Committee

Member of the Supervisory Board and the Audit Committee (since July 1, 2016)

Member of the Supervisory Board and the Audit Committee (each until June 30, 2016)

Member of the Supervisory Board

Member of the Supervisory Board (since August 25, 2016)

Member of the Supervisory Board

Member of the Supervisory Board and of the Presidential Committee

1 The employee representatives have stated that their board remuneration is to be transferred to the Hans-Böckler Foundation,

in accordance with the guidelines of the German Trade Union Federation.

2 Mr. Sanches has directed that he receive no remuneration and that his board remuneration is to be paid to the Hans-Böckler Foundation.

448,500

370,000

153,900

128,800

255,400

128,800

183,400

128,800

127,700

193,200

161,164

97,208

128,800

127,700

128,800

44,495

128,800

183,400

B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION 155

Takeover-Relevant Information and Explanation

(Report pursuant to Section 315 Subsection 4 and Section 289 Subsection 4 of the German Commercial Code (HGB))

Composition of share capital
The share capital of Daimler AG amounted to approximately
€3,070 million as of December 31, 2016. It is divided into
1,069,837,447 registered shares, each of which accounts for
approximately €2.87 of equity capital. Pursuant to Section 67
Subsection 2 of the German Stock Corporation Act (AktG),
only those persons registered as shareholders in the register
of shareholders are considered to be shareholders of the Com-
pany. With the exception of treasury shares, from which the
Company does not have any rights, all shares confer equal
rights to their holders. Each share confers the right to one
vote and, with the possible exception of any new shares that
are not yet entitled to a dividend, to an equal share of the
profits in accordance with the dividend payout approved by
the Annual Shareholders’ Meeting. The rights and obligations
arising from the shares are derived from the provisions of
applicable law, in particular Sections 12, 53 a ff., 118 ff. and 186
of the German Stock Corporation Act. There were no treasury
shares as of December 31, 2016.

Restrictions on voting rights and on the transfer of shares
The Company does not have any rights from treasury shares.
In the cases described in Section 136 of the German Stock
Corporation Act (AktG), the voting rights of treasury shares
are nullified by law.

Shares acquired by employees within the context of the
employee share program may not be disposed of until the end
of the following year. Eligible participants in the Performance
Phantom Share Plans are obliged by the Plans’ terms and con-
ditions and by the Stock Ownership Guidelines to acquire
Daimler shares with a part of their Plan income up to a defined
target volume and to hold them for the duration of their
employment at the Daimler Group.

Provisions of applicable law and of the Articles of Incorpo-
ration concerning the appointment and dismissal of
members of the Board of Management and amendments
to the Articles of Incorporation
Members of the Board of Management are appointed and
dismissed on the basis of Sections 84 and 85 of the German
Stock Corporation Act (AktG) and Section 31 of the German
Codetermination Act (MitbestG). In accordance with Section 84
of the German Stock Corporation Act, the members of the
Board of Management are appointed by the Supervisory Board
for a maximum period of office of five years. However, the
Supervisory Board of Daimler AG has decided generally to limit
the initial appointment of members of the Board of Manage-
ment to three years. Reappointment or the extension of a period
of office is permissible, in each case for a maximum of five years.

Pursuant to Section 31 Subsection 2 of the German Codeter-
mination Act (MitbestG), the Supervisory Board appoints the
members of the Board of Management with a majority com-
prising at least two thirds of its members’ votes. If no such
majority is obtained, the Mediation Committee of the Supervisory
Board has to make a suggestion for the appointment within
one month of the vote by the Supervisory Board. The Supervi-
sory Board then appoints the members of the Board of
Management with a majority of its members’ votes. If no such
majority is obtained, voting is repeated and the Chairperson
of the Supervisory Board then has two votes. The same proce-
dure applies for dismissals of members of the Board of
Management.

In accordance with Article 5 of the Articles of Incorporation, the
Board of Management has at least two members. The number
of members is decided by the Supervisory Board. Pursuant to
Section 84 Subsection 2 of the German Stock Corporation
Act (AktG), the Supervisory Board can appoint a member of the
Board of Management as its Chairperson. If a required member
of the Board of Management is lacking, an affected party can
apply in urgent cases for that member to be appointed by the
court pursuant to Section 85 Subsection 1 of the German Stock
Corporation Act (AktG). Pursuant to Section 84 Subsection 3
of the German Stock Corporation Act (AktG), the Supervisory
Board can revoke the appointment of a member of the Board
of Management and of the Chairperson of the Board of Man-
agement if there is an important reason to do so.

156 B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION

Pursuant to Section 179 of the German Stock Corporation Act
(AktG), the Articles of Incorporation can only be amended by
a resolution of an Annual Shareholders’ Meeting. Unless other-
wise required by applicable law, resolutions of the Annual
Shareholders’ Meeting – with the exception of elections – are
passed pursuant to Section 133 of the German Stock Corpora-
tion Act (AktG) and Article 16 Subsection 1 of the Articles
of Incorporation with a simple majority of the votes cast and
if required with a simple majority of the share capital repre-
sented. Pursuant to Section 179 Subsection 2 of the German
Stock Corporation Act (AktG), any amendment to the purpose
of the Company requires a 75% majority of the share capital
represented at the Shareholders’ Meeting; no use is made in
the Articles of Incorporation of the possibility to stipulate a
larger majority of the share capital. Amendments to the Arti-
cles of Incorporation that only affect the wording can be decided
upon by the Supervisory Board in accordance with Article 7
Subsection 2 of the Articles of Incorporation. Pursuant to
Section 181 Subsection 3 of the German Stock Corporation Act
(AktG), amendments to the Articles of Incorporation take
effect upon being entered in the Commercial Register.

Authorization of the Board of Management to issue
or buy back shares
By resolution of the Annual Shareholders’ Meeting of April 1,
2015, the Company was authorized to acquire its own shares
during the period until March 31, 2020, for all legal purposes
in a volume of up to 10% of the share capital at the time of the
resolution of the Annual Shareholders’ Meeting. The shares
can be used, under the exclusion of shareholders’ subscription
rights, for, among other things, corporate mergers and acquisi-
tions or else can be sold for cash to third parties at a price
that is not significantly below the market price at the time
of the sale. The shares can also be used to service debt on
convertible bonds and/or bonds with warrants, or else issued
to employees of the Company and employees and members
of executive bodies of affiliated companies pursuant to
Section 15 ff. of the German Stock Corporation Act (AktG).
The Company’s own shares can also be canceled.

In addition, the Board of Management is authorized under
other defined circumstances and with the consent of the
Supervisory Board to exclude shareholders’ subscription rights
for shares they acquire. The Company’s own shares in a
volume of up to 5% of the share capital existing at the time of
the resolution of the Annual Shareholders’ Meeting can also
be acquired with the application of derivative financial instru-
ments (put or call options, forwards or a combination of these
financial instruments), whereby the terms of the derivatives
may not exceed 18 months and must be terminated on March 31,
2020, at the latest.

No use was made of this authorization to acquire the Compa-
ny’s own shares during the reporting period.

By resolution of the Annual Shareholders’ Meeting held on
April 9, 2014, the Board of Management was authorized
with the consent of the Supervisory Board to increase the
share capital of Daimler AG in the period until April 8, 2019,
wholly or in partial amounts, on one or several occasions,
by up to €1 billion by issuing new registered shares of no
par value in exchange for cash or non-cash contributions, and
with the consent of the Supervisory Board under certain
conditions and within defined limits to exclude shareholders’
subscription rights (Approved Capital 2014). Subscription
rights can, under these defined conditions, be excluded in the
event of a capital increase through non-cash contributions
for the purposes of an acquisition, and in the case of a capital
increase through cash contributions, if the issue price of
new shares is not significantly below the market price at the
time of the issue.

No use has yet been made of Approved Capital 2014.

By resolution of the Annual Shareholders’ Meeting held on
April 1, 2015, the Board of Management, with the consent of the
Supervisory Board, is authorized to issue during the period
until March 31, 2020, convertible bonds and/or bonds with
warrants or a combination of those instruments (commercial
papers) in a total nominal amount of up to €10 billion with a
maximum term of ten years, and to grant the owners/lenders
of those bonds conversion or option rights to new, registered
shares of no par value in Daimler AG with a corresponding
amount of the share capital of up to €500 million, in accor-
dance with the terms and conditions of those convertible
bonds or bonds with warrants. The bonds may be issued in
exchange for consideration in cash, but also for consideration
in kind, in particular for a participation in other companies.
The respective terms and conditions may also provide for man-
datory conversion or an obligation to exercise the option
rights. The bonds can be issued once or several times, wholly
or in installments, or simultaneously in various tranches.
They can also be issued by companies affiliated with Daimler AG
pursuant to Section 15 ff. of the German Stock Corporation
Act (AktG).

Inter alia, the Board of Management was also authorized under
certain circumstances, within certain limits and with the
consent of the Supervisory Board, to exclude shareholders’
subscription rights to the bonds. Subscription rights can, under
these defined conditions, be excluded when bonds are issued
in exchange for non-cash contributions, particularly within the
framework of a merger or acquisition, and when bonds are
issued in exchange for cash contributions, if the issue price
is not significantly below the theoretical market price of the
bonds at the time of the issue. No use has yet been made
of this new authorization to issue convertible bonds and/or
bonds with warrants.

In order to service the debt of the convertible bonds and/or
bonds with warrants issued as a result of the authorization, the
Annual Shareholders’ Meeting of April 1, 2015, also approved
a conditional increase in the share capital of up to €500 million
(Conditional Capital 2015).

B | COMBINED MANAGEMENT REPORT | TAKEOVER-RELEVANT INFORMATION AND EXPLANATION 157

Material agreements taking effect in the event
of a change of control
Daimler AG has concluded various material agreements,
as listed below, that include clauses regulating the possible
event of a change of control, as can occur as a result of
a takeover bid:
– A non-utilized syndicated credit line for a total amount

of €9 billion, which the lenders are entitled to terminate
if Daimler AG becomes a subsidiary of another company
or comes under the control of one person or several persons
acting jointly.

– Credit agreements with lenders for a total amount

of €2.4 billion, which the lenders are entitled to terminate
if Daimler AG becomes a subsidiary of another company
or comes under the control of one person or several persons
acting jointly.

– Guarantees and securities for credit agreements of consoli-
dated subsidiaries for a total amount of €146 million, which
the lenders are entitled to terminate if Daimler AG becomes
a subsidiary of another company or comes under the control
of one person or several persons acting jointly.

– An agreement concerning the acquisition of a majority
(50.1%) of AFCC Automotive Fuel Cell Cooperation Corp.,
which has the purpose of further developing fuel cells for
automotive applications and making them marketable.
In the case of a change of control of Daimler AG, the agree-
ment provides for the right of termination by the other
main shareholder, Ford Motor Company. Control as defined
by this agreement is the beneficial ownership of the
majority of the voting rights and the resulting right to appoint
the majority of the members of the Board of Management.
– A cooperation agreement with Ford concerning the joint pre-
development of a fuel-cell system. In the event of a change
of control of one of the parties to the agreement, the agree-
ment provides for the right of termination for the other
parties. A change of control is deemed to occur at a thresh-
old of 50% of the voting rights of the company in question
or upon authorization to appoint a majority of the members
of its managing board.

– A master cooperation agreement on wide-ranging strategic
cooperation with Renault S. A., Renault-Nissan B.V. and
Nissan Motor Co., Ltd. In the case of a change of control
of one of the parties to the agreement, each of the other
parties has the right to terminate the agreement. A change
of control as defined by the master cooperation agreement
occurs if a third party or several third parties acting jointly
acquire, legally or economically, directly or indirectly, at least
50% of the voting rights in the company in question or are
authorized to appoint a majority of the members of its manag-
ing board. Under the master cooperation agreement, several
cooperation agreements were concluded between Daimler AG
on the one side and Renault and/or Nissan on the other,
which provide for the right of termination for a party to the
agreement in the case of a change of control of another party.

These agreements primarily concern a new architecture for
small cars, the shared use and development of fuel-efficient
diesel and gasoline engines and transmissions, the development
and supply of a small urban delivery van, the development,
production and supply of pickups, the use of an existing archi-
tecture for compact cars, the joint development of compo-
nents for a new architecture for compact cars, and the joint
production of Infiniti/Nissan and Mercedes-Benz compact
vehicles in a 50-50 joint venture in Mexico. A change of control
is deemed to occur at a threshold of 50% of the voting rights
of the company in question or upon authorization to appoint
a majority of the members of its managing board. In the case
of termination of cooperation in the area of the development
of small cars due to a change of control in the early phase of
the cooperation, the party affected by the change of control
would be obliged to bear its share of the costs of the devel-
opment of shared components even if the development were
terminated for that party.

– An agreement with BAIC Motor Co., Ltd., related to a jointly
held company for the production and distribution of cars
of the Mercedes-Benz brand in China, by which BAIC Motor Co.,
Ltd. is given the right to terminate the agreement or exercise
a put or call option in the case that a third party acquires one
third or more of the voting rights in Daimler AG.

– An agreement related to the establishment of a joint venture

with Beiqi Foton Motor Co., Ltd. for the purpose of producing
and distributing heavy-duty and medium-duty trucks of the
Auman brand. This agreement gives Beiqi Foton Motor Co.,
Ltd. the right of termination in the case that one of its
competitors acquires more than 25% of the equity or assets
of Daimler AG or becomes able to influence the decisions
of its Board of Management.

– An agreement between Daimler and Robert Bosch GmbH
related to the joint establishment and joint operation
of EM-motive GmbH for the development and production
of traction and transmission-integrated electric motors
as well as parts and components for such motors for auto-
motive applications and for the sale of those articles to
the Robert Bosch Group and the Daimler Group. If Daimler
should become controlled by a competitor of Robert Bosch
GmbH, Robert Bosch GmbH has the right to terminate the
consortium agreement without prior notice and to acquire
all the shares in the joint venture held by Daimler at a fair
market price.

– An agreement between Daimler AG, BMW AG and Audi AG
related to the acquisition of the companies of the HERE
Group and the associated establishment of There Holding
B.V. In the event of a change of control of one of the parties
to the agreement, the agreement obligates the party in
question to offer its shares in There Holding B.V. to the other
parties to the agreement (shareholders). If none of the
other parties acquire these shares, the agreement gives
them the right to dissolve There Holding B.V.

158 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Risk and Opportunity Report

The Daimler Group is exposed to a large number of risks that
are directly linked with the business activities of its divisions or
which result from external influences. A risk is understood as
the danger that events, developments or actions will prevent
the Group or one of its divisions from achieving its targets.
At the same time, it is important for the Daimler Group to identify
opportunities so that they can be utilized in the course of its
business activities, thus safeguarding and enhancing the Group’s
competitiveness. An opportunity is understood as the possibility
to safeguard or to surpass the planned targets of the Group or
a division as a result of events, developments or actions.
The divisions have direct responsibility for recognizing and
managing business risks and opportunities at an early stage.
As part of the strategy process, risks related to the planned
long-term development and opportunities for further profitable
growth are identified and integrated into the decision-making
process. In order to identify risks and opportunities at an early
stage and to assess and manage them consequently, effective
management and control systems, which are clustered into a
risk and opportunity management system, are applied. Risks
and opportunities are not offset. The system is described
below.

B.58
Assessment of probability of occurrence / possible impact

Level

Low

Medium

High

Probability of occurrence

0% < Probability of occurrence ≤ 33%

33% < Probability of occurrence ≤ 66%

66% < Probability of occurrence < 100%

Level

Low

Possible impact

€0 <

Medium

€500 million ≤

High

Impact

< €500 million

< €1 billion

≥ €1 billion

Risk and opportunity management system

The risk management system with regard to existence-
threatening and other material risks is integrated into the
value-based management and planning system of the Daimler
Group. It is an integral part of the overall planning, manage-
ment and reporting process in the legal entities, divisions and
corporate functions. The risk management system is intended
to systematically and continually identify, assess, control,
monitor and report risks threatening Daimler’s existence and
other material risks, in order to support the achievement of
corporate targets and to enhance risk awareness at the Group.

The opportunity management system at the Daimler Group
is derived from the risk management system. The objective of
opportunity management is to recognize the possible opportuni-
ties arising in business activities as a result of positive develop-
ments at an early stage, and to utilize them as optimally as
possible for the Group by taking appropriate measures. By taking
advantage of opportunities, planned targets should be secured
or overachieved. Opportunity management considers relevant
and implementable opportunities that have not yet been
included in any planning.

In the context of operative planning, risks and opportunities –
with consideration of appropriate risk and opportunity catego-
ries – are identified and assessed for a two-year planning
period. Furthermore, the discussions for the derivation of mid-
term and strategic targets in the context of strategic planning
include the identification and assessment of risks and opportu-
nities relating to a longer period. The reporting of risks and
opportunities in the Management Report generally relates to
a period of one year. Besides the reporting at specific times,
risk and opportunity management is established as a continuous
task within the Group. In addition to the regular reporting,
there is also an internal reporting obligation within the Group
for material risks arising unexpectedly. The central Group Risk
Management regularly reports the identified risks and opportu-
nities to the Board of Management and the Supervisory Board.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 159

Risk assessment takes place on the basis of probability of
occurrence and possible impact according to the levels low,
medium and high. These levels also apply to the possible
impact of opportunities. An analysis of the probability of occur-
rence is not considered here. When assessing the impact of
a risk, its effect on EBIT is basically considered.

At the Daimler Group, risks below €500 million are classified
as low, between €500 million and €1 billion as medium, and
above €1 billion as high. For the quantification of each risk and
opportunity category in the Management Report, the individual
risks and opportunities are summarized for each category.
The assessment of the dimensions probability of occurrence
and possible impact is based on the levels shown in table
 B.58 and is conducted before measures are implemented.
In the context of describing the risk and opportunity categories,
significant changes in comparison to the prior year are explained.

Risk management is based on the principle of completeness.
This means that at the level of the individual entities, all concrete
risks enter the risk management process. General uncertainties
without any clear indication of a possible effect on earnings
are monitored by the internal control system (ICS).

The scope of consolidation for risk and opportunity management
corresponds to the scope of consolidation of the consolidated
financial statements and goes beyond that if necessary. The risks
and opportunities of the divisions and operating units, important
associated companies, joint ventures, joint operations and the
corporate departments are included.

The tasks of the employees responsible for risk and opportunity
management include, besides the identification and assess-
ment of risks and opportunities, the development of measures
and the initiation of such measures, if necessary. The objective
of such measures is to avoid, reduce or transfer risks. The utiliza-
tion or enhancement of an opportunity, and its partial or full
implementation, also require measures to be taken. The cost-
effectiveness of a measure is assessed before its implementation.
The development of all risks and opportunities of the individual
entities and of the related measures that have been initiated
are continually monitored. The management activities take
place at the level of the divisions based on individual risks and
opportunities.

The internal control and risk management system with
regard to the accounting process has the objective of ensuring
the correctness and effectiveness of accounting and financial
reporting. It is designed in line with the internationally recognized
framework for internal control systems of the Committee of
Sponsoring Organizations of the Treadway Commission (COSO
Internal Control – Integrated Framework), is continually devel-
oped further, and is an integral part of the accounting and
financial reporting process in all relevant legal entities and corpo-
rate functions. The system includes principles and procedures
as well as preventive and detective controls. Among other things,
it is regularly checked, if
– the Group’s uniform financial reporting, valuation and

accounting guidelines are continually updated and regularly
taught and adhered to;

– transactions within the Group are accounted

for and properly eliminated;

– issues relevant for financial reporting and disclosure from
agreements entered into are recognized and appropriately
presented;

– processes are established to guarantee the completeness

of financial reporting;

– processes are established for the segregation of duties and
for the “four-eyes principle” (dual accountability) in the
context of preparing financial statements, and authorization
and access rules exist for relevant IT accounting systems.

The effectiveness of the internal control system is systematically
assessed with regard to the corporate accounting process.
The first step consists of risk analysis and the definition of control.
Significant risks are identified relating to the process of corpo-
rate accounting and financial reporting in the main legal entities
and corporate functions. The controls required are then
defined and documented in accordance with Group-wide
guidelines. Random samples are regularly tested to assess
the effectiveness of the controls. Those tests constitute the
basis for self-assessment of the appropriate magnitude and
effectiveness of the controls. The results of this self-assessment
are documented and reported in a groupwide IT system. Identified
weaknesses are eliminated with consideration of their poten-
tial effects. At the end of the annual cycle, the selected legal
entities and corporate functions confirm the effectiveness
of the internal control and risk management system with regard
to the corporate accounting process. The Board of Manage-
ment and the Audit Committee of the Supervisory Board are
regularly informed about the main control weaknesses and the
effectiveness of the control mechanisms installed. However,
the internal control and risk management system for the
accounting process cannot ensure with absolute certainty that
material false statements in accounting are avoided.

The organizational embedding and monitoring of risk and
opportunity management takes place through the risk
management organization established at the Group. The divisions,
corporate functions and legal entities are requested to report
about concrete risks and opportunities at regular intervals.
This information is passed on to Group Risk Management,
which processes the information and provides it to the Board
of Management and the Supervisory Board as well as to the
Group Risk Management Committee (GRMC).

160 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Risks and opportunities

The following section describes the risks and opportunities
that can have a significant influence on the profitability, cash
flows and financial position of the Daimler Group. In general,
the reporting of risks and opportunities takes place in relation
to the individual segments. If no segment is explicitly men-
tioned, the risks and opportunities described relate to all the
automotive divisions.

In addition, risks and opportunities that are not yet known
or classified as not material can influence profitability, cash
flows and financial position.

Industry and business risks and opportunities

The following section describes the industry and business
risks and opportunities of the Daimler Group. A quantification
of these risks and opportunities is shown in table  B.59.

Economic risks and opportunities
Economic risks and opportunities constitute the framework for
the risks and opportunities listed in the following categories
and are integrated as premises into the quantification of these
risks and opportunities. Overall economic conditions have a
significant influence on automobile sales markets. Their devel-
opment is included among the Group’s major risks and opportu-
nities.

Like the majority of economic research institutes, Daimler
expects the world economy to remain within its rather below-
average growth corridor of 2.5 to 3.0% also in 2017. Economic
developments in 2016 are described in detail in the “Economic
Conditions and Business Development” section of this Man-
agement Report; growth assumptions for 2017 are explained
in the “Outlook” section E pages 97 ff and 174 ff.

Economic risks and opportunities are linked with assumptions
and forecasts concerning the general development of
individual issues. Overall, economic risks and above all the
degree of uncertainty for the business environment have tended
to increase compared with the previous year.

In order to ensure the complete presentation and assessment
of existence-threatening and other material risks of the Group,
as well as the control and risk processes with regard to the
corporate accounting process, Daimler has established the
GRMC. It is composed of represen tatives of Accounting & Finan-
cial Reporting, the Legal departement and Group Compliance,
and is chaired by the Board of Management Member for
Finance & Controlling / Daimler Financial Services. The internal
auditing department contributes material findings on the
internal control and risk management system.

In addition to dealing with fundamental and material issues
related to the design of the risk management, the committee
has the following tasks:
– The GRMC is responsible for the creation and design of the

framework conditions relating to the organization, methods,
processes and systems for a functional, Group-wide risk
management at Daimler AG and its subsidiaries.

– The GRMC regularly reviews the effectiveness and functionality
of the installed risk management processes, including the
necessary adaptations. This includes reviewing the appropri-
ateness of the organization, methods, processes and systems.
The GRMC specifies minimum requirements relating to the
design of risk management, gives instructions for necessary
and appropriate corrective measures to eliminate possibly
identified system failings or weaknesses, and monitors their
implementation. The general objective is to ensure efficient
and effective risk management that facilitates the early iden-
tification of material risks and enables management to recog-
nize developments at an early stage and to control them
by taking suitable measures.

Responsibility for operational risk management and for the
risk management processes lies directly with the divisions,
corporate functions and legal entities.

Reports regarding the current risk situation and the effective-
ness, functionality and appropriateness of the internal control
and risk management system are regularly presented to the
Board of Management and to the Audit Committee of the
Supervisory Board of Daimler AG. Furthermore, the responsible
managers regularly discuss risks and opportunities out of
business operations with the Board of Management.

The Audit Committee of the Supervisory Board is responsible
for monitoring the internal control and risk management
system. The internal auditing department monitors whether
the statutory conditions and the Group’s internal guidelines
concerning the internal control and risk management system
of the Group are adhered to. If required, measures are then
initiated in cooperation with the respective management.
External auditors audit the system for the early identification
of risks which is integrated in the risk management system for
its general suitability to identify risks threatening the existence
of the Group; in addition, they report to the Supervisory Board
on any significant weaknesses that have been recognized in
the internal control and risk management system.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 161

A return to that discussion could lead to renewed uncertainty
and volatility in the financial markets. The risks associated with
the United Kingdom’s exit from the European Union have been
manifested. Although the negative effects on the economies
of the UK and the rest of the EU were limited after the referen-
dum, substantial risks exist in connection with the upcoming
exit negotiations, whereby most of the risk relates to the UK.
The possible burden on the British economy would be immense
if the British government does not succeed in securing access
to the European single market after Brexit. If other countries
follow the example of the United Kingdom and aim to carry out
referendums, the resulting investor and consumer uncertainty
could additionally impact the economic prospects of the EU.
Developments in Italy and Spain continue to be a source of
political and economic uncertainty within the European Mone-
tary Union. In particular in Italy, the rejection of constitutional
reforms means that the risk has increased of a new government
more averse to reform and a return to the sovereign-debt crisis.
The European market continues to be very important for Daimler
across all divisions; in fact, it is still the biggest sales market
for the Mercedes-Benz Cars and Mercedes-Benz Vans divisions.
An opportunity that is difficult to assess can be seen in a sig-
nificantly improved economic development of the euro zone.
If countries such as Italy and France implement reform mea-
sures more quickly and decisively than has so far been assumed,
economic growth could also accelerate. That would benefit
the development of investment and demand for motor vehicles
in the important European market.

A regionally limited opportunity exists in the possibility of a
distinct acceleration of economic growth in Japan. This could
be caused by a significant increase in investment activity,
resulting from the targeted structural reforms and the expan-
sive monetary and fiscal policies that have already been initiated.
However, the failure of the country’s expansive monetary and
fiscal policy and the lack of structural reforms could trigger a
significant growth slowdown or recession. As a result, there
could be positive or negative effects on the Mercedes-Benz Cars
and Daimler Trucks divisions, for which Japan is an important
sales market.

The ongoing growth dynamism of the US economy will be
determined, among other factors, by which of the measures
announced during the election campaign are actually imple-
mented by the new US President Donald Trump. In the year
2017, the possibility exists of faster growth for the US economy
as a result of tax reductions and higher infrastructure investment.
In the short term, however, risks will increase if trade restric-
tions are imposed (renegotiation of the NAFTA-agreement with
Canada and Mexico and punitive tariffs on imports from
China). For Daimler, altered trade conditions in particular
affecting Mexico would have a considerable impact on existing
production interdependencies and supply chains. And the
US labor market, which has so far benefited greatly from immi-
gration, could also suffer from a change in immigration policy.
Higher import duties and barriers to trade would also increase
inflationary pressure in the United States. This would reduce
consumer spending power and would result in faster increases
in benchmark interest rates by the US Federal Reserve (Fed).
In this connection, it is unclear how the economy would react
after such a long phase of extremely low interest rates. Exces-
sively fast increases in interest rates by the US Fed would have
a significantly negative impact on the US economy. Rising
interest on loans could slow down the recovery of the real-estate
market and dampen companies’ investments. Although the
Fed could attempt to counteract significantly weakening growth
through its monetary policy, it would have little scope for
action in this field, so the effectiveness of such possible mea-
sures would be limited. A possible renewed wave of expansive
measures would also further increase the danger of speculative
bubbles. Such a development would have significant
consequences because the Daimler Group (especially the
Mercedes-Benz Cars, Daimler Trucks and Daimler Financial
Services divisions) generates a considerable volume of its rev-
enue in the United States and diminished growth could also
spread to other regions. However, if the aforementioned tax
cuts and infrastructure spending mean that investment activity
turns out to be significantly more dynamic than previously
assumed, this could result in substantially stronger growth.
The resulting increased employment and income effects could
boost demand for all the automotive divisions.

If there is no continuation of the required consolidation of state
budgets and of reform efforts in the countries of the European
Monetary Union (EMU), this could cause renewed turmoil
in the financial markets, leading to increasing refinancing costs
through rising capital-market interest rates and thus jeopardizing
the still only moderate economic recovery. Furthermore, the
exceptionally low rate of inflation harbors an additional risk in
that a long-lasting and broad-based fall in prices would consti-
tute a considerable threat to the economic recovery of the
EMU and make it even more difficult for the debt-ridden countries
of the euro zone to finance their debts. Furthermore, there is
concern that the very expansive monetary policy of the Euro-
pean Central Bank could further increase the danger of specu-
lative bubbles in the stock and bond markets. Although the
agreement reached between Greece and its creditors in the
summer of 2015 reduced the direct risk of Greece’s exit from
the euro zone, that risk is by no means completely removed.

162 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

unit sales. An opportunity is to be seen in the significant imple-
mentation of reforms in important emerging economies.
If structural reforms are quickly and consistently carried out
in countries such as India or Indonesia, new scope for growth
will be created. Capital flows into emerging markets already
increased in 2016 after two years of decline; a renewed period
of macroeconomic stability in combination with rising raw-
material prices and more stable currencies could stimulate
global growth. This would also benefit export-dependent
countries in the euro zone. Rising global demand would
then boost raw-material prices and provide significant relief
for raw-material exporters in Latin America, the Middle East and
Africa.

Further risks exist from political tension such as the conflict
between Russia and Ukraine, the conflict in Syria, and Turkey.
Should further terrorist attacks or assassinations in Europe
or other major economies lead to a high degree of uncertainty,
investment and consumer confidence could be severely under-
mined with a resulting impact on the real economy. In addition,
state spending for such purposes as coping with the refugee
crisis and security actions could lead to rising fiscal deficits in
Europe. However, the suspension of the sanctions imposed on
Iran represents an opportunity. The resumption of economic
relations and an enormous need to catch up after the end of
the sanctions offer great growth potential in which the divisions
Mercedes-Benz Cars and above all Daimler Trucks can participate.

On the global financial markets, after a long phase of very
expansive monetary policy, there could be significant market
corrections and phases of extreme volatility, for example if market
expectations with regard to central bank activities in the
United States or Europe are not fulfilled. Such developments
could impact the worldwide investment climate and have a
negative effect on the global economy. Furthermore, tension
relating to currency exchange rates could lead to an increase
in protectionist measures and a kind of “devaluation race”.

The increasing wave of political populism also brings the risk
that more and more economies will turn away from free trade
and globalization. In this political climate, it will be difficult to
ratify new trade agreements. There is even an increased risk
of renewed protectionary measures.

Due to China’s enormous importance as a growth driver for the
world economy in recent years, a downturn in China’s economy
would represent a considerable risk to the world economy.
The stock-market slumps in the summer of 2015 and at the
beginning of 2016 and the volatile development of the real-
estate sector along with falling exports and increasing capital
outflows are indicators of structural weaknesses. The looser
fiscal and monetary policy of recent months has resulted in
some short-term stability, but it must be assumed that the
stimulating impact will subside in the course of the year. If the
growth slowdown then expected turns out to be more pro-
nounced than assumed, the world economy would cool off
significantly. Another factor is the significant risk inherent in
the enormous growth in debt that has been observed since
the global financial crisis, especially in the corporate sector.
If the growth slowdown results in an excessive increase in
credit defaults, this could lead to turbulence in the banking
sector and the financial markets. China is now a key sales
market for the Mercedes-Benz Cars and Mercedes-Benz Vans
divisions in particular, which means that any disruptions
caused by the aforementioned risks could result in lower-than-
planned growth in unit sales. In addition, a drop in demand in
China would further exacerbate the fall in the price of oil and
other (industrial) raw materials, with extremely disadvantageous
effects for raw-material exporting countries worldwide, especially
in Latin America, the Middle East and Sub-Saharan Africa.
This would have a massive negative impact on demand for the
automotive divisions in those regions. On the other hand, a fur-
ther opportunity is seen in an even stronger development of
the Chinese economy. This could be triggered by the expansive
monetary and fiscal policies taking rapid effect, accompanied
by a significant increase in consumption. Strong growth in
overall economic consumption would create additional oppor-
tunities for the aforementioned divisions.

Another risk is to be seen in a renewed weakening of growth
in the emerging markets. There have been disappointing
developments in recent years, especially in major economies
such as Russia and Brazil, although other countries such as
Indonesia and Turkey have also developed below their poten-
tial. A combination of weak growth and high interest-rates
increases the risk of a rising number of defaults in those coun-
tries, especially in view of the substantial expansion of credit
in some cases over the past few years. A further drop in the
price of raw materials along with upcoming interest-rate
increases in the United States could lead to renewed substantial
capital outflows, especially in raw-material exporting emerging
countries. This would worsen financing conditions above all
in the emerging markets, which are very dependent on foreign
capital due to their high current-account deficits and have high
rates of foreign debt. Financial-market turbulence going as far
as currency crises would be possible consequences and could
have a massive impact on the economies of the affected coun-
tries. Additional enormous political risks exist in Turkey as a
result of the attempted coup in mid-2016; this is significant in
particular due to the country’s great dependence on the inflow
of foreign capital. As Daimler is already very active in these
countries, or their markets play a strategic role, this would
have significantly negative effects on the Group’s prospective

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 163

General market risks and opportunities
The risks and opportunities for the economic development of
automotive markets are strongly affected by the cyclical situa-
tion of the global economy as described above. The assess-
ment of market risks and opportunities is associated with
assumptions and forecasts about the overall development of
markets in the regions in which the Daimler Group is active.
The possibility of markets developing better or worse than
assumed in the planning, or of changing market conditions,
generally exists for all divisions of the Daimler Group.

Potential effects of the risks on the development of the Daimler
Group’s unit sales are included in risk scenarios. The risks
can cause changes in the planned business activities and the
related unit sales, inventories and aftersales business. In partic-
ular, the partially unstable macroeconomic environment as
well as political or economic uncertainty could be causes in
this context. Differences between the divisions exist due to
a varying regional focus of their activities. The development
of markets, unit sales and inventories is continually analyzed
and monitored by the divisions; if necessary, specific market-
ing and sales programs are implemented. Clear strategies have
been formulated for each division in order to ensure profitable
growth and efficient progress.

Existing uncertainties with regard to market developments
can also mean that the overall market or regional conditions
for the automotive industry might develop better than assumed
in the internal forecasts and premises upon which the Group’s
target planning is based. This can lead to market opportuni-
ties. Opportunities can also arise from an improvement in the
competitive situation or a positive development of demand for
the divisions. However, the existing market opportunities of
the divisions of the Daimler Group can only be utilized if pro-
duction can be focused accordingly and if this is enabled by
regional conditions. In addition, any gaps between demand and
supply have to be recognized and covered in good time. The
measures that could be initiated by the Daimler Group to utilize
potential opportunities include a combination of local sales
and marketing activities as well as central strategic product
and capacity planning.

Due to the partly difficult financial situation of some dealer-
ships and vehicle importers, supporting actions might
become necessary to ensure the capability of such business
partners. The sources of these risks lie in the respective risk
environment. Supporting actions would negatively effect the
profitability, cash flows and financial position of the automotive
segments. Further risks may result from the dependency on
certain dealerships. Possibly, relationships with new partners
may have to be developed. The financial situation of strategi-
cally relevant dealerships and vehicle importers is continually
monitored. Risks of this kind exist for dealerships and vehicle
importers of the divisions Mercedes-Benz Cars, Daimler Trucks
and Mercedes-Benz Vans divisions.

The successful product portfolio of the Daimler Group contributes
to the advantageous positioning compared to the competitors.
A possible increase in competition and price pressure would
also generally affect all the automotive segments. Thereby
aggressive pricing policies, the introduction of new products
by competitors, or price pressure related to the aftersales
business could make it impossible to achieve the targeted
prices. This might result in lower revenue, the failure to achieve
the products’ planned profitability, or lower market share.
The extent of such risks is related to the amount of a division’s
sales volume. Depending on the specification, product-specific
and possibly regional measures are taken to support weaker
markets. They include the use of new sales channels, actions
designed to strengthen brand awareness and brand loyalty,
and sales and marketing campaigns. These measures can also
be applied to safeguard business in the area of aftersales.
Daimler also operates various programs to boost sales. These
programs use financial incentives for customers. Corresponding
measures taken to support the segments’ unit sales could
adversely affect the projected revenue. Continuous monitoring
of competitors is carried out in order to recognize such risks
at an early stage.

B.59
Industry and business risks and opportunities

Risk category

Probability
of occurrence

General market risks

Medium

Risks relating to leasing
and sales financing

Procurement market risks

Risks relating to the legal
and political framework

Low

Medium

Impact

Opportunity category

Impact

High

Low

High

General market opportunities

Opportunities relating to leasing
and sales financing

High

Low

Procurement market opportunities

Medium

Opportunities relating to the legal
and political framework

Low

164 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

customers in the leasing and sales-financing business due to
higher refinancing costs could reduce the new business and
contract volume of Daimler Financial Services, also reducing
the unit sales of the automotive divisions. Risks and opportuni-
ties also arise from a lack of matching maturities with refinancing.
The risk of mismatching maturities is minimized by coordi-
nating the refinancing with the periods of financing agreements,
from the perspective of interest rates as well as liquidity. Any
remaining risks from changes in interest rates are managed by
the use of derivative financial instruments. Further information
on credit risks and the Group’s risk-minimizing actions is pro-
vided in E Note 32 of the Notes to the Consolidated Financial
Statements. With regard to the leasing business, the auto-
motive divisions also have a residual-value risk resulting
from the risks associated with the development of used-vehicle
markets. The extent of the risks and opportunities and the
probability of occurrence of the risks relating to the leasing
and sales-financing business continue to be assessed as low.

Procurement market risks and opportunities
Procurement market risks arise for the automotive divisions
in particular from fluctuations in prices of raw-materials and
energy. There are also risks of financial problems of suppliers,
capacity bottlenecks caused by supplier delivery failures as
well as risks of insufficient utilization of production capacities
at suppliers. In general, the possible impact of risks related to
the procurement market continues to be assessed as “high”.
The risk situation relating to probability of occurrence and pos-
sible impact has not changed compared with the previous year.
Opportunities in the raw-material markets have increased
compared with the previous year because prices of relevant
raw materials develop better than expected.

Raw-material prices continued to feature significant volatility
in 2016. Due to almost completely unchanged macroeconomic
conditions, price fluctuations are expected with uncertain and
uneven trends in the near future. On the one hand, raw-material
markets can be impacted by political crises and uncertainties –
combined with possible supply bottlenecks – as well as by volatile
demand for specific raw materials; this increases the risk from
raw-material prices for the individual automotive segments.
On the other hand, the automotive segments’ procurement
operations profit from both the significantly lower dynamism
of Chinese industry and from renewed anticipation of slightly
below-average growth of the world economy. Generally, the
ability to pass on the higher costs of commodities and other
materials in the form of higher prices for their manufactured
vehicles is limited because of strong competitive pressure
in the international automotive markets. A drastic increase
in raw-material prices would at least temporarily result in a
considerable reduction in economic growth.

Further risks and opportunities at Mercedes-Benz Cars and
Daimler Trucks relate to volatilities in the development of
used vehicle markets and thus to the residual values of the
vehicles produced. As part of the established residual-value
management process, certain assumptions are made at local
and corporate levels regarding the expected level of prices,
based upon which the cars to be returned in the leasing busi-
ness are evaluated. If changing market developments lead to
a negative deviation from assumptions, there is a risk of lower
residual values of used cars. Depending on the region and the
current market situation, the measures taken generally include
continuous market monitoring as well as, if required, price-setting
strategies or sales pro motion measures designed to regulate
vehicle inventories. The quality of market forecasts is verified
by periodic comparisons of internal and external sources, and
the determination of residual values is advanced as necessary
with regard to methods, processes and systems.

In addition, a residual-value risk from non-Daimler vehicles exists
for Daimler Financial Services due to the acquisition of the
Athlon Group effective December 1, 2016, because most of
those vehicles, comprising 40 different brands, are not covered
by manufacturers’ residual-value guarantees. Residual-value
risk is taken into account through a high level of diversification
with regard to brands, regions, customers and lease periods.
Used-vehicle prices are continually monitored both locally and
centrally, so that the residual-value risk from a drop in market
prices can be forecast in good time and suitable countermea-
sures may be initiated.

As the target achievement of the Daimler Financial Services
division is closely connected with the development of business
in the automotive divisions, the existing volume risks
and opportunities are also reflected in the Daimler Financial
Services segment. In this context, Daimler Financial Services
contributes towards marketing expenses, especially for adver-
tising campaigns in the media.

The assessment of general market risks and opportunities
across all segments is unchanged compared with the previous
year.

Risks and opportunities relating to the leasing
and sales-financing business
In connection with the sale of vehicles, Daimler also offers its
customers a wide range of financing possibilities – primarily
of leasing and financing the Group’s products. The resulting
risks for the Daimler Financial Services segment are mainly
due to borrowers’ worsening creditworthiness, so that receiv-
ables might not be recoverable in whole or in part due to cus-
tomers’ insolvency (default risk or credit risk). Daimler coun-
teracts credit risks by means of creditworthiness checks on
the basis of standardized scoring and rating methods and the
collateralization of receivables, as well as a effective risk
management with a firm focus on monitoring both internal and
macroeconomic leading indicators. Other risks associated with
the leasing and sales-financing business involve the possibility
of increased refinancing costs due to changes in interest rates
(interest-rate risk). An adjustment of credit conditions for

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 165

Supplier risk management aims to identify potential financial
difficulties for suppliers at an early stage and to initiate suitable
countermeasures. Even though the crisis of recent years is
over, the situation of some of suppliers remains difficult due
to tough competitive pressure. This has necessitated individual
or joint support actions by vehicle manufacturers to safeguard
their production and sales. In the context of supplier risk man-
agement, regular reporting dates are set for suppliers for which
we have received early warning signals and made corresponding
internal assessments. On those dates, the suppliers report key
performance indicators to Daimler and decisions are made
concerning any required support actions.

In case of a further decrease in unit sales in major emerging
markets, the Daimler Trucks division in particular is faced with
the risk that Daimler will require a significantly lower volume
of components from suppliers than originally planned. This would
result in underutilization of production capacities for the
suppliers. If their fixed costs were no longer covered, there
would be the risk that suppliers could demand compensation
payments.

Risks and opportunities related to the legal
and political framework
The automotive industry is subject to extensive governmental
regulation worldwide. Risks and opportunities from the legal
and political framework have a considerable impact on Daimler’s
future business success. Regulations concerning vehicles’
emissions, fuel consumption and certification play a partic-
ularly important role. Complying with these varied and often
diverging regulations all over the world requires strenuous
efforts on the part of the automotive industry. In the future,
Daimler expects to spend an even larger portion of the research
and development budget to ensure fulfillment of these regula-
tions. Despite the difficult environment, the assessment of
risks and opportunities related to the legal and political frame-
work remains “medium” for the probability of occurance and
“high” regarding the potential impact.

Many countries have already implemented stricter regulations
to reduce vehicles’ emissions and fuel consumption, or are
currently doing so. They relate for example to the environmental
impact of vehicles, including emission levels, fuel economy and
noise, as well as the pollutants generated by the plants where
the automobiles are produced. Noncompliance with regulations
applicable in the various regions could result in significant
penalties and reputational harm or the inability to sell vehicles
in the relevant markets. The cost of compliance with these
regulations is significant, and in this context, Daimler expects
a significant increase in such costs.

The Mercedes-Benz Cars segment faces risks in particular
with respect to regulations on average fleet fuel consumption
in the Chinese market. Regulations concerning the CO2 emissions
of new cars are challenging also in the European Union. In
addition, the planned replacement of the NEDC (New European
Driving Cycle) with the WLTP (Worldwide Harmonized Light
Vehicles Test Procedure) is creating uncertainty, because
based on current knowledge, the effects of converting from
WLTP to NEDC figures to check the NEDC fleet target will make
it more difficult to meet CO2 targets as of 2020. Legislation in
the United States on greenhouse gases and fuel consumption
impacts German premium manufacturers and thus also the
Mercedes-Benz Cars division harder than US manufacturers,
for example. As a result of ongoing strong demand for large,
powerful engines in the United States, financial penalties cannot
be ruled out. Similar legislation exists or is being prepared in
many other countries, for example in Japan, South Korea, India,
Canada, Switzerland, Mexico, Saudi Arabia, Brazil and Australia.
Daimler gives these targets due consideration in its product
planning. The increasingly ambitious targets require significant
proportions of plug-in hybrids or cars with other types of electric
drive. The market success of these drive systems is greatly
influenced by regional market conditions, for example the battery-
charging infrastructure and state support. Risks result from
the high degree of uncertainty relating to the market environment.

In the past two years, the diesel technology that is important
in particular for achieving the challenging CO2 targets in the EU
came under pressure due to air-quality problems in cities
(failure to meet NOx limits). In this environment, large parts
of the Real Driving Emission (RDE) legislation have been or
are being introduced. This has led to very ambitious legislation,
which will require very complex exhaust-gas aftertreatment
and detailed documentation as of 2017. It still remains to be
seen to what extent the negative headlines and the threat of
driving bans on diesel vehicles have unsettled customers, with
resulting shifts in the drive-system portfolio (fewer diesel and
more gasoline engines). If such a shift occurs over the long
term, additional measures will have to be taken to meet the
CO2 fleet limits as of 2020. On the other hand, a ban only on
those cars with the most polluting diesel engines (not a total
ban) could result in competitive advantages for our new 4 and
6-cylinder engines (OM 654 and OM 656) with their very good
emission levels.

166 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Daimler continually monitors the development of statutory
and political cond itions and attempts to anticipate foreseeable
requirements and long-term targets at an early stage in the
process of product development. The biggest challenge in the
coming years will be to offer an appropriate range of drive
systems and the right product portfolio in each market, while
fulfilling customers’ wishes, internal financial targets and
statutory requirements. With an optimal product portfolio and
market-launch strategy, competitive advantages may also
arise.

The position of the Daimler Group in key foreign markets could
also be affected by an increase in bilateral trade agreements.
If bilateral agreements are concluded without the involvement
of the European Union or without the conclusion of equivalent
agreements by the EU, the position of the Daimler Group could
be significantly impacted. At the same time, however, this
could also result in opportunities for the Daimler Group if the
EU concludes agreements with markets which have no similar
agreements with other important competitive markets.

Furthermore, the danger exists that individual countries will
attempt to defend and improve their competitiveness in the
world’s markets by resorting to interventionist and protec-
tionist actions. This applies to the markets of developing
countries and emerging economies, but also to Europe, the
United States and China. Furthermore, attempts are being
made to limit growth in imports by making certification
processes more difficult, through delays in certification and
through other barriers to market access, while attracting direct
foreign investment by means of appropriate industrial policies.
Changes in tax subsidies or the like have the potential to signif-
icantly influence the overall market development and to
increase uncertainties in the planning process.

In order to adapt to these requirements, Daimler has already
increased its local value added in major markets, and has thus
taken appropriate action in good time. On the basis of our
production locations’ increasing proximity to the various markets,
however, further opportunities also exist for the Daimler Group
such as logistical advantages or opportunities relating to the
utilization of market potential.

Pursuant to EU Directive 2006/40/EC, since January 1, 2011,
vehicles only receive type approval if their air-conditioning
units are filled with a refrigerant that meets certain criteria
with regard to climate friendliness. For vehicles produced
on the basis of type approvals granted previously, the
directive allows a period of transition until December 31, 2016.
Mercedes-Benz vehicles will fully comply with these legal
requirements as of January 1, 2017 through the application
of CO2 air-conditioning and the refrigerant R1234yf in combination
with a specially developed safety device that will be used
depending on each vehicle’s configuration. In December 2015,
the EU Commission decided that it would file a lawsuit with
the European Court of Justice (ECJ) against the Federal Republic
of Germany. The Commission sees a contravention of the type-
approval directive by the German authorities. At present, the
Group does not assume that this will result in material effects
on its profitability, cash flows or financial position.

Strict regulations for the reduction of vehicles’ emissions and
fuel consumption create potential risks also for the Daimler
Trucks division. For example, legislation was passed in Japan
in 2006 and in the United States in 2011 for the reduction of
greenhouse-gas emissions and fuel consumption by heavy-duty
commercial vehicles. In China, legislation has been drafted
which is likely to affect exports to that country and require
additional expen diture as of 2017. The European Commission
is currently working on methods for measuring the CO2 emissions
of heavy-duty commercial vehicles that will probably have to
be applied as of 2018. It has also started to consider limits on
trucks’ CO2 emissions. We have to assume that the statutory
limits will be very difficult to meet in some countries.

Very demanding regulations for CO2 emissions are also planned
or have been approved for light commercial vehicles. This will
present a challenge for Mercedes-Benz Vans, especially in
the long term. In the United States, Mercedes-Benz Vans is
affected to varying degrees by fuel-consumption and green-
house-gas regulations for both light-duty and heavy-duty vehicles.
The stricter limits planned for the years 2021 to 2027 will also
affect Mercedes-Benz Vans.

In addition to emission, fuel-consumption and safety regulations,
traffic-policy restrictions for the reduction of traffic jams,
noise and emissions are becoming increasingly important in cities
and urban areas of the European Union and other regions of
the world. Drastic measures are increasingly being taken such
as general vehicle-registration restrictions and the limited
allocation of car-registration approvals, for example in Beijing,
Guangzhou and Shanghai and other urban areas. This can have
a dampening effect on the development of unit sales, especially
in growth markets. Pressure to reduce personal transport is
also being applied in European cities through increasing measures
such as restrictions on vehicles entering or driving in inner cities.
The debate about restricting certain drive systems in Germany
is another source of increasing uncertainty. This stimulates
demand for mobility services, including car sharing services.
In order to utilize the resulting opportunities, Daimler is present
in the market with the provision of innovative mobility services
(including car2go, moovel and mytaxi).

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 167

Company-specific risks and opportunities

The following section is responsive to the company-specific
risks and opportunities of the Daimler Group. A quantification
of these risks and opportunities is shown in table  B.60.

Production and technology risks and opportunities
Key success factors for achieving the desired level of prices
for the products of the Daimler Group, and hence for the
achievement of corporate targets are brand image, design and
quality and thus the acceptance of products by customers
as well as technical features based on innovative research and
development. Convincing solutions, which for example promote
accident-free driving or further improve the product’s fuel con-
sumption and emissions e.g. diesel-hybrid or electric vehicles,
are of key importance for safe and sustainable mobility.
Innovations and technology opportunities for the progressive
and future-oriented design of the product range flow into the
strategic product planning of the automotive divisions. However,
due to growing technical complexity, continually rising require-
ments in terms of emissions, fuel consumption and safety,
as well as meeting and steadily raising the Daimler Group’s
quality standards, product launching and manufacturing in the
automotive divisions are also subject to production and tech-
nology risks.

In the context of product launches, the required parts and
equipment components have to be available. To avoid restrictions
in this context, the related processes are continually evaluated
and improved. In order to safeguard and enhance the long-term
future-orientation of production facilities, modernization,
expansion, construction and restructuring measures are carried
out. The execution of modernization activities and the
launch of new products are generally connected with high
investments. Guidelines or delays in the ramp-up phase of
an innovation or during a product’s lifecycle can lead to a

short-term reduction in production level. In order to achieve
a very high level of quality, which is one of the main decision
attributes of customers for the products of the Daimler Group,
it is necessary to make investments in new products and tech-
nologies that sometimes exceed the actually planned scope.
Such a cost overrun would then reduce the anticipated earnings
from the launch of a new model series or product generation.
Those automotive segments are affected which are currently
launching a new product or are planning a related production
buildup. In this context, it is also necessary to consider depen-
dencies between contractual partners and possible changes
in regional conditions, which have to be included in the local
decision-making process.

In principle, there is a danger that infrastructure problems or
the failure of production equipment or a production plant
cause internal bottlenecks that would consequently generate
costs. With the parallel failure of several production plants,
the resulting effects could accumulate. These risks mainly exist
for the Mercedes-Benz Cars segment. The production equip-
ment is continually maintained and modernized. As a precaution,
spare parts are held available or, if required, alternative pro-
duction structures are build up for the production plants that
might be at risk.

Insufficient availability of vehicle components at the right
time, interruptions in the supply chain as well as possible inter-
ruptions in the supply by energy providers can lead to bottle-
necks. In order to avoid such bottleneck situations, priority
is given to a balanced capacity planning. In addition, supply
chains and the availability and quality of products are continu-
ously monitored within the context of managing the entire
value chain. All segments undertake supplier management for
the prevention of risks. With regard to energy supply, necessary
precautionary measures are taken and alternative supply lines
are builded up.

B.60
Company-specific risks and opportunities

Risk category

Probability
of occurrence

Impact

Opportunity category

Impact

Production and technology risks

Information technology risks

Personnel risks

Risks related to equity interests
and joint ventures

Low

High

Medium

Low

Production and technology opportunities

Information technology opportunities

Personnel opportunities

–

Opportunities related to equity interests
and joint ventures

Low

168 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Despite all precautionary measures disturbances in information
processing and therefore negative impacts on the business
processes cannot be completely ruled out. The possible impact
and probability of occurrence of IT risks remain unchanged
compared to the previous year.

Personnel risks and opportunities
Daimler’s success is highly dependent on its employees and
their expertise. They are involved in their respective activities
and working processes with their ideas and suggestions,
and thus contribute considerably every day to improvements
and innovations.

To support this process, the Daimler Group has established
an ideas management system through which employees can
submit ideas and suggestions for improvements. The target-
oriented processing of the incoming information in the employee
suggestion system and the integration of ideas in an assessment
process carried out by experts and persons in charge of the
respective processes is supported by an established IT system.
This is intended to ensure the systematic and sustained
encouragement of employees’ ideas and suggestions for
improvement.

Furthermore, workgroups create processes and instruments
to produce new business ideas and to establish inter-depart-
mental cooperation. In this context, an online community
exists in the area of business innovation to which suggestions
for discussions can be submitted, which all employees can
assess and develop further.

Competition for highly qualified staff and management is still
very intense in the industry and the regions in which Daimler
operates. The future success of the Daimler Group also depends
on the magnitude to which we succeed over the long term in
recruiting, integrating and retaining specialist employees. The
established human resources instruments take such personnel
risks into consideration, while contributing toward the recruitment
and retention of staff with high potential and expertise and
ensuring transparency with regard to the resources of the
Daimler Group. One focus of human resources management
is the targeted personnel development and further training of
the workforce. Employees benefit for example from the range
of courses offered by the Daimler Corporate Academy and from
the transparency created by a uniform worldwide performance
and potential management system. Management culture and
principles are currently being further developed in a Group-
wide project.

Warranty and goodwill cases could arise in the Daimler Group
if the quality of the products does not meet the requirements,
regulations are not fully complied with, or support can not be
provided in the required form in connection with product
problems and product care. Such claims are examined and,
if applicable, necessary measures are taken on the affected
products. This can reduce the products’ profitability and generate
follow-up costs. The Daimler Group works continually and
intensively to maintain product quality at a very high level,
along with growing product complexity, in order to avoid the
risk of needing correction measures on end products and
to supply customers with the best possible products. Further-
more, processes are implemented at the Daimler Group
to regularly obtain customers’ opinions on the support provided
to improve service and customer satisfaction continuously.
Quality problems with suppliers’ components fitted to
vehicles can result in production and technology risks for
the Daimler Group. This includes risks in connection with
industry-wide problems with Takata airbags.

The possible impact of production and technology risks is
assessed as “high”, as in the previous year. However, due to
the industry-wide problems with Takata airbags, the risks
have increased significantly.

Information technology risks and opportunities
The digitization strategy that is systematically pursued at
Daimler offers new possibilities for enhancing customer benefits
and enterprise value. However, it includes risks from the
increasing dependency of products and business processes
from IT. In addition, specific risks exist due to the use and
avail ability of new technologies in connection with digitization,
which for example can affect the products, their use, or the
operational business.

It is essential for a global company like Daimler that information
is currently maintained and exchanged, comprehensively and
correctly. Appropriately secure IT systems and a reliable IT
infrastructure must be used to protect information. Risks that
could result in the interruption of business processes due to
the failure of IT systems or which could cause the loss or
corruption of data are therefore identified and evaluated over
the entire life cycle of applications and IT systems.

In order to fulfill the growing requirements on the confidentiality,
integrity and availability of data, so that related risks are
avoided and possible damage is limited, Daimler has defined
various preventive and corrective measures. These measures
are continually adapted to changing circumstances. For example,
the Group minimizes potential interruptions of operating pro-
cesses in data centers by measures like mirrored data sets,
decentralized data storage, outsourced data backups and IT
systems designed for high availability. To ensure operating
capability, emergency plans are developed, employees are
trained and further technical and organizational precautions
are taken. Specific threats are analyzed and countermeasures
are coordinated at a central cyber security center. The protection
of our products and services from danger caused by hacking
and cybercrime is developed in line with the threat situation.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 169

Due to demographic developments, the Group has to cope with
changes relating to an aging workforce and has to secure a
sufficient number of qualified young persons with the potential
to become the next generation of highly skilled specialists
and executives. We address this issue by taking appropriate
measures in the area of generation management. If this risk
occures, depending on the size of the personnel shortage, an
impact is to be expected on the Group’s activities and thus
also on the earnings of the Daimler Group. Risks in the context
of collective bargaining negotiations currently exist only to
a limited extent.

There is no segment-specific assessment of the human resources
risk because the described risks are not related to any specific
business segment, but are valid for all segments in the respective
region. Personnel risks overall have decreased compared with
the previous year with regard to both their possible impact and
probability of occurrence.

Risks and opportunities related to associated companies,
joint ventures and joint operations
Cooperation with partners in associated companies, joint
ventures and joint operations and other types of partnership
is of key importance for Daimler. Along with ensuring better
access to growth markets and new technologies, these share-
holdings and partnerships help us exploit synergies and improve
cost structures and thus enable us to successfully respond
to the competitive situation in the automotive industry.
Through investments in start-ups, Daimler promotes innovative
approaches in many areas of the Group.

Daimler generally bears a proportionate share of the risks
and opportunities from associated companies, joint ventures
and joint operations. Possible risks from negative financial
developments or from delays in setting up development
and production structures, which can negatively impact the
achievement of targets in the affected segments, are considered
in separate categories.

In addition, risks and opportunities could arise from the remea-
surement of an associated company, joint venture or joint
operation relating to the corresponding carrying value for the
segment to which it is allocated. Furthermore, the business
activities of an associated company, joint venture or joint opera-
tion, or a disposal or acquisition of a stake in such an entity,
could cause financial obligations or an additional financing
requirement, but can also cause higher income or cash inflows
in excess of the targets set. Such risks are also generally con-
nected with start-ups whose further development is not yet
forseeable. Risks from associated companies, joint ventures
and joint operations exist in the Mercedes-Benz Cars,
Daimler Trucks, Mercedes-Benz Vans and Daimler Financial
Services segments, as well as in the associated companies,
joint ventures and joint operations directly allocated to the Group.

All associated companies, joint ventures and joint operations
are subject to a continuous monitoring process so that they
can be promptly supported if required and their profitability
can be ensured. The recoverable value of investments is also
continually monitored. Due to the development of the quoted
portfolio, the probability of occurrence and the possible
impact of risks in this category has decreased compared to the
previous year from “medium” to “low.”

Financial risks and opportunities

The following section deals with the financial risks and
opportunities of the Daimler Group. Risks and opportunities
can have a negative or positive effect on the profitability,
cash flows and financial position of the Daimler Group. The
probability of occurrence and possible impact of these risks
and opportunities is presented in table  B.61.

In principle, the Group’s operating and financial risk exposures
underlying its financial risks and opportunities can be divided
into symmetrical and asymmetrical risk and opportunity profiles.
With the symmetrical risk and opportunity profiles (e.g. cur-
rency exposures), risks and opportunities exist equally, while
with the asymmetrical risk and opportunity profiles (e.g. credit
and country exposures), the risks outweigh the opportunities.

B.61
Financial risks and opportunities

Risk category

Exchange rate risks

Interest rate risks

Commodity price risks

Credit risks

Country risks

Risks of restricted capital-market access

Risks relating to pension plans

Risks from changes in credit ratings

Probability
of occurrence

Impact

Opportunity category

Impact

Low

High

Low

Exchange rate opportunities

Interest rate opportunities

Commodity price opportunities

Credit opportunities

Country opportunities

Medium

Opportunities of restricted capital-market access

High

Low

Opportunities relating to pension plans

Opportunities from changes in credit ratings

High

Low

–

High

Low

170 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Daimler is generally exposed to risks and opportunities from
changes in market prices such as currency exchange rates,
interest rates, commodity prices and share prices. Market-price
changes can have a negative or positive influence on the
Group’s profitability, cash flows and financial position. Daimler
manages and monitors market-price risks and opportunities
primarily in the context of its operational business and financing
activities, and applies derivative financial instruments for
hedging purposes where needed, thus limiting both market-
price risks and opportunities.

In addition, the Group is exposed to credit and country-related
risks and risks of restricted access to capital markets. As part
of the risk management process, Daimler regularly assesses
these risks by considering changes in key economic indicators
and market information. Pension plan assets to cover retire-
ment and healthcare benefits (market sensitive investments
including equities and interest-bearing securities) are not
included in the following analysis.

Exchange rate risks and opportunities
The Daimler Group’s global orientation means that its business
operations and financial transactions are connected with risks
and opportunities related to fluctuations in currency exchange
rates. This applies in particular to fluctuations against the euro
of the US dollar, Chinese renminbi, British pound and other
currencies such as currencies of growth markets. An exchange
rate risk or opportunity arises in business operations primarily
when revenue is generated in a currency different from that
of the related costs (transaction risk). This applies in particular
to the Mercedes-Benz Cars division, as a major portion of its
revenue is generated in foreign currencies while most of its
production costs are denominated in euros. The Daimler Trucks
division is also exposed to such transaction risks, but to a lesser
degree because of its worldwide production network. Regularly
updated currency risk exposures are successively hedged with
suitable financial instruments (predominantly currency forwards
and options) in accordance with exchange rate expectations,
which are continually reviewed, whereby both risks and opportu-
nities are limited. Any overcollateralization caused by changes
in exposure is generally reversed by suitable measures without
delay. Exchange rate risks and opportunities also exist in con-
nection with the translation into euros of the net assets, revenues
and expenses of the companies of the Group outside the euro
zone (translation risk); these risks are not generally hedged.

Interest rate risks and opportunities
Changes in interest rates can create risks and opportunities
for business operations as well as for financial transactions.
Daimler employs a variety of interest-rate sensitive financial
instruments to manage the cash requirements of its business
operations on a day-to-day basis. Most of these financial
instruments are held in connection with the financial services
business of Daimler Financial Services, whose policy is generally
to perform term-congruent refinancing. However, to a limited
extent, the funding does not match in terms of maturities and
interest rates, which gives rise to the risk of changes in interest
rates. The funding activities of the industrial business and the
financial services business are coordinated at Group level.
Derivative interest rate instruments such as interest rate swaps
are used to achieve the desired interest rate maturities and
asset/liability structures (asset and liability management).

Equity price risks and opportunities
The Group is subject to equity price risks in connection with
its listed associated companies and joint ventures. As of
December 31, 2016, the only shares that Daimler holds are
shares that are included in the consolidated financial statements
using the equity method (primarily BAIC Motor). The Group
does not include these investments in a market-price risk
analysis. The section “Risks and opportunities related to
associated companies, joint ventures and joint operations”
provides more information on equity risks and opportunities.

Commodity price risks and opportunities
As already described in the section “Procurement market risks
and opportunities”, the Group’s business operations are
exposed to changes in the marketprices of consignments and
raw materials. The Group addresses these procurement risks
by means of concerted commodity and supplier risk manage-
ment. To a minor degree, derivative financial instruments are
used to reduce the Group’s market-price risks related to the
purchase of certain metals.

Credit risks
The Group is exposed to credit risks which result primarily
from its financial services activities and from the operations
of its vehicle business. Credit risks also arise from the Group’s
liquid assets. The following statements pertain to risks arising
from the Group’s liquid assets; risks related to leasing and
sales financing are addressed on E page 164. Should defaults
occur, this would negatively affect the Group’s financial position,
cash flows and profitability. In recent years, the limit methodology
for exposures with financial institutions has been continually
further developed in order to counteract the diminished credit-
worthiness of the banking sector since the financial crisis. In
connection with investment decisions, priority is placed on the
borrower’s very high creditworthiness and on balanced risk
diversification. Most liquid assets are held in investments with
an external rating of A or better.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 171

Country risks
Daimler is exposed to country risks that primarily result from
cross-border financing or collateralization for Group companies
or customers (for example Turkey), from investments in subsid-
iaries and joint ventures, and from cross-border trade receivables
(for example China). Country risks also arise from cross-border
cash deposits at financial institutions. The Group addresses
these risks by setting country limits (e.g. for cross-border
financing of customers and for hard-currency portfolios from
financial services companies) and through investment-
protection insurance against political risks in high-risk countries.
Daimler also has an internal rating system that divides all
countries in which it operates into risk categories.

Risks of restricted access to capital markets
Daimler covers its refinancing needs, among other things,
by means of borrowing in the capital markets. Access to capital
markets in individual countries may be limited by government
regulations or by a temporary lack of absorption capacity.
In addition, pending legal proceedings as well as its own business
policy considerations, may temporarily prevent the company
from covering any liquidity requirements by means of borrowing
in the capital markets.

Further information on financial risks, risk-limiting measures
and the management of these risks is provided in E Note 32
of the Notes to the Consolidated Financial Statements.
Information on the Group’s financial instruments is provided
in E Note 31 of the Notes to the Consolidated Financial
Statements.

Risks and opportunities relating to pension plans
Daimler has pension benefit obligations and to a lesser degree
obligations relating to healthcare benefits, which are largely
covered by plan assets. The balance of pension obligations less
plan assets constitutes the carrying amount or funded status
of those employee benefit plans. The measurement of pension
obligations and the calculation of net pension expense are
based on certain assumptions. Even small changes in those
assumptions such as a change in the discount rate could
have a negative or positive effect on the funded status and the
group equity in the current financial year or could lead to
changes in the periodic net pension expense in the following
financial year. The fair value of plan assets is determined to a large
degree by devel opments in the capital markets. Unfavorable or
favorable developments, especially relating to equity prices
and fixed-interest securities, can reduce or increase the carrying
value of plan assets. The currently increased volatility of finan-
cial markets raises the risks and opportunities relating to the
measurement of both pension obligations and plan assets.
The structure of pension obligations is taken into consideration
with the determination of the investment strategy for the plan
assets in order to reduce fluctuations of the funded status.
A change in the composition of pension assets can have
an additional positive or negative impact on the fair value of
the plan assets. The legal situation in connection with pension
plans can in some countries lead to payment obligations
if underfunding of the plans in those countries has to be offset.
Further information on the pension plans and their risks
is provided in E Note 22 of the Notes to the Consolidated
Financial Statements.

Risks and opportunities from changes in credit ratings
Daimler’s creditworthiness is assessed by the rating agencies
S&P Global Ratings, Moody’s Investors Service, Fitch Ratings
and DBRS. Risks and opportunities exist in connection with
potential downgrades or upgrades to credit ratings by these
rating agencies. Downgrades could have a negative impact on
the Group’s financing if such a downgrade leads to an increase
in the costs for external financing or restricts the Group’s ability
to obtain financing. A credit rating downgrade could also damage
the company’s reputation or discourage investors from invest-
ments in Daimler AG. A risk to the credit rating of the Daimler
Group could also arise if the earnings and cash flows anticipated
from the Group’s growth could not be realized. Credit rating
upgrades could lead to lower borrowing costs for the Group
and also facilitate its access to financing sources in the money
and capital markets. If the positive development of the Group
continues and its cash flow and profitability also develop posi-
tively, opportunities could arise for an upgrade of the credit
rating on the part of the rating agencies.

Risks from guarantees, legal and tax risks

The Group continues to be exposed to risks from guarantees
as well as legal risks and tax risks. Provisions are recognized
for those risks if and insofar as they are likely to be utilized
and the amounts of the obligations can be reasonably estimated.
No quantitative assessment of these risks is carried out.

Risks from guarantees
Issuing guarantees results in liability risks for the Group.
For example, Daimler holds an equity interest in the system for
recording and charging tolls for the use of highways in Germany,
which includes fees for the use of autobahns and selected fed-
eral highways, by commercial vehicles. The operation of the
electronic toll-collection system is the responsibility of the
operator company, Toll Collect GmbH, in which Daimler holds
a 45% stake and which is included in the consolidated financial
statements using the equity method of accounting. In addition
to Daimler’s membership of the Toll Collect consortium and its
equity interest in Toll Collect GmbH, risks also arise from
guarantees that Daimler Financial Services AG has assumed
with the other partners in the Toll Collect consortium
(Deutsche Telekom AG and Cofiroute S.A.) supporting obligations
of Toll Collect GmbH toward the Federal Republic of Germany.
These guarantees are connected with the toll system and a call
option of the Federal Republic of Germany, i.e. the possibility
of the Federal Republic of Germany to take over the shares in
Toll Colect GmbH. Claims could be made under those guarantees
if toll revenue is lost for technical reasons, if certain contractually
defined performance parameters are not fulfilled, if additional
claims are made by the Federal Republic of Germany, if the
final operating permit is not granted, if Toll Collect GmbH fails
to meet contractual obligations, if it fails to have the required
equipment available, or if the Federal Republic of Germany
takes over Toll Collect GmbH. The maximum loss risk for
the Group from these risks can be substantial. Additional infor-
mation is provided in E Note 29 (Legal proceedings) and
E Note 30 (Financial guarantees, contingent liabilities and other
financial commitments) of the Notes to the Consolidated
Financial Statements.

172 B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT

Legal risks
Various legal proceedings, claims and government investigations
(legal proceedings) are pending against Daimler AG and its
subsidiaries on a wide range of topics, including vehicle safety,
emissions, fuel economy, financial services, dealer, supplier
and other contractual relationships, intellectual property rights,
warranty claims, environmental matters, legal proceedings
relating to competition law and shareholder litigation. Product-
related litigation involves claims alleging faults in vehicles,
some of which have been made as class actions. If the outcome
of such legal proceedings is detrimental to Daimler, the Group
may be required to pay substantial compensatory and punitive
damages or to undertake service actions, recall campaigns,
monetary penalties or other costly actions. Some of these
legal proceedings may have an impact on the Group’s reputation.

The automotive industry is subject to extensive governmental
regulations worldwide. Laws in various jurisdictions regulate
occupant safety and the environmental impact of vehicles,
including emission levels, fuel economy and noise, as well as
the pollutants generated by the plants where vehicles are
produced. Noncompliance with regulations applicable in the
different regions could result in significant penalties and reputa-
tional harm or the inability to sell vehicles in the relevant markets.
The cost of compliance with these regulations is significant,
and in this context, Daimler expects a significant increase in
such costs.

Currently, Daimler is subject to governmental information
requests, inquiries and investigations as well as litigation relating
to environmental, securities, criminal and other laws and regula-
tions in connection with diesel exhaust emissions. Several federal
and state authorities, including in Europe and the United States,
have inquired about and are investigating test results, the
emission control systems used in Mercedes-Benz diesel vehicles
and Daimler’s interaction with the relevant federal and state
authorities as well as related legal issues and implications,
including, but not limited to, under applicable environmental,
securities and criminal laws. These authorities include, among
others, the U.S. Department of Justice (“DOJ”), which has
requested that Daimler conduct an internal investigation, the
U.S. Environmental Protection Agency (“EPA”), the California
Air Resources Board (“CARB”) and other state authorities as
well as the U.S. Securities and Exchange Commission (“SEC”).
Daimler has also offered its cooperation to the Stuttgart district
attorney’s office and provided information to it, and has compre-
hensively responded to the diesel emissions committee of
inquiry of the German Parliament. Daimler is fully cooperating
with the authorities. Irrespective of such cooperation by Daimler
with the authorities, it is possible that civil and criminal investi-
gative and enforcement actions and measures relating to
Daimler and/or its employees will be taken, such as subpoenas,
i.e. legal instructions issued under penalty of law in the process
of taking evidence, or other requests for documentation, testi-
mony or other information, a notice of violation or an increased
formalization of the governmental proceedings. Additionally,
delays in obtaining regulatory approvals necessary to introduce
new or recertify existing diesel models could occur. In light
of the recent notices of violation that were issued by US
environmental authorities to another vehicle manufacturer
in January of 2017, identifying functionalities, apparently

including functionalities that are common in diesel vehicles,
as undisclosed Auxiliary Emission Control Devices (AECDs)
and potentially impermissible, and in light of the ongoing govern-
mental information requests, inquiries and investigations, and
our own internal investigation, it cannot be ruled out that the
authorities might reach the con-clusion that Mercedes-Benz
diesel vehicles have similar functionalities. The inquiries and
investigations as well as the replies to the governmental
information requests and our internal investigation are still
ongoing and open; hence, Daimler cannot predict the outcome
at this time. If these or other inquiries, investigations, legal
actions and/or proceedings result in unfavorable findings, an
unfavorable outcome or otherwise develop unfavorably,
Daimler could be subject to significant monetary penalties,
remediation requirements, vehicle recalls, process improve-
ments and mitigation measures, and/or other sanctions,
measures and actions, including further investigations by these
or other authorities and additional litigations. The occurrence
of the aforementioned events in whole or in part could cause
significant collateral damage including reputational harm.
In addition, Daimler’s ability to defend itself in litigations could
be impaired by unfavorable findings, results or developments
in any of the governmental information requests, inquiries,
investigations, legal actions and proceedings discussed above.
Therefore, it cannot be ruled out that the risks discussed
above may materially adversely impact our profitability, cash
flows and financial situation.

As legal proceedings are fraught with a large degree of uncer-
tainty, it is possible that after their final resolution, some of
the provisions we have recognized for them could prove to be
insufficient. As a result, substantial additional expenditures
may arise. This also applies to legal proceedings for which the
Group has seen no requirement to recognize a provision.

Although the final result of any such litigation may influence
the Group’s earnings and cash flows in any particular period,
Daimler believes that any resulting obligations are unlikely
to have a sustained effect on the Group’s cash flows, financial
position or profitability. Further information on legal proceedings
is provided in E Note 29 of the Notes to the Consolidated
Financial Statements.

Tax risks
Daimler AG and its subsidiaries operate in many countries
worldwide and are therefore subject to numerous different
statutory provisions and tax audits. Any changes in legislation
and jurisdiction, as well as different interpretations of the law
by the fiscal authorities – especially in the field of cross-border
transactions, may be subject to considerable uncertainty.
It is therefore possible that established provisions will not be
sufficient, which could have negative effects on the Group’s
net profit and cash flows.

Any changes or interventions by the fiscal authorities are
continuously monitored by the tax department and measures
are taken if required.

B | COMBINED MANAGEMENT REPORT | RISK AND OPPORTUNITY REPORT 173

Overall, risks have increased compared with the previous year.
This applies in particular to risks connected with production
and technology, as well as risks resulting from possible changes
in emission legislation. No risks are recognizable – neither on
the balance sheet date nor at the time of preparing the consoli-
dated financial statments – that either alone or in combination
with other risks could endanger the continued existence of the
Group. But since considerable economic and industry risks still
exist, setbacks on the way to sustainably achieving growth and
profitability targets cannot be completely ruled out. New com-
petitors in the IT sector for example and the Group’s current
strategy for (among other things) electric mobility pose further
challenges for the Daimler Group and are connected with risks
and opportunities. By effectively and flexibly focusing production
and sales activities on changing conditions, the divisions of the
Daimler Group strive to utilize the opportunities offered so that
they can fulfill or surpass their respective targets and plans.
As far as it can be influenced by the Daimler Group and provided
that the required measures are financially viable, the Group
takes appropriate action to realize those opportunities.

In order to recognize risks and opportunities at an early stage
and to deal successfully with the current risk and opportunity
situation, the established risk and opportunity management
system is continually monitored and further developed.

Overall assessment of the risk and
opportunity situation

The overall view of the Group’s risk and opportunity situation
is the sum of the described individual risks and opportunities
of all risk and opportunity categories for the divisions, the
corporate functions and the legal entities.

In addition to the risk categories described above, unpredictable
events can disturb production and business processes, such
as natural disasters, political instability or terrorist attacks.
Emergency plans are therefore prepared to allow the resumption
of business operations as soon as possible. As far as possible,
precautionary measures are taken and insurance policies are
arranged. Risks relating to compliance are included in the risk
management process and are continually monitored. Regular
training courses are carried out to prevent compliance violations.

In addition to the risk categories described above, there are
risks that affect the public perception and therefore the
reputation of the Daimler Group as a whole. Public interest
is focused on Daimler’s position with regard to individual
issues in the fields of sustainability and integrity. Furthermore,
customers, business partners and capital markets are inter-
ested in how the Group reacts to the technological challenges
of the future, how it succeeds in offering up-to-date and tech-
nologically leading products in the markets, and how business
operations take place under the given conditions. As one of
the fundamental principles of business activity, Daimler places
particular priority on adherence to applicable laws and ethical
standards. In addition, a secure approach to sensitive data
is a precondition for business relationships with customers
and suppliers in a trusting and cooperative environment.

174 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Outlook

The statements made in the Outlook chapter are based on the
operational planning of Daimler AG as approved by the Board
of Management and the Supervisory Board in December 2016.
That planning is based on the premises we set regarding the
economic situation and the development of the automotive
markets. It involves assessments made by Daimler, which
are based on relevant analyses by various renowned economic
research institutes, international organizations and industry
associations, as well as on the internal market analyses of our
sales companies. The prospects for our future business
development as presented here reflect the targets of our divi
sions as well as the opportunities and risks presented by
the anticipated market conditions and the competitive situa
tion during the planning period. Against this backdrop, we
adjust our expectations for business development to reflect
updated forecasts for the development of the various auto
motive markets. The statements made below are based on the
facts known to us at the beginning of 2017.

Our assessments for the year 2017 are based on the assumption
of generally stable economic conditions and the expectation
that the moderate upward trend of the global economy and
of worldwide demand for motor vehicles will continue. The
development we have outlined is subject to various opportuni
ties and risks, which are explained in detail in the Risk and
Opportunity Report on E pages 158 ff.

The world economy

At the beginning of 2017, the world economy is continuing
along a path of steady, if very moderate, growth. We expect
growth to accelerate slightly as the year progresses. For
the full year, the advanced economies are likely to achieve
growth rates similar to those of 2016. The emerging markets,
however, should experience a slight revival after several years
of economic weakness.

Various indicators suggest that the US economy should expand
faster again after rather weak growth in 2016, although inter
est and inflation rates are likely to rise slightly. While private
consumption will continue to profit from the favorable labor
market and rising incomes, the expected acceleration will be
mainly driven by investment. Another important question for
the year 2017 will be which expansive fiscal policies are imple
mented by the new administration. Although those policies
are unlikely to have their full effects before 2018, a certain
boost to the economy could also occur this year, depending
on the magnitude of stimulating measures. Overall, most analysts
currently anticipate growth in gross domestic product (GDP)
of 2 to 2.5%.

Growth prospects for the Japanese economy remain rather
moderate. Although domestic demand could develop rather
more dynamically than in 2016, current GDP growth forecasts
are only of the magnitude of 1%.

The economy of the European Monetary Union (EMU) has
proven to be quite resilient in the past two years, and should
continue its upward trend in 2017, although at a moderate
growth rate. But due to the possible negative effects of the
British referendum on leaving the European Union (EU), we
expect economic growth to be somewhat slower than last year.
The European Central Bank is likely to maintain its expansive
monetary policy during 2017. There should also be a little posi
tive economic stimulus from the fiscal side. At present, we
anticipate GDP growth in the EMU of approximately 1.5%. Cur
rent forecasts for growth in Germany are of the same magni
tude. Although the negotiations on the UK’s exit from the EU
expected for the coming months are likely to have a negative
impact, no severe slump is currently anticipated for the British
economy.

B | COMBINED MANAGEMENT REPORT | OUTLOOK 175

Demand for medium- and heavy-duty trucks in the regions
relevant for us is likely to remain at the rather weak prioryear
level.

In the NAFTA region, the cyclical market correction can be
expected to continue. In weight classes 68, it must be
assumed that demand will decrease by approximately 5% after
the significant drop in 2016. In the heavyduty segment
(class 8), the weakening of demand is likely to be rather more
pronounced.

The market of the EU30 region (European Union, Switzerland
and Norway) temporarily peaked last year, according to current
assessments. In a rather more restrained economic environ
ment than last year, we expect truck sales to decrease slightly.
After the end of the deep economic recession in Brazil, only
a slight recovery of the truck market from a very low level can
be expected there. And after last year’s dramatic slump in
Turkey, a further slight decrease is anticipated. Starting from
a very low level, significant recovery of demand is to be
expected in Russia. The Chinese market should remain fairly
stable, following its strong growth of 2016.

The most important Asian markets from Daimler’s perspective
are likely to present a mixed picture in 2017. As the Japanese
market for light, medium and heavyduty trucks has remained
at a relatively sound level for several years, a market correc
tion of about 5% is now expected. Following the significant
drops in demand of recent years in Indonesia, the overall truck
market there is expected to be of the magnitude of 2016.
Slight market expansion is anticipated for India. The planned
reform of sales taxes, which would reduce truck prices, could
have a positive impact on demand during the year.

We expect a slight increase in demand for small, midsize and
large vans in the EU30 region in 2017, driven in particular by
the German van market, but also by other major European mar
kets. In the United States, demand for large vans is likely to
remain fairly stable. On the other hand, the market for midsize
and large vans in Latin America should revive significantly in
2017, although from a very low level. In China, we also anticipate
a revival of demand in the market we address there.

We expect slight growth in the market for buses in the EU30
region compared with 2016. The market development in Latin
America continues to be negatively impacted by the current
economic situation in Argentina and Brazil. After the significant
drop in demand of recent years, we assume that the market
bottomed out in 2016. We anticipate a significant recovery in
the year 2017, especially in Brazil, but the market volume will
continue to be at a very low level.

The emerging economies could achieve aggregate growth in
output of just over 4% in 2017, which would bring them back to
their longterm trend. This improvement is primarily the result
of the expected development on the South American continent
and also in Russia. In both regions, a return to slight growth
is now generally anticipated after the recessions there, some
of which were quite severe. A key factor behind this improvement
is the ongoing, although only gradual, stabilization of rawmate
rial prices expected in 2017. However, oil prices in particular
will probably remain too low to provide sustained economic
stimulus in the countries of the Middle East. In view of the
volume it has now reached, GDP growth in China is likely to
continue slowing down in the coming years. But we assume
that the political decision makers will take countermeasures
and carry out fine tuning in good time, thus succeeding in
avoiding a “hard landing” also this year, and we anticipate
growth of just under 6.5%.

Overall, there are some indications that the world economy
will perform somewhat better in 2017 than the weak growth
of the previous year, but will probably not exceed the rather
belowaverage growth corridor of 2.5 to 3%.

Automotive markets

Worldwide demand for cars is likely to increase again from a
high level in 2017. According to current forecasts, slight growth
in the magnitude of 1 to 2% is to be expected. One of the
factors decisive for global economic dynamism will be the
extent to which market growth weakens in China, now that
the tax incentives for cars with small engines have been reduced
since the beginning of 2017. Despite the dynamic market
development in 2016, we anticipate further slight growth in China.

The US market for cars and light trucks should this year main
tain its exceptionally high level of more than 17 million units
sold. Possible fiscalpolicy stimulus from the new US govern
ment could have an additional positive impact on demand.
In Europe, we expect a slightly larger market overall. In West
ern Europe, it must be assumed that the number of cars sold
will be only at about the level of 2016, following the rather
lively recovery of recent years. The solid market volume
that has meanwhile been reached again and the somewhat
dampened economic growth following the Brexit vote in
the United Kingdom are the main reasons for the expected
stagnation of demand. In key markets such as Germany
and France, slight growth is to be anticipated at best, and
a market correction is likely in the UK. After the drastic
contraction of recent years, the Russian car market should
recover in 2017.

Following two years of falling demand, we expect a stabiliza
tion of car sales in Japan this year. In India, the dynamic growth
of recent years is likely to continue with another significant
increase in demand.

176 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Unit sales

Mercedes-Benz Cars will continue its “MercedesBenz 2020”
strategy in 2017. Overall, we intend to slightly increase our
unit sales, thus reaching a new record level. We anticipate further
growth above all in China and Europe. This is based on our
attractive and young model portfolio, which is more diverse
than ever before. The new EClass models in particular should
provide growth impetus. Both the sedan and the wagon ver
sions will be available for the first time over a full year. They
will be followed by the new EClass Coupe this spring and by
the EClass Cabriolet in the summer. But we are well posi
tioned also with our SUVs and the new sports cars that we
launched in 2016. Furthermore, we will enhance the attractive
ness of our product portfolio with various model upgrades.
In particular with the new SClass, we will strengthen our lead
ing position in the field of automated driving and connectivity.
And we will push forward with our Best Customer Experience
sales and marketing strategy. For example, the range of
services offered by Mercedes me connect will be gradually
expanded and rolled out in 20 additional markets. Further
more, we will enhance the attractiveness of the Mercedes
Benz brand with increasing digitization in retailing and with
additional service functions.

In the coming years, we will focus our product portfolio even
more closely on future requirements. The acronym CASE
stands for Connected, Autonomous, Shared & Services and
Electric: These four futureoriented strategic areas will
define the mobility of the future. The main challenge consists
of intelligently linking up those four areas. We are actively
tackling this challenge by promoting the related activities
through an organizationally independent unit. Daimler,
and in particular MercedesBenz Cars, play a leading role
in all four areas already today. For example, the “Concept EQ”
study that had its world premiere in Paris last year provides
a clear outlook on a completely new generation of vehicles
from MercedesBenz. It shows the possibilities that will be
offered for customers by closely linking up the CASE areas.
The study is also the starting signal for the new EQ brand, under
which MercedesBenz will bring together all the key aspects
for customeroriented electric mobility. In line with the intelli
gent linking up of the CASE areas, the new brand covers a
broad spectrum: It ranges from electric vehicles to wall boxes,
charging services, home energy storage and sustainable
recycling solutions.

The new electric smart (electricity consumption combined:
13.1 12.9 kWh/100 km; CO2 emissions combined: 0 g/km),
which can be experienced as of spring 2017 not only as a
fortwo, but for the first time also as a forfour, is a key element
of our electric offensive. Additional growth opportunities are
presented by the “ready to” services, which we launched
in 2016 and are successively expanding this year. They augment
the spectrum of a vehicle’s use, especially in the city, thus
creating significant added value for the customer.

Daimler Trucks anticipates total unit sales in the year 2017
in the magnitude of the previous year. In the three major regions,
Europe, North America and Japan, we also anticipate a stable
level of unit sales overall, supported by a stronger second half
of the year. After last year’s significant market correction in
the segment for heavyduty trucks in the NAFTA region, our unit
sales in 2017 should be at the prioryear level. This develop
ment will be driven also by the new Freightliner Cascadia, our
flagship in the North American market, which went into pro
duction at the beginning of 2017. We assume that we will con
solidate our already strong market position in 2017. In a slightly
declining market environment in the EU30 region, we antici
pate unit sales in the volume of 2016. Our sales in Japan should
also be at the prioryear level. In Brazil, we expect that along
with a gradual market recovery, our unit sales should also
be above the very low prioryear level. Also in India, we anticipate
unit sales higher than in 2016.

Mercedes-Benz Vans plans to achieve slight growth in unit
sales in 2017. We anticipate slight increases in sales of vans also
in the EU30 region. In the context of our strategy for the
division, “MercedesBenz Vans goes global,” we launched the
VClass multipurpose vehicle and the Vito in 2016 also in
China, the world’s biggest market for motor vehicles. This will
additionally boost demand there in 2017. We aim to achieve
further growth also with the Sprinter, which we will produce
also in North America in the future. And in late 2017, we will
enter the midsizepickup segment with the XClass, enabling
us to further increase our worldwide unit sales in the long
term.

Daimler Buses assumes that it will be able to defend its market
leadership in its traditional core markets for buses above 8
tons with innovative, futureoriented and highquality products.
We anticipate total unit sales in 2017 significantly above the
prioryear level. We assume that unit sales in the EU30 region
will increase moderately. After the substantial decrease in
unit sales in Brazil last year, we expect a significant recovery
in 2017, but still at a very low level. A continuation of the
positive development of unit sales is expected in Mexico.

Daimler Financial Services aims to achieve ongoing growth
in the coming years. In the year 2017, we expect a slight
increase in new business and further growth in contract volume.
This will be primarily driven by the growth of the automotive
divisions, especially MercedesBenz Cars. In addition, we are
utilizing new market potential above all in Asia, and are making
use of new and digital possibilities for customer contacts –
in particular through the further development of our online sales
channels. We see good growth opportunities also in the field
of innovative mobility services, where we are active with the
brands car2go, moovel and mytaxi, as well as with equity
interests in the companies Blacklane and FlixBus.

On the basis of our assumptions concerning the development
of automotive markets and the divisions’ planning, we expect the
Daimler Group to slightly increase its total unit sales in 2017.

B | COMBINED MANAGEMENT REPORT | OUTLOOK 177

On the basis of the market developments we expect, the afore
mentioned factors and the planning of our divisions, we
assume that Group EBIT will increase again slightly in 2017.

The individual divisions have the following expectations for
EBIT in the year 2017:
MercedesBenz Cars: significantly above the prioryear level,
Daimler Trucks: slightly below the prioryear level,
MercedesBenz Vans: significantly below the prioryear level,
Daimler Buses: slightly above the prioryear level
Daimler Financial Services: in the magnitude of the prior year.

The decrease in earnings we anticipate at Daimler Trucks pri
marily reflects expenditure incurred in connection with the
further optimization of fixed costs. We expect this to result
in a total expense in the magnitude of up to €500 million,
mainly in the year 2017. This will be partially offset by income
of approximately €250 million that we expect from the sale
of real estate at the Kawasaki site in Japan. The MercedesBenz
Vans division achieved very high EBIT and a high return on
sales in 2016. Compared with the longterm average, we antici
pate a very high level of earnings also in 2017. The main cause
of the significant decrease compared with 2016 will be high
advance expenditure for the renewal and expansion of the
product portfolio.

Free cash flow and liquidity

The anticipated development of earnings in the automotive
divisions will have a positive impact on the free cash flow
of the industrial business. In view of repeated higher advance
expenditure for new products and technologies, the free
cash flow from the industrial business should be of the same
magnitude as in 2016, and thus higher than the dividend
distribution in 2017.

For the year 2017, we aim to have liquidity available in a volume
appropriate to the general risk situation in the financial
markets and to Daimler’s risk profile. When measuring the
level of liquidity, we give due consideration to possible refi
nancing risks caused for example by temporary distortions
in the financial markets. We continue to assume, however,
that we will have very good access to the capital markets and
bank markets also in the year 2017. We aim to cover our
funding needs in the planning period primarily by means
of bonds, commercial paper, bank loans, customer deposits
in the direct banking business and the securitization of receiv
ables in the financial services business; the focus will be on
bonds and loans from globally and locally active banks. In view
of the very good liquidity situation of the international capital
markets and our strong creditworthiness, we expect a continua
tion of very attractive refinancing conditions in 2017.
An additional goal is to continue securing a high degree of
financial flexibility.

Revenue and earnings

We assume that the revenue of the Daimler Group will also
increase slightly in 2017, as a result of the overall positive
development of unit sales in the automotive divisions.

Our divisions currently have very attractive and competitive
product ranges, which have been expanded and systematically
renewed in recent years. We therefore assume that Daimler
will profit to an aboveaverage extent from the slight growth
in global demand for motor vehicles that we expect also in the
year 2017, and will be able to strengthen its position in impor
tant markets. At MercedesBenz Cars, additional growth this
year will be driven above all by the new EClass models, the
successful SUVs and the new convertible models. The other
automotive divisions are also well positioned with their prod
ucts, and Daimler Financial Services’ new business will profit
from further growth in unit sales. Against this backdrop,
we expect revenue growth for MercedesBenz Cars, Daimler
Buses and Daimler Financial Services. Revenue at Daimler
Trucks in 2017 should be of the magnitude of the previous year.
Unlike the slightly positive development of unit sales expected
at MercedesBenz Vans, the division’s revenue is likely
to be at the prioryear level, as contract manufacturing of vans
for Volks wagen was discontinued in the fourth quarter of 2016.

In regional terms, we expect the highest growth rates in Asia
and Europe, but our business volumes should expand also
in the other regions. In particular in China, we have created the
right conditions for further growth with new sales outlets,
additional production capacities and a broad product range.
But the growth in unit sales in China will have a disproportion
ately low impact on revenue growth, as the share of local
production will continue to increase. Our Chinese associated
company Beijing Benz Automotive China (BBAC) is included
in our consolidated financial statements using the equity
method of accounting.

The growth in unit sales and revenue that we anticipate will
have a positive impact on earnings in 2017. We have laid
the foundations for a lasting high level of earnings with various
programs for improved profitability, which we implemented
in the years 2013 to 2015. We are currently taking further
measures in all divisions for the longterm and structural opti
mization of our business system. We are standardizing and
modularizing our production processes throughout the Group.
In this context, we are making intelligent use of vehicle plat
forms, allowing us to achieve further cost advantages. In
parallel, we are pushing forward with digital connectivity: in
all divisions and at all stages of the value chain – from develop
ment to production to sales and service. In this way, we are
opening up additional scope to become even faster, more
flexible and more efficient to the benefit of our customers.

There will be opposing effects, however, from the ongoing
high expenditure for our model offensive, for innovative technolo
gies, for the digitization of our products and processes, and
for the expansion and modernization of our worldwide produc
tion facilities. As a result, our advance expenditure aimed at
securing a successful future will once again be higher in 2017
than in the previous year. E page 178

178 B | COMBINED MANAGEMENT REPORT | OUTLOOK

Dividend

Research and development

At the Annual Shareholders’ Meeting on March 29, 2017, the
Board of Management and the Supervisory Board will propose
a dividend of €3.25 per share (prior year: €3.25). This represents
a total distribution of €3.5 billion (prior year: €3.5 billion).
With this proposal, we are letting our shareholders participate
in the Company’s success.

Investment

In order to achieve our ambitious growth targets, we will sys
tematically expand our product range in the coming years.
In this context, we also aim to utilize growth potential outside
our traditional markets by taking appropriate local action.
At the same time, we want to make sure that we can play
a leading role in the farreaching technological transformation
of the automotive industry. This applies in particular to the
digital connectivity of our products and processes along the
entire value chain. By intelligently connecting the constantly
growing volumes of data, we will create efficiency advantages,
improve our product quality and facilitate the ongoing flexi
bilization of the production process. Against this backdrop, we
will once again significantly increase our investment in prop
erty, plant and equipment in the year 2017.

Following the significant increase in the year 2016, capital
expenditure at MercedesBenz Cars will increase again in 2017.
The most important projects include the product rampup
of the new GLE and GLS, the successor models of the current
compact class, and new gasoline and diesel engines. Sub
stantial investment is planned also for the realignment of our
German production sites as competence centers, as well
as for the expansion of our international production network.
Daimler Trucks will mainly invest in successor generations
of existing products, in new products, in global component
projects and in the optimization of its worldwide production
network. At MercedesBenz Vans, the focus of capital
expenditure will be on production of the next generation
of the Sprinter in Germany and the United States. Key
projects at Daimler Buses are improvements in the production
network and advance expenditure for new models, in
particular for the development of an electrically powered
city bus.

With our research and development activities, our goal is to
further strengthen Daimler’s competitive position against
the backdrop of upcoming technological challenges. We want
to create competitive advantages above all by means of inno
vative solutions for low emissions and safe mobility. In addition,
we intend to utilize the growth opportunities offered by
worldwide automotive markets with new and attractive prod
ucts. We are increasingly focusing on the strategic areas
for the future of connectivity, autonomous driving, flexible
use and services, and electric drive, which we have given
the acronym CASE (Connected, Autonomous, Shared & Services
and Electric). We aim to occupy a leading position in these
areas, both individually and by linking them up intelligently.
In order to achieve our goals, we will once again significantly
increase our total expenditure for research and development
in 2017. At MercedesBenz Cars, a large part of that expenditure
will flow into the renewal and expansion of our model range.
The division’s most important projects are the successor models
of the GLE and GLS and the new compact models. We are
also working hard on new, lowemission combustion engines,
electric mobility, the connectivity of our vehicles and innovative
safety technologies for autonomous driving. At Daimler Trucks,
the focus will be on activities in the areas of fuel efficiency
and emission reductions, as well as expenditure for tailored
products and technologies for the Latin American market
and China. Key projects at MercedesBenz Vans are the suc
cessor generation of the Sprinter, the new XClass pickup
and the further development of the Vito and VClass. Another
important topic is the connectivity of products and processes,
especially the innovative connectivity solution Mercedes PRO.
An important area of research and development at Daimler
Buses is to meet future emission standards and to increase
fuel efficiency. Alternative drive systems – electrification in
particular – will also play an important role at Daimler Buses.

The workforce

Due to the growth in unit sales and revenue that we expect,
production volumes will continue rising in 2017. At the same
time, the efficiencyenhancing measures we have implemented
in recent years at all divisions are now taking effect. The
medium and longterm measures we have taken for structural
improvements of our business processes should facilitate
further efficiency progress. Against this backdrop, we assume
that we will be able to achieve our ambitious growth targets
with slight workforce growth. Additional employees will be
required in particular for the expansion of our international
production network, as well as in the area of research and
development for projects in the future areas of electric mobility
and digitization. More jobs are likely to be created also at
companies that we operate together with Chinese partners and
whose employees are not included in the figures for the
Daimler Group.

B | COMBINED MANAGEMENT REPORT | OUTLOOK 179

Forward-looking statements
This document contains forwardlooking statements that reflect our current
views about future events. The words “anticipate,” “assume,” “believe,”
“estimate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should”
and similar expressions are used to identify forwardlooking statements.
These statements are subject to many risks and uncertainties, including
an adverse development of global economic conditions, in particular a
decline of demand in our most important markets; a deterioration of our refi
nancing possibilities on the credit and financial markets; events of force
majeure including natural disasters, acts of terrorism, political unrest, armed
conflicts, industrial accidents and their effects on our sales, purchasing,
production or financial services activities; changes in currency exchange rates;
a shift in consumer preferences towards smaller, lowermargin vehicles;
a possible lack of acceptance of our products or services which limits our
ability to achieve prices and adequately utilize our production capacities;
price increases for fuel or raw materials; disruption of production due to
shortages of materials, labor strikes or supplier insolvencies; a decline in
resale prices of used vehicles; the effective implementation of costreduction
and efficiencyoptimization measures; the business outlook for companies
in which we hold a significant equity interest; the successful implementation
of strategic cooperations and joint ventures; changes in laws, regulations
and government policies, particularly those relating to vehicle emissions, fuel
economy and safety; the resolution of pending government investigations
or of investigations requested by governments and the conclusion of pending
or threatened future legal proceedings; and other risks and uncertainties,
some of which we describe under the heading “Risk and Opportunity Report”
in this Annual Report. If any of these risks and uncertainties materializes
or if the assumptions underlying any of our forwardlooking statements prove
to be incorrect, the actual results may be materially different from those
we express or imply by such statements. We do not intend or assume any
obligation to update these forwardlooking statements since they are based
solely on the circumstances at the date of publication.

Overall statement on future development

We have implemented our strategy with great determination
in recent years, thus creating the basis for further growth:

We are very well positioned in our markets with innovative
products and services. We are increasingly succeeding
in addressing new target groups, utilizing additional market
potential and strengthening our market position worldwide.

In particular with autonomous driving, we have gained

a competitive advantage with pioneering innovations. This
is demonstrated also by the innovative concept vehicles
we presented in the year 2016.

With the efficiency programs that have been implemented in
all divisions in recent years, we have improved our cost
structures on a sustained basis and thus laid the foundations
for a high level of profitability. This means that we have
created a sound financial basis for further profitable growth.

Through the digitization of the entire value chain, we are

now able to shorten the development process, and to make
production more flexible and marketing and sales channels
more direct. By making intelligent use of constantly rising
volumes of data while linking up all elements of the value
chain, we are gaining further efficiency advantages, improv
ing quality and facilitating the flexibilization of the entire
production process.

We will once again increase our advance expenditure for the
future of the Daimler Group, on the basis of our healthy
business development. In particular in the strategic, future
oriented areas of connectivity, autonomous driving, flexible
use and services, and electric drive, as well as by intelligently
linking up those areas, we will therefore play a leading
role also in the future.

Together with the workforce, we are developing a new leader
ship culture under the heading of Leadership 2020 that
will allow us to successfully shape our future. In this way,
we are meeting the challenges of the digital world and
creating the basis for cultural changes at the Group.

Against this backdrop, we look to the year 2017 with confi
dence. We anticipate higher unit sales, revenue and earnings
than in the previous year.

We convince our customers with
innovative vehicles and services

Daimler’s business operations developed positively overall in the year 2016. The return
on sales of 9.4% in the automotive business adjusted for special items once again
surpassed our target. The divisions Mercedes-Benz Cars and Mercedes-Benz Vans
signiﬁ cantly increased their revenue and unit sales, and the Daimler Financial
Services division also increased its new business. The unit sales of Daimler Trucks
and Daimler Buses decreased signiﬁ cantly for market reasons. With innovative
technologies, groundbreaking concept vehicles and completely new service oﬀ er-
ings, we presented solutions for the mobility of the future.

C | The Divisions

C | THE DIVISIONS | CONTENTS 181

Mercedes-Benz Cars

182 – 187

Daimler Buses

196 – 198

– Continuation of market leadership in traditional core
markets for buses over 8 tons gross vehicle weight
– Target return on sales of 6% achieved
– Positive development of complete-bus business in EU30
– First drive on public roads of Mercedes-Benz Future Bus

in partially automated mode

– Further progress with fuel efficiency
– Roadmap presented for alternative drive systems
– EBIT significantly above prior-year level at €249 million
(2015: €214 million)

Daimler Financial Services

199 – 201

– Record number of cars and commercial vehicles
financed or leased
– Continued high number of automotive insurance

policies brokered

– Fleet business strengthened through acquisition of
Athlon Car Lease International
– Increased range of innovative mobility services
– car2go expands further and has more than 2.2 million
customers
– mytaxi is biggest European taxi network after fusion
with Hailo
– First place in Great Place to Work competition
– EBIT slightly above prior-year level at €1.7 billion

(2015: €1.6 billion)

– Unit sales and revenue at record levels
– Acceleration of model offensive
– Successful start of new Mercedes-Benz E-Class
– Presentation of EQ brand for electric mobility
and of Concept EQ
– Launch of ten new models in China
– “Best Customer Experience” pushed forward with

new sales formats

– Presentation of new electric smart models
– Great success in motorsport
– CO2 emissions average of 123 g/km
– EBIT of €8.1 billion slightly above prior-year level
(2015: €7.9 billion)

Daimler Trucks

188 – 192

– Worldwide unit sales of 415,100 trucks
– Global market presence expanded with new

regional centers

– Presentation of automated trucks driving in a platoon
with license for public roads
– Presentation of Urban eTruck, FUSO eCanter and
Freightliner Cascadia
– Presentation of new safety systems Active Brake Assist 4
and Sideguard Assist
– Presentation of connectivity services such as
Mercedes-Benz Uptime
– Expansion of platform strategy also with Truck Data
Center, the newly developed connectivity hardware
– Significant decrease in EBIT to €1.9 billion

(2015: €2.6 billion)

Mercedes-Benz Vans

193 – 195

– Unit sales and revenue at record levels
– V-Class and Vito drive growth
– Three-millionth Sprinter delivered
– Mid-size portfolio now offered also in China
– Ground breaking for new plant in the United States
– “Concept X-CLASS” provides a glimpse of premium pickup
– Presentation of adVANce future initiative
– EBIT significantly above prior-year level at €1.2 billion
(2015: €0.9 billion)

182 C | THE DIVISIONS | MERCEDES-BENZ CARS

Mercedes-Benz Cars

Mercedes-Benz Cars continued to grow profitably and very dynamically in 2016. Unit sales and
revenue increased once again, and earnings before interest and taxes reached a record level,
despite the considerable advance investment we made in our product offensive. Our most important
new model in the year under review was the new E-Class, “the world’s most intelligent business
sedan.” Our model offensive focused on convertibles and roadsters as well. We also once again
extended and modernized our very successful range of SUVs. In addition, our new EQ brand
and the fascinating Concept EQ vehicle study have laid the foundation for a broad-based electric
mobility offensive at Mercedes-Benz Cars.

C.01
Mercedes-Benz Cars

€ amounts in millions

% change

2016

2015

16/15

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

89,284

8,112

9.1

4,147

83,809

7,926

9.5

3,629

5,671
2,008

4,711
1,612

2,235,352

2,059,823

2,197,956

2,001,438

Employees (December 31)

139,947

136,941

+14

+20
+25

+10

C.02
Unit sales Mercedes-Benz Cars

in thousands

Mercedes-Benz

thereof A-/B-Class

C-Class

E-Class

S-Class
SUVs1

Sports cars

smart

Mercedes-Benz Cars

thereof Europe

thereof Germany

NAFTA region

thereof United States

Asia

thereof China

1 Including the GLA

2016

2015

16/15

% change

2,054

1,880

435

490

304

712

144

425

470

306

106

543

121

2,198

2,001

980

314

406

347

715

488

874

296

412

359

618

400

-1

-21

+31

-7

+19

+10

+12

-1

-3

+16

+22

Growth continues
The Mercedes-Benz Cars division consists of the Mercedes-
Benz brand with the Mercedes-AMG, Mercedes-Maybach and
Mercedes me sub-brands, as well as the smart brand and
the new EQ brand for electric mobility. The division continued
on its course of profitable growth in the year under review,
with unit sales increasing by 10% to the new record level of
2,198,000 vehicles and revenue rising by 7% to €89.3 billion.
 C.01 We were also able to gain market share in nearly all
regions. Our positive overall business development throughout
the year was largely due to our new products, in particular our
attractive SUVs and the new E-Class. Despite considerable
advance investment in our product offensive, we were also
able to increase EBIT slightly, to €8.1 billion (2015: €7.9 billion).
When adjusted for special items, EBIT corresponds to a return
on sales that is higher than our target.

Mercedes-Benz once again posts record unit sales
The Mercedes-Benz brand increased its unit sales by 9% to
2,053,500 vehicles in 2016. Global growth at Mercedes-Benz
therefore not only outpaced that of its German competitors,
the division also delivered more premium-segment vehicles
worldwide than any other automaker.  C.02 In fact, we are
the number one manufacturer in the premium segment in
Germany, several core European markets, the United States,
Canada and Japan. We also significantly improved our position
in China in the year under review.

Mercedes-Benz sold a total of 872,200 vehicles in Europe in
2016, an increase of 12% on the previous year. Double-digit
growth was recorded in the volume markets of the United King-
dom (+15%), France (+18%), Italy (+16%) and Spain (+20%).
We also increased our unit sales in Germany by 6% to 275,900
vehicles. Sales rose by 20% in China, where we outperformed
both the market as a whole and important competitors in the
year under review. Sales in the NAFTA region were slightly
below the prior year’s level. Although sales rose in Mexico,
they declined slightly in the United States and Canada. Sales
in Japan decreased by 6% from the previous year as a result
of general market developments in that country. However, we
were able to record substantial increases in unit sales in
South Korea (+33%), Australia (+17%) and Taiwan (+12%).

C | THE DIVISIONS | MERCEDES-BENZ CARS 183

Another dream car: The new Mercedes-Benz E-Class Coupe combines luxury, sportiness and technology at the highest level.

The main contribution to the growth in unit sales came from our
SUVs. All in all, sales in the SUV segment increased by 31%
to 712,100 units. This positive development was primarily due
to the GLC and GLE models, as well as high demand for our
SUVs in China. Our A-Class and B-Class models also remained
very popular, with sales of these cars increasing by 2% in
2016. Including the CLA and CLA Shooting Brake, a total of
435,400 of these models were delivered to customers.
Demand for our C-Class models also remained very strong,
with sales increasing by 4% to 490,200 sedans, wagons,
coupes and convertibles in the year under review. In the year
of the model changeover, sales of the E-Class nearly
reached the prior year’s level. The new E-Class met with a
very positive response from customers, which generated
powerful sales momentum in the second half of the year.
In total, we sold 304,200 cars in the E-Class segment in 2016,
including 188,300 units of the new model. The S-Class
performed very well in 2016. With sales of 84,300 units (-21%),
the S-Class was once again the world’s bestselling luxury
sedan.

The new E-Class: a masterpiece of intelligence
In January 2016, Mercedes-Benz presented the new E-Class
sedan at the North American International Auto Show in
Detroit. The vehicle marks a further milestone on the road to
accident-free and autonomous driving. The sedan’s attractive
design, outstanding comfort and connectivity features all serve
to strengthen the loyalty of existing customers and attract
new customer groups. Clarity and emotion defi ne the design
of the new Mercedes-Benz E-Class, and high-end materials
characterize the interior. The new E-Class also features numer-
ous technological innovations that celebrated their world
premieres in the model. Mercedes-Benz has taken the next
step on the road to autonomous driving with numerous new
driver-assistance features. With them, the new E-Class can not
only automatically maintain a proper distance to vehicles
ahead on highways and country roads, but can also keep the
E-Class in its lane at speeds of up to 210 km/h.

The fi rst new E-Class sedan models were delivered to custom-
ers in April 2016. A superior driving experience is ensured
by a four-cylinder gasoline engine and an all-new four-cylinder
diesel engine with an output of 143 kW (195 hp). The latter
unit makes a big impression with very low NEDC fuel consump-
tion in the E 220 d (fuel consumption in l/100 km urban:
4.7–4.3 / extra-urban: 4.1–3.6 / combined: 4.3–3.9; CO2
emissions in g/km combined: 112-102). E pages 126 f
The year under review also saw the launch of the E 350 e (fuel
consumption in l/100 km combined: 2.1; CO2 emissions in
g/km combined: 49; electricity consumption in kWh/100 km
combined: 11.5). With a system output of 210 kW (286 hp),
this plug-in hybrid off ers the performance of a sports car and
the effi ciency of a subcompact.

The new E-Class wagon was then presented to the public in
June 2016. Like its predecessor, this model is one of the most
spacious vehicles in its segment. The model has up to 1,820
liters of cargo space. Moreover, despite a much sportier roof
line, space in the rear is once again outstanding for this
vehicle class. Developers focused here on practical dimensions
and the use of an innovative cargo-space management approach.

In September, Mercedes-Benz presented a new member of
the E-Class family in Paris – the new E-Class All-Terrain, which
combines a striking appearance in SUV style with the intelli-
gent space concept of the wagon and pioneering E-Class safety
innovations. With 4MATIC all-wheel drive as standard and
higher ground clearance thanks to the AIR BODY CONTROL
multi-chamber air suspension (also standard), the All-Terrain
is a true all-rounder with outstanding versatility.

184 C | THE DIVISIONS | MERCEDES-BENZ CARS

The dream car with the star
Our model off ensive during the year under review also focused on
convertibles and roadsters. Our range of convertible dream
cars extends from the smart fortwo convertible to the S-Class
convertible. Mercedes-Benz Cars now off ers more young
convertibles and roadsters than any other manufacturer. With
the world premiere of the fi rst-ever convertible based on the
C-Class at the Geneva Motor Show in March 2016, Mercedes-
Benz rounded out its range of convertibles in the classic
soft-top style. The model is optionally available with the AIRCAP
automatic draft stop system and AIRSCARF neck-level heating,
which guarantee exceptional comfort during open-top driving
365 days a year. Sporty and agile handling is ensured
by effi cient and powerful engines and dynamically designed
suspension – with AIRMATIC air suspension as an option.

The new S-Class convertible is the sixth variant of the current
S-Class family and the fi rst open-top luxury four-seater from
Mercedes-Benz since 1971. The sporty and elegant model cele-
brated its world premiere at the IAA in September 2015 and
deliveries began in April 2016. With this new model, Mercedes-
Benz has fulfi lled its pledge to build the most comfortable
convertible in the world.

The new Mercedes-Benz SL has been extensively optimized
both technologically and visually and has been available since
April 2016. More powerful engines, 9G-TRONIC automatic
transmission, DYNAMIC SELECT with fi ve driving modes and
Active Body Control with the curve tilting function all take
this automotive legend to a new dynamic level. In visual terms,
the front end in particular has been made much sportier
and includes a new hood, new bumpers and new headlights.

To coincide with its 20th anniversary, the compact SLK road-
ster was relaunched in April 2016 with signifi cantly optimized
engineering features an even more attractive appearance and
a new name – the SLC. A particularly striking aspect of the
new model is its diamond radiator grille, which is a standard
feature.

The new GLS – the S-Class of SUVs
During the year under review, we continued our SUV off ensive
with the GLS, customer deliveries of which began in the
spring of 2016. Like its predecessor, the GL, the new GLS sets
standards in the SUV world. The full-fl edged seven-seater
combines luxury with impressive comfort, agile handling and
best-in-class safety. With a total of seven models in all
classes, Mercedes-Benz off ers a more extensive range of
SUVs than any other premium brand.

The sports coupe of SUVs
In September 2016, we extended our range of SUVs to include
the all-new GLC coupe, a vehicle that combines the distinctive
main body section and the Mercedes design idiom of current
SUV models with the characteristic elongated roof line of a
sports coupe. This sports car among the mid-size SUVs from
Mercedes-Benz also makes a big impression with its typical
Mercedes safety features, state-of-the-art assistance systems
and outstanding sporty-dynamic character. The model’s standard
sports suspension, more direct sports steering, DYNAMIC
SELECT and 4MATIC permanent all-wheel drive with the 9G-
TRONIC nine-speed automatic transmission combine superior
ride comfort with exceptionally sporty agility.

EQ: electric mobility redeﬁ ned
With the Concept EQ, Mercedes Benz demonstrated at the
Paris Motor Show that electric cars can soon move into
the fast lane. The concept car, which has the appearance of
a sporty SUV coupe, off ers a preview of a new generation
of vehicles with battery-electric drive. With a range of up to 500
kilometers and the typical Mercedes strengths of safety,
comfort, functionality and connectivity, the Concept EQ meets
every requirement in terms of cutting-edge sustainable
mobility. The vehicle also features innovative solutions inside –
including a completely new interior concept. The Concept EQ
off ers a preview of the new EQ product brand for electric
mobility. E pages 4 and 20 ff

The sports car among the SUVs: the new Mercedes-Benz GLC Coupe.

C | THE DIVISIONS | MERCEDES-BENZ CARS 185

Benchmark for open-air driving pleasure: the new Mercedes-AMG Roadsters.

Mercedes-Maybach: perfection blended
with exclusivity
Mercedes-Maybach stands for the highest levels of exclusivity
and individuality. The luxury brand, which was introduced
in November 2014, combines the perfection of the Mercedes-
Benz S-Class with the exclusivity of a Maybach. The Mercedes-
Maybach S 600 Pullman launched in early 2016 (fuel con-
sumption in l/100 km urban: 19.6 / extra-urban: 10.3 /
combined: 13.6; CO2 emissions in g/km combined: 314) has
a face-to-face seating configuration and is a clear top-of-
the-line model. Mercedes-Maybach will launch its first convert-
ible in the spring of 2017. The special characteristics of the
model, of which a limited edition of only 300 units will be built,
include high-end appointments in the interior. The Vision
Mercedes-Maybach 6 concept vehicle is a sensational luxury-
class coupe offering a preview of the future of the Mercedes-
Maybach brand. The 2+2-seater pays tribute to the age of the
Aero-Coupes and transports this tradition into the future.
The vehicle’s electric drive system has an output of 550 kW
(750 hp), and the flat underfloor battery has a range of more
500 kilometers according to the NEDC. The battery also
boasts a visionary fast-charging feature that allows for an
impressive charging power of up to 350 kW. As a result,
it takes only five minutes to charge the battery up to a level
enabling a further 100 kilometers of driving.

Mercedes-AMG: the sports-car and performance brand
The brand claim of “Driving Performance” reflects the
two core competencies of Mercedes-AMG: the ability to pro-
vide an unparalleled driving experience and the ability to
serve as a driving force in the high-performance segment. The
Mercedes-AMG sports-car brand enhances the fascination
of Mercedes-Benz. The brand’s dynamic vehicles especially
attract young and sporty customers to the brand with the
three-pointed star. Mercedes-AMG models differ extensively
from their production-model cousins in terms of both engineer ing
and appearance, thus strengthening the authenticity and
distinctive identity of the Mercedes-AMG brand. Mercedes-
AMG positions itself even more aggressively as a dynamic
sports car and high-performance brand with the GT. The latest
members of this sports car family are the Mercedes-AMG
GT Roadster (fuel consumption in l/100 km urban: 15.1–12.2 /
extra-urban: 9.0-7.8 / combined: 11.4–9.4; CO2 emissions in
g/km combined: 259-219). True to its philosophy of blending
performance with responsibility, Mercedes-AMG is also striving
to become even more efficient through new engine technologies
and a comprehensive lightweight design approach. Mercedes-
AMG models already have some of the lowest emissions in
their segments. The sports-car and performance brand from
Mercedes-Benz, which is celebrating its 50th anniversary in
2017, extended its product range by more than ten models and
delivered 99,200 vehicles to customers in 2016 (+44%). As a
result, sales at Mercedes-AMG have more than tripled over the
last three years.

186 C | THE DIVISIONS | MERCEDES-BENZ CARS

smart celebrates a sales milestone and launches new
electric vehicles and innovative services
The smart brand achieved a major milestone in September
2016 when it celebrated the sale of more than two million vehi-
cles since 1998. smart cars are now sold in 46 markets
worldwide. Total sales of smart-brand vehicles increased by 19%
to the new record of 144,400 units in 2016. The smart was
particularly popular in China, where sales increased by 70%
compared with the previous year. China is now the smart
brand’s third-biggest sales market after Germany and Italy.

The most important new smart-brand products in the year under
review were the new electric drive models (electricity con-
sumption combined: 13.1–12.9 kWh/100 km; CO2 emissions
combined: 0 g/km). These vehicles have made the switch
to electric mobility more attractive than ever, as they combine
the agility of a smart with locally emission-free driving — the
ideal combination for urban mobility. The enjoyment of driving
an electric vehicle can now also be experienced for the first
time in the four-seat smart forfour, along with the smart fortwo
coupe and smart fortwo convertible. The new smart electric
drive models had their world premiere at the Paris Motor Show
in October 2016; market launch is scheduled to begin in the
spring of 2017. E page 24 f

The smart brand has played a pioneering role in the automotive
industry since it was launched in 1998, and it continues to
redefine urban mobility on a regular basis. In 2016, smart intro-
duced an innovative range of services that expands the utility
of smart vehicles in urban settings beyond the basic aspect of
driving itself. The first such service is “smart ready to drop,”
which makes it possible to deliver parcels straight to a smart
vehicle’s trunk. This system, which also allows for parcel return

pick-ups, is operated in cooperation with DHL and makes
online purchasing even more convenient. It is just one of the
many innovative services that will be offered by the smart
brand in the future.

Production “in China for China”
If we are to continue growing in China, we need to be able to
offer the right products and manufacture them locally. Our
product lineup in China was more attractive than ever in 2016.
During the year under review, we launched more than ten
new or revised models in China, including the new GLS and
several smart models. Mercedes-Benz presented the long-
wheelbase version of the new E-Class at Auto China in April
2016. This model is tailored to the requirements of the
growing Chinese market and is manufactured locally. The long-
wheelbase version of the E-Class is 140 millimeters longer
than the base model, providing considerably more legroom for
passengers in the rear of the vehicle, as well as seats with
numerous comfort features. With the launch of the DENZA
400, the second generation of an electric vehicle with a range
of up to 400 kilometers, we have also expanded our portfolio
of emission-free products in China. The DENZA is built in China
for China by the joint venture Shenzen DENZA New Energy
Automotive Co., Ltd. In June 2016, Daimler and its joint-venture
partner BAIC announced that they will invest more than €500
million in the expansion of their shared engine plant in Beijing.

All in all, we were able to increase sales of Mercedes-Benz
brand vehicles in China by 20% to 465,400 units, thus signifi-
cantly outpacing the growth of the automotive market as a
whole. A total of 317,100 of the vehicles we sold in China during
the reporting year (2015: 250,200) were manufactured
locally at facilities operated by our Beijing Benz Automotive Co
Ltd. joint venture (BBAC).

More fuel-efficient, lighter and more compact: the new four-cyclinder diesel OM 654 from Mercedes-Benz starts a new engine family.

C | THE DIVISIONS | MERCEDES-BENZ CARS 187

The new electric smart models combine agility with locally emission-free driving – the ideal combination for urban mobility.

Best Customer Experience
Within the framework of the “Best Customer Experience”
marketing and sales strategy, Mercedes-Benz is aligning its
sales and marketing organization with changing customer
requirements. The goal is to address new target groups while
maintaining the brand loyalty of established customers. To
this end, Mercedes-Benz is using new sales channels and digi-
tal portals as innovative interfaces with the brand. Various
sales formats with new, digital channels and digital elements,
as well as new roles in retailing, supplement the services
offered at traditional Mercedes-Benz dealerships and show-
rooms. The centerpiece of Best Customer Experience is
the range of mobility and other services offered by Mercedes
me. w mercedes.me This platform is also the name of a
new chain of stores Mercedes-Benz has opened in inner-city
locations. Various Mercedes me Stores have opened around
the world since 2014. New temporary formats such as special
events and pop-up stores have also been created. In addition,
the “She’s Mercedes” initiative was launched in 2015. This
program is designed to help Mercedes-Benz address women in
a targeted manner and significantly increase its proportion
of female customers over the medium term. Along with the pro-
vision of a new community and inspiration platform, the
initiative also includes networking events, training programs
for sales personnel and measures to increase the proportion
of women in the sales workforce.

Successful motorsports year: #TheTriple
MERCEDES-AMG PETRONAS captured both the Drivers’ and
the Constructors’ Championship in the Formula 1 racing series
for the third consecutive year in 2016, and also finished first
in more races than ever before. In addition, the Mercedes-Benz
hybrid-drive system, which is also used by the Williams F1,
Sahara Force India and Manor-Racing Formula 1 teams, was
both the most efficient and most successful drive system

in the competition. Mercedes-Benz was also very successful in
the popular German DTM touring car series, recording four
victories and 15 podium finishes in 18 races. We also enjoyed
numerous successes with the Mercedes-AMG Customer
Sports program in 2016 – including a historic 1-2-3-4 finish in
the prestigious Nürburgring 24-hour race. Daimler’s motors-
ports efforts pay off for the company – not just in the form of
significant image enhancement and the extensive publicity
provided by the races, but also in terms of the valuable experi-
ence we gain with the hybrid technologies and lightweight
designs that we use in our motorsports activities, which are
also incorporated into our series-production vehicles.

CO2 emissions at the previous year’s level
Mercedes-Benz Cars makes a continual effort to reduce the
fuel consumption of its vehicles while enhancing their perfor-
mance — and thus increasing driving enjoyment and safety.
As early as 2015, we were able to reduce the CO2 emissions of
newly registered vehicles from Mercedes-Benz Cars in the
European Union to an average of 123 g/km. This means we
achieved our 2016 target of 125 g/km ahead of schedule.
We were able to maintain the figure of 123 g/km in 2016 as
well, despite the fact that our sales structure in the European
Union shifted to a higher proportion of mid-sized and large
vehicles. This achievement was made possible by technical
innovation. We further reduced the CO2 emissions of the
individual models through continual improvements to our com-
bustion engines and the use of extremely efficient hybrid
drive systems. Our efforts are supported here by new and very
economical models with lightweight designs and significantly
improved aerodynamics, allowing us to exploit further fuel-saving
potential. E page 130

188 C | THE DIVISIONS | DAIMLER TRUCKS

Daimler Trucks

In financial year 2016, the focus at Daimler Trucks was on megatrends of the future: connectivity
and electric drive. With the Mercedes-Benz Urban eTruck and the third-generation FUSO eCanter,
we presented new, locally emission-free vehicles for urban transport. Other topics included digital
services such as Mercedes-Benz Uptime and the Fleetboard Store for apps. In this way, we once
again underscored our ambition as a technology leader. We systematically strengthened our
global presence with our new sales and service organization for commercial vehicles in major growth
regions. And we continued to push forward with the use of intelligent platforms in 2016 with
the newly developed standardized connectivity hardware, the “Truck Data Center.”

Business development impacted by contracting markets
Daimler Trucks’ unit sales of 415,100 vehicles (2015: 502,500)
were significantly below the high level of the previous year.
Revenue decreased to €33.2 billion (2015: €37.6 billion) and
EBIT fell to €1.9 billion (2015: €2.6 billion). The division’s
return on sales was 5.9% (2015: 6.9%). Overall, the development
of business last year was affected by significant market
contraction in many regions. Daimler Trucks is systematically
continuing the efficiency-enhancing actions initiated in 2012
with “Daimler Trucks #1.” In order to further strengthen our
competitiveness, we will continue optimizing our fixed costs,
in particular at the Mercedes-Benz brand. Our goal is to bring
Daimler Trucks to the targeted level of profitability.

Unit sales below high prior-year level
Against the backdrop of shrinking truck markets, our unit sales
decreased in most of our regions. We sold a total of 415,100
trucks in 2016 (2015: 502,500). There was positive market
impetus in the EU30 region (European Union, Switzerland
and Norway), although with decreasing dynamism in the second
half of the year. Our unit sales there increased by 4% to
79,800 vehicles. Our Mercedes-Benz brand maintained its mar-
ket leadership in the medium- and heavy-duty segment with
a share of 21.6% (excluding the United Kingdom) (2015: 22.4%).
Our sales in Turkey fell by more than 50% to 9,300 units
(2015: 24,900). This drastic decline is the result of weaker demand
due to the introduction of the Euro VI emission standard at
the beginning of 2016 as well as the country’s difficult situation.

C.03
Daimler Trucks

€ amounts in millions

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant, and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

Employees (December 31)

2016

2015

16/15

Change in %

33,187

1,948

5.9

1,243

37,578

2,576

6.9

1,110

1,265
57

411,265

415,108

78,642

1,293
26

506,663

502,478

86,391

-12

-24

+12

-2
+119

-19

-17

-9

C.04
Unit sales of Daimler Trucks

In thousands

Total

EU30

thereof Germany

United Kingdom

France

NAFTA region

thereof United States

Latin America (excluding Mexico)

thereof Brazil

Asia

thereof Japan

Indonesia

For information purposes:

BFDA (Auman Trucks)

Total (including BFDA)

2016

2015

16/15

Change in %

415

146

122

125

493

502

192

167

148

572

-17

-2

-10

+13

-24

-27

-10

-26

-15

-13

+13

-14

C | THE DIVISIONS | DAIMLER TRUCKS 189

The Mercedes-Benz Urban eTruck: goods transport in the city, emission free and quiet.

Our unit sales in Latin America continued to be impacted
by the ongoing deep recession in Brazil and were once again
significantly lower than in the previous year at 27,500 units
(2015: 30,500). In Brazil, our main market in the region, our
Mercedes-Benz brand trucks achieved market leadership
and increased their share of the medium- and heavy-duty
segment to 29.8% (2015: 26.7%). Daimler has been active in
Brazil for 60 years and Mercedes-Benz do Brasil is the biggest
manufacturer of trucks and buses in Latin America. But in
view of the further market contraction, we were obliged to take
steps to adjust our production capacities in Brazil, mainly
through a program of voluntary severance packages. Irrespec-
tive of the currently difficult situation, we believe in the
long-term viability of the important Latin American market.

In the NAFTA region as well, we were unable to escape the
impact of the sharply contracting market for Class 8 trucks.
We reacted to the market changes already in the first half of
the year and reduced the workforce at our plants in North
America. Sales of 145,700 trucks (2015: 191,900) were signifi-
cantly lower than the unusually high number sold in the
previous year. In classes 6-8, we are the market leader by
a large margin with a share of 39.3% (2015: 39.4%). In class 8
(heavy-duty trucks), we increased our market share to 40.0%
(2015: 39.3%). We are very successful in the North American
market, especially with our integrated powertrains.
Approximately 95% of the trucks we sold in the heavy-duty
segment in the United States and Canada were fitted with
our integrated heavy-duty engines. Since last year, the DD5
medium-duty engine produced in Mannheim has also been
available for customers in North America. Local production
of the DD5 in Detroit for the North American market will

start in 2018. We were able to increase the percentage of
Freightliner Cascadia and Western Star 5700 XE trucks fitted
with the DT12 automatic transmission in the United States
and Canada to approximately 65%. Our Thomas Built Buses
brand had its 100th anniversary in the year 2016. Thomas
Built Buses is one of the leading manufacturers of school buses
in North America.

Our unit sales in Japan increased to 46,400 vehicles (2015:
45,600). With the FUSO brand, we increased our share of
the overall Japanese truck market to 20.4% (2015: 20.8%). In
the Indonesian market, which once again contracted sharply,
our unit sales fell to 28,000 vehicles (2015: 32,100). But with
a 46.7% share of the overall truck market (2015: 48.0%), we
continue to be the market leader by a large margin with the
FUSO brand. We have further strengthened our strategic posi-
tion in Indonesia. In the future, our sales partner P.T. Krama
Yudha Tiga Berlian Motors (KTB) will focus solely on the sale of
FUSO commercial vehicles and will transfer its car business
to a separate legal entity. Our Asian subsidiary Mitsubishi Fuso
Truck and Bus Corporation (MFTBC) increases its interest
in KTB from 18 to 30%. Until now, we have mainly sold light- and
medium-duty trucks of the FUSO brand in Indonesia. In addi-
tion, our subsidiary P.T. Mercedes-Benz Distribution Indonesia
(MBDINA) will also sell new models of heavy-duty Mercedes-
Benz trucks in the future; the first deliveries are already planned
for the first quarter of 2017. In the medium term, we will
produce our trucks from CKD kits at the Mercedes-Benz plant
in Wanaherang, Indonesia.

190 C | THE DIVISIONS | DAIMLER TRUCKS

The new FUSO eCanter is already the third generation of the world’s first light-duty truck powered solely by electricity.

In India, our unit sales of 13,100 trucks were below prior-year
level (2015: 14,000); with our BharatBenz trucks, we achieved
a market share of 6.8% (2015: 7.3%). Deliveries of the export
vehicles produced in Chennai to markets in Asia, Latin America
and Africa more than doubled to over 4,000 units in 2016.
Meanwhile, more than 30 markets are already supplied with
trucks from Chennai. Our sales in the Middle East decreased
significantly to 17,600 vehicles (2015: 36,300). The main
reasons for the sluggish investment there in 2016 were low
oil prices and the ongoing conflict in the region.

Daimler Trucks further expands its global presence
In the NAFTA and EU30 regions (excluding the United King-
dom), Daimler Trucks is already very well positioned as
the market leader. We continued to push forward with the
regionalization of our sales-and-service organization for
the commercial vehicle business in major growth regions.
Within seven months, we opened six regional centers
for the Middle East and North Africa, East, Central and West
Africa, Southern Africa, Southeast Asia, Latin America
and South Asia. With the new regional centers, we are focusing
even more in those regions on the specific local features
of the truck business and are therefore even closer to the

customers and markets there. In China, the world’s biggest
truck market, Daimler AG has a 50% interest in Beijing Foton
Daimler Automotive Co. Ltd. (BFDA), a joint venture with Beiqi
Foton Motor Co. Ltd. Medium- and heavy-duty trucks of the
Auman brand have been produced there since mid-2012. With
the recovery of the Chinese truck market in 2016, the joint
venture increased its sales of Auman trucks to 77,800 units
(2015: 69,200). More than 380,000 Auman trucks have been
sold since the joint venture started operations.

Highly efficient products – today and in the future
With the world premiere of the Urban eTruck E page 42 in
September 2016, Mercedes-Benz Trucks linked the two future
topics of digitization and electric mobility and provided an
outlook on the connected and fully electric truck of tomorrow.
The locally emission-free truck for heavy distribution trans-
port with a gross vehicle weight of up to 26 tons has a battery
pack with a total capacity of 212 kilowatt hours, allowing
a range of approximately 200 kilometers. Market launch is
conceivable early in the next decade. Following the start of a
one-year fleet test of five battery-powered FUSO Canter E-Cell
trucks in Germany in April, we presented the third generation
of the world’s first purely electric light truck: the new eCanter
E page 42. It benefits from the extensive experience gained
during customer tests with the previous generation and will be
delivered to customers in Europe, the United States and Japan

in a small series starting this year. We offer improved fuel
consumption also with our Mercedes-Benz series products.
After the further development of the Mercedes-Benz OM 471
engine in 2015, fuel efficiency has now improved again also for
the latest generation of the OM 470 engine. The fuel con-
sumption of the Actros with the OM 470 has been reduced by
up to 5% as a result of modifications to the engine and drive-
train. And also with the OM 471, the fuel consumption of the
Actros can be reduced by up to 6% compared with the
previous engine due to engine modifications as well as opti-
mized aerodynamics and drivetrain. In addition, we have
pushed forward with our activities relating to the so-called
integrated approach. Together with trailer manufacturer
Krone, Mercedes-Benz presented a highly efficient semi-trailer
truck at IAA Commercial Vehicles 2016; its fuel consumption
and CO2 emissions are up to 20% lower than those of a semi-
trailer truck of 2014. The optimizations of the integrated
approach were tested with five customers on the so called
Efficiency Run 2016. The integrated approach includes all
parties involved with goods transport by road to achieve its
CO2 goals: truck manufacturers, bodybuilders, tire suppliers,
logistics companies and political decision makers. The
initiative was presented for the first time at IAA Commercial
Vehicles 2014.

C | THE DIVISIONS | DAIMLER TRUCKS 191

Mercedes-Benz gets nearer to the vision of
accident-free driving
At IAA Commercial Vehicles in September 2016, Mercedes-
Benz presented two new safety systems which are unique
in the market: Active Brake Assist 4 is the first system of its
kind in the world; it warns the driver of an impending collision
with pedestrians and automatically initiates partial braking.
Mercedes-Benz is also the first truck manufacturer to launch
Sideguard Assist with person recognition. It is the first assis-
tance system on the market that protects pedestrians and
cyclists from trucks turning left or right. Active Brake Assist 4
and Sideguard Assist have been available for selected models
since late 2016.

New products and services relating to connectivity
In September, we presented the new flagship for the heavy-
duty class 8: the Freightliner Cascadia. The new Cascadia
has made significant progress in terms of connectivity, fuel
efficiency and safety. With the new connectivity platform,
Detroit Connect Analytics, customers can access automated
analyses of fuel efficiency and safety. Thanks to its aerody-
namic design and integrated Detroit powertrain, the new Cas-
cadia achieves fuel efficiency up to 8% better than a 2016
Cascadia Evolution. With the new full-LED system, the new
Cascadia offers a significantly larger field of vision in conditions
of poor visibility. And the optional safety package Detroit
Assurance 4.0 includes Active Brake Assist. Deliveries of the
new Freightliner started in January 2017. In order to expand

The new Freightliner Cascadia once again sets standards for connectivity and fuel efficiency.

192 C | THE DIVISIONS | DAIMLER TRUCKS

the range of Detroit Connect connectivity services with new
features, Daimler Trucks North America (DTNA) is cooperating
with AT&T and Microsoft. AT&T will provide its mobile-tele-
phony service for Detroit Connect, and we are cooperating
with Microsoft on the development of a new cloud-based
back-office environment for Detroit Connect services.

In Europe, we are using intelligent connectivity to increase
vehicle availability with the new service product Mercedes-
Benz Uptime, which has been available in selected markets
for the Actros, Arocs and Antos since IAA Commercial Vehicles
2016. Mercedes-Benz Uptime continuously checks vehicle
systems and offers customers three key advantages: It can
avoid time off the road, makes the management of repairs
and maintenance more efficient, and supports the customers’
maintenance activities in real time. With the new FleetBoard
Store, we presented our marketplace for apps at IAA Commer-
cial Vehicles 2016. The platform has been designed to be
open so that industry partners such as bodybuilders and app
developers can contribute their own apps to make road
transport more efficient. The FleetBoard Store is open for
customers as of 2017.

Furthermore, Daimler Trucks is pushing forward with the
further development of autonomous driving. In the first half
of 2016, we presented a world premiere of three autono-
mously driving Mercedes-Benz trucks licensed for use on
public roads, which connected into a “platoon” via Wi-Fi.
E page 46 Autonomous trucks link up with other autonomous
trucks on the road to form a platoon. This saves fuel due to
the small gaps between the vehicles and the resulting lower
wind resistance, as well as reducing the space they need
on the highway.

Extension of our platform strategy
In addition to the expansion of global presence and technology
leadership, we systematically continued with the roll-out of
intelligent platforms and modules in 2016. The platforms for
drivetrain components for medium- and heavy-duty engines
and automated transmissions have already been launched
successfully. In 2016, Daimler Trucks extended its platform
strategy to the chassis, which will be used across brands in
the Mercedes-Benz Actros and the new Freightliner Cascadia,
and to a uniform electric/electronic architecture. With the newly
developed connectivity hardware, the Truck Data Center,
we introduced a standardized component in 2016 that will
be applied across our Daimler Trucks brands. The Truck Data
Center is the heart of the connected truck where all real-time
data is received and transmitted. It is already being applied
through Detroit Connect Analytics in the new Freightliner
Cascadia and through FleetBoard in Mercedes-Benz trucks.
The Truck Data Center will also be installed in FUSO trucks
as of spring 2017.

Awards for Daimler Trucks vehicles
Our products received a large number of awards once again
last year. In the readers’ poll carried out by the ETM publishing
house, our trucks Mercedes-Benz Atego, Antos, Actros
and Arocs took first place in their respective categories. The
editors of the trade magazines “Verkehrs-Rundschau” and
“Trucker” gave the Mercedes-Benz Actros 1845 the Green
Truck Award 2016. And for the twelfth time in succession,
the Mercedes-Benz Unimog was voted the best off-road
vehicle of the year in the “special vehicles” category by the
readers of “Off Road” magazine.

C | DIVISIONS | MERCEDES-BENZ VANS 193

Mercedes-Benz Vans

Mercedes-Benz Vans continued its success story of recent years, setting a new record for unit
sales in 2016. The division’s earnings also reached an all-time high. Growth was primarily driven
by the mid-size segment with the Vito van and the V-Class multipurpose vehicle. The market
launches of the V-Class and Vito in China marked new milestones for our “Mercedes-Benz Vans
goes global” growth strategy. We are continuing to implement this strategy by expanding our
product range to include the new X-Class – the world’s first premium pickup. With its future-oriented
“adVANce” initiative, Mercedes-Benz Vans is also increasingly transforming itself from a manu-
facturer of globally successful vans into a provider of holistic system solutions.

New records for unit sales, revenue and EBIT
Mercedes-Benz Vans set a new sales record once again in
financial year 2016, with an increase of 12% to 359,100 units.
At €12.8 billion, revenue was also significantly higher than
in the previous year (2015: €11.5 billion). EBIT rose by 33% to
the new record level of €1,170 million.

Continued growth
Mercedes-Benz Vans’ products remained very successful in
financial year 2016. Our Sprinter, Vito and Citan vans are
mainly tailored to commercial customers, while the V-Class
is designed primarily for private use.

Unit sales in the EU30 region, our most important market, rose
by 13% to 249,900 vans in the year under review. Particularly
significant increases were recorded in Italy (+46%), the Nether-
lands (+27%), Austria (+27%), Sweden (+21%), Spain (+20%)
and Poland (+26%), and Mercedes-Benz Vans posted strong
growth also in several key European volume markets. In
Germany, we set a new sales record with 96,100 units (2015:
88,400). In the United Kingdom, we increased unit sales
by 4% to 36,700 vehicles. However, unit sales declined signifi-
cantly in Russia (-15%) and Turkey (-7%).

At the same time, Mercedes-Benz Vans continued to grow
in the NAFTA region, where sales rose sharply to 43,400 units
(2015: 40,500). We set a new sales record with 33,700 units
(2015: 32,400) in the United States, where the new Metris also
contributed to our sales success.

The market environment in Latin America remained difficult
during the year under review. Sales in the region fell by 21%
to 12,500 units. Sales in China rose by 90% following the suc-
cessful launch of our new vehicles in the mid-size segment.

C.05
Mercedes-Benz Vans

€ amounts in millions

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

Employees (December 31)

2016

2015

16/15

% change

12,835

1,170

9.1

373

442
238

11,473

880

7.7

202

384
153

368,574

359,096

24,029

328,129

321,017

22,639

+12

+33

+85

+15
+56

+12

C.06
Unit sales by Mercedes-Benz Vans

Total

EU30

thereof Germany

NAFTA region

thereof United States

Latin America (excluding
Mexico)

Asia

thereof China

Other markets

2016

2015

16/15

% change

359,096

249,860

96,130

43,354

33,749

12,497

22,526

13,636

30,859

321,017

221,989

88,380

40,519

32,376

15,750

11,781

7,178

30,978

+12

+13

-21

+91

+90

-0

194 C | THE DIVISIONS | MERCEDES-BENZ VANS

We sold a total of 193,400 units of the Sprinter worldwide
in 2016 (2015: 194,200). Sales of vehicles in the mid-size
segment were significantly higher than in the previous year,
totaling 140,800 units in the year under review (2015: 105,100).
Sales of Vito models for commercial use rose by 24% to 92,100
vehicles, while sales of the Mercedes-Benz Citan reached
24,900 units (2015: 21,700). The V-Class multipurpose vehicle
remains very popular with our customers; sales of the model
rose by 58% to 48,700 units in the year under review.

Our Sprinter remains extremely popular around the world,
and especially in North America. So that we can supply custom-
ers in North America with the next-generation Sprinter more
rapidly and in a more individualized and economical manner in
the future, we are currently building a new production plant
in North Charleston, South Carolina in the United States. We
broke ground for the new facility in July 2016. Mercedes-Benz
Vans is investing roughly half a billion dollars in the new van
plant and will create up to 1,300 new jobs there.

Three million units of the iconic van sold to date:
ongoing success of the Sprinter
Mercedes-Benz Vans achieved yet another milestone with its
successful Sprinter van in March. Since the model’s launch
in 1995, we have delivered three million units of the “global
van” to customers. The large van is now on the road in more
than 130 countries. The milestone Sprinter was transformed
into a HYMER ML-T premium camper van by Hymer, a
Mercedes-Benz Vans bodybuilder partner. The camper van
segment is becoming increasingly important for Mercedes-
Benz Vans, and the Sprinter is already the number one
high-end comfort camper van. It is also increasingly in demand
as the base vehicle for partially and fully integrated camper
vans.

The three-millionth Sprinter rolled off the line at our Ludwigs-
felde plant, which is one of six Sprinter manufacturing facilities
worldwide. Ludwigsfelde is also the third-largest van plant in
our international production network, and the only European
manufacturing facility that builds the open versions of the
Sprinter (flatbed trucks and chassis) for use with a wide variety
of body types. In February 2016, the plant had its 25th anni-
versary as a successful manufacturing location for Mercedes-
Benz Vans in the former East Germany. A total of more than
700,000 vans were built in Ludwigsfelde between 1991 and the
end of 2016.

We are working continually to increase the appeal of the
Sprinter for our customers. In April, for example, Mercedes-
Benz Vans presented a Sprinter with a higher gross vehicle
weight and two new entry-level engine options. The new vari-
ant of our bestselling van now has a GVW of up to 5.5 metric
tons, which makes it even more attractive to bodybuilders
and vehicle conversion specialists. The new entry-level engines
have an output of 84 kW/114 hp (fuel consumption in l/100 km:
urban 11.0–10.8/extra-urban 7.1–6.9/combined 8.6–8.4;
CO2 emissions in g/km: combined 224–219) and 105 kW/143 hp
(fuel consumption in l/100 km: urban 10.0–9.8/extra-urban
7.2–7.1/combined 8.3–8.1; CO2 emissions in g/km: combined
218–213).

V-Class variety: a sportier and more luxurious
multipurpose vehicle
At the beginning of 2016, Mercedes-Benz Vans expanded the
wide range of optional equipment for the V-Class once again.
With the introduction of the V-Class AMG Line, the multipur-
pose vehicle now features prominent design elements from
the Mercedes-AMG high-performance and sports car brand.
The V-Class EXCLUSIVE boasts a broad range of exclusive
equipment that raises the style, comfort and functionality of
the V-Class to an even higher level.

The Sprinter: Its name defines its category – now with a more powerful basic engine and up to 5.5 tons gross vehicle weight.

C | THE DIVISIONS | MERCEDES-BENZ VANS 195

Concept X-CLASS: The concept vehicle presented in October 2016 provides an outlook onto the X-Class, which will be launched in late 2017.

Mercedes-Benz Vans goes global: mid-size portfolio now
successful also in China
With the launch of the V-Class multipurpose vehicle and the
Vito van in China, we have taken another major step forward with
our “Mercedes-Benz Vans goes global” growth strategy.
Customer deliveries of the V-Class in China began in the spring
of 2016, with the Vito following in the fall. As a result, we
now offer our complete mid-size vehicle program in the world’s
biggest automotive market. Both vehicles are “made in China
for China” and manufactured by our local joint venture Fujian
Benz Automotive Co., Ltd. (FBAC) in Fuzhou.

Our plant in Vitoria, Spain, is also benefiting from the huge
global demand for the V-Class and the Vito. In response to the
tremendous sales success enjoyed by the two models,
Mercedes-Benz Vans created additional capacity in Vitoria by
introducing a third shift at the plant in October. A total of
approximately €260 million has been invested in the produc-
tion of the current generations of the two models in Vitoria.

The Mercedes-Benz X-Class is coming: the world’s first
premium pickup for urban lifestyles
With the presentation of two design variants of its Concept
X-CLASS in October 2016, Mercedes-Benz Vans provided
a clear preview of the world’s first premium pickup – the
Mercedes-Benz X-Class. Our pickup will reflect the core
Mercedes values in terms of everything from brand-typical
design and comfort to handling and safety. We will thus
become the first premium manufacturer to take into account
changing customer requirements in the global growth segment
for mid-size pickups. As a result, the tough one metric-ton
model with seating for up to five persons will be the first
pickup capable of attracting interest as an urban lifestyle
and family vehicle. The X-Class will thus close one of the last
gaps in the Mercedes-Benz vehicle lineup. The model will
initially be launched in Europe in late 2017. It will then be
launched in other core markets such as Argentina, Brazil,
South Africa, Australia and New Zealand in 2018.

Mercedes-Benz Vans is a leader in the transformation of
the transportation sector
Mercedes-Benz Vans presented its adVANce strategic initiative
in September 2016. The division is thus systematically focusing
on new, quickly changing customer needs. By 2020, we will
have invested some €500 million in digitization, automation
and robotics for vans, as well as in innovative mobility solu-
tions. As a result, Mercedes-Benz Vans be transformed from
a manufacturer of globally successful vans into a provider of
holistic system solutions. These solutions have the potential
to make the transportation of goods and passengers even more
efficient. They also offer our customers economic benefits and
completely new business opportunities. The all-electric and
thus locally emission-free “Vision Van” concept vehicle, which
was also presented in September, features a fully automatic
cargo area and integrated delivery drones, thus embodying the
holistic approach we are employing with adVANce. Mercedes-
Benz Vans has also announced plans to once again begin
series production of a battery-electric van in 2018. Back in 2011,
Mercedes-Benz Vans became the first manufacturer to pro-
duce an electric van in series production – the Vito E-Cell.

The first concrete measures implemented within the framework
of adVANce were the launch of the new Mercedes PRO
service brand and the establishment of Mercedes-Benz Vans
Mobility GmbH. With Mercedes PRO, Mercedes-Benz Vans
is enabling the seamless and efficient integration of numerous
service and mobility solutions, and thus setting the standard
for services for commercial van customers. The first half
of 2017 will see the launch of the Mercedes PRO connect inno-
vative connectivity solution for vehicle fleets. In addition,
Mercedes-Benz Vans Mobility GmbH offers holistic mobility
services and flexible solutions for the van segment as of 2017.

196 C | THE DIVISIONS | DAIMLER BUSES

Daimler Buses

Business development in 2016 was again negatively affected by the difficult economic situation in
Latin America, leading to a sharp decrease in unit sales. However, thanks to the positive develop-
ment of our business with complete buses, we were able to achieve a slight increase in revenue.
Earnings significantly surpassed the good level of the prior year, and achieved our target for return
on sales of 6%. As the leading bus manufacturer in its traditional core markets, Daimler Buses
focuses on innovative and forward-looking city buses and coaches. Our presentation of the Mercedes-
Benz Future Bus in 2016 marked a new milestone on our path to the mobility of the future.

C.07
Daimler Buses

€ amounts in millions

Revenue

EBIT

Return on sales (in %)

Investment in property,
plant and equipment

Research and
development expenditure
thereof capitalized

Production

Unit sales

Employees (December 31)

C.08
Unit sales by Daimler Buses

Total

EU30

thereof Germany

Latin America
(excluding Mexico)

thereof Brazil

Mexico

Asia

Other markets

2016

2015

16/15

% change

4,176

4,113

249

6.0

202
11

214

5.2

104

184
13

26,180

26,226

17,899

29,092

28,081

18,147

+16

-7

+10
-15

-10

-7

-1

2016

2015

16/15

% change

26,226

28,081

8,838

3,063

9,837

4,937

3,780

1,759

2,012

8,573

2,787

11,909

7,216

3,964

1,030

2,605

-7

+10

-17

-32

-5

+71

-23

Earnings significantly above the prior-year level
Daimler Buses sold 26,200 buses and bus chassis worldwide
in financial year 2016 (2015: 28,100). This significant decrease
in unit sales was largely due to the ongoing poor economic
situation in Brazil. Nevertheless, the division was able to main-
tain its clear leading position in its traditional core markets,
i.e. the EU30 region, Brazil, Turkey, Argentina and Mexico. Sales
of complete buses in the EU30 region were once again higher
than in the prior year. Revenue rose slightly from the prior year
(+2%), while EBIT increased substantially to €249 million
(2015: €214 million).

Varied business development in core regions
In the EU30 region, the Daimler Buses brands Mercedes-Benz
and Setra offer a full range of city buses, intercity buses
and coaches, as well as bus chassis. Thanks to a significant
improvement in our business with complete buses, sales
in the region increased by 3% to 8,800 units. Strong demand
for our Mercedes-Benz and Setra buses led to an increase
in sales in Germany to 3,100 units (2015: 2,800). Daimler Buses
also further expanded its leading position in the EU30 region
with a market share of 29.7% (2015: 29.5%). At 600 units, sales
in Turkey were significantly lower than in the prior year (2015:
1,000) due to the difficult situation in that country. The ongoing
economic difficulties in Latin America (excluding Mexico),
especially in Brazil, led to a significant further deterioration in
the region, with the Brazilian bus market reaching its lowest
point for many years in 2016. Sales of Mercedes-Benz bus chassis
in Brazil declined by double digits once again (-32%) to 4,900
units. Nonetheless, we were able to significantly expand our
leading position in Brazil to a market share of 58.4% (2015:
52.5%). At 3,800 units (2015: 4,000), sales in Mexico were
slightly lower than in the previous year.

C | THE DIVISIONS | DAIMLER BUSES 197

The ComfortClass 500 from the Setra brand stands for a versatile bus concept meeting high requirements in terms of economy,
safety and flexibility in an exemplary manner.

The Mercedes-Benz Citaro NGT powered by natural gas features significantly reduced CO2 emissions.
When running on organic natural gas, it is virtually CO2 neutral.

198 C | THE DIVISIONS | DAIMLER BUSES

Daimler Buses is a pioneer in autonomous driving
Daimler Buses, a leading provider of mobility solutions, achieved
a major milestone on the road to autonomous urban driving
in 2016. In July, the Mercedes-Benz Future Bus with CityPilot
drove partially autonomously for the first time on a public road
that is part of the BRT (Bus Rapid Transit) route in Amsterdam.
The key technical component of the Future Bus is the CityPilot,
which is based on the Highway Pilot system presented two
years ago in the autonomous version of the Mercedes-Benz
Actros truck. Highway Pilot technology was extensively
enhanced for the specific application in a city bus, and several
new features were added. With its numerous cameras and
sensors, the city bus can recognize and communicate with
traffic lights, can brake and accelerate on its own, react
autonomously to obstacles and pedestrians, and drive up to
bus stops. Through this intelligent networking of assistance
systems, Daimler Buses has been able to improve the efficiency
of city buses, notably by lowering their fuel consumption. In
addition, the networked technology makes things easier for bus
drivers in stressful city traffic and also enhances safety. The
Future Bus thus marks another step toward the vision of acci-
dent-free driving. With this forward-looking design, integrated
infotainment systems and e-ticketing solutions, Daimler Buses
is also demonstrating how city buses can be made even more
attractive and comfortable for passengers. Daimler Buses will
invest approximately €200 million in the further development
of its city bus lineup between now and 2020.

Expansion of innovative services
Daimler Buses will continue expanding its range of innovative
services that offer real added value to customers. Our goal
is to reduce downtime and maintenance requirements and
optimize the total cost of ownership even further. With this in
mind, Daimler Buses established a new unit known as Mobility
Solutions in 2016. The new team is responsible for the further
development of existing business models, as well as the devel-
opment of entirely new mobility solutions for the international
bus business. The team also addresses the challenges faced
by the passenger transport sector as a result of trends such
as increasing urbanization and drive-system electrification.

Innovations at IAA Commercial Vehicles 2016
At the trade exhibition IAA Commercial Vehicles 2016, Daimler
Buses presented a comprehensive range of solutions for future
bus mobility as provided by its Mercedes-Benz and Setra
product brands and its OMNIplus and BusStore service brands.
Along with the partially autonomous Mercedes-Benz Future
Bus with CityPilot, the highlights included the natural-gas pow-
ered Mercedes-Benz Citaro NGT city bus and a new locally
manufactured Mercedes-Benz school bus for the Indian market.
The IAA presentation also focused on innovative services
such as a new tele-diagnosis system for the 24-hour service
program, which can significantly reduce downtime in the
event of a breakdown.

Further efficiency gains and the roadmap for alternative
drive systems
Daimler Buses has been able to further improve the fuel effi-
ciency and environmental compatibility of its products through
the use of innovative technologies. We are working continually
on the further optimization of the combustion engine. Fuel savings
of up to 8% have already been achieved through the launch of
Euro VI bus models. And use of the latest generation of the
OM 470 and OM 471 diesel engines, as well as vehicle-related
measures, have led to a further reduction in fuel consumption
and CO2 emissions of up to 4%. The Mercedes-Benz Citaro
NGT natural-gas city bus represents another milestone on the
road to emission-free driving. The CO2 emissions of the
Mercedes-Benz natural-gas engine are up to 10% lower than
those produced by a diesel engine. When organic natural gas
is used as fuel, the bus is virtually CO2 neutral, with emissions
well below the limits stipulated by the Euro VI emissions
standard in some cases. Daimler Buses also continues to imple-
ment its roadmap for alternative drive systems. Among other
things, the roadmap calls for the launch of series production
of the Citaro E-Cell electric city bus in 2018. Daimler Buses
is also developing a holistic system for providing customers
with advice on electric mobility issues. The goal here is to offer
customers products that are perfectly tailored to their needs
and to local aspects such as existing infrastructure, route
arrangements, topography and vehicle-range requirements.

New Mercedes-Benz Travego coach with an efficient
combustion engine
In 2016, Daimler Buses presented a new forward-looking
coach for the Turkish market – the Mercedes-Benz Travego
15 SHD. This new Travego has a length of 12 meters and can
accommodate 46 passengers. The bus is powered by an
OM 470 Euro VI engine with Bluetec technology. This engine is
more efficient than previous engine models and also further
reduces both exhaust gas emissions and fuel consumption.
In addition, the new Travego underscores Daimler Buses’ tech-
nology leadership in the area of accident-free driving, as the
coach features numerous safety systems as standard equipment,
including AEBS 3 (anticipatory emergency braking system),
ACC (Adaptive Cruise Control), SPA (Lane Assistant) and FCG
(Front Collision Guard).

Numerous awards for Daimler Buses
At the end of the year under review, the Mercedes-Benz
Future Bus received the Sustainability Award 2017 from the
busplaner trade journal in the category Technology/Urban
Regular-Service Bus. The award is presented to manufacturers
with outstanding products and ideas that make a verifiable
contribution to environmental protection and thus to sustain-
ability around the world. In addition, a reader survey con-
ducted by EuroTransportMedia-Verlag resulted in first-place
finishes for the Mercedes-Benz Citaro in the Urban Regular-
Service Bus category and for the Mercedes-Benz Tourismo in
the Midibus category. The Setra TopClass 500 HDH came out
on top in the High-deck Coach Category. Finally, Daimler Buses
Latin America was presented with the 2016 Latin American
Bus and Coach Chassis Price/Performance Value Leadership
award by the Frost & Sullivan corporate consulting firm.

C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES 199

Daimler Financial Services

The number of cars and commercial vehicles financed or leased by Daimler Financial Services
reached a new all-time high of more than 4.3 million at the end of financial year 2016. New
business and contract volume also rose once again, and the combination of sales financing with
brokered automotive insurance policies continued to gain in importance as well. During the
year under review, we further expanded our range of innovative mobility services. car2go increased
its customer base to more than 2.2 million in 2016, while mytaxi, after merging with Hailo,
now has approximately six million customers and more than 100,000 drivers in its taxi network,
which is the largest in Europe.

C.09
Daimler Financial Services

€ amounts in millions

Revenue

EBIT

New business

Contract volume

2016

2015

16/15

% change

20,660

1,739

61,810

18,962

1,619

57,891

132,565

116,727

+14

+23

+21

Investment in property,
plant and equipment

Employees (December 31)

12,062

9,975

Nearly half of all vehicles delivered to customers
are financed or leased by Daimler Financial Services
During the year under review, Daimler Financial Services
concluded 1.6 million new financing and leasing contracts worth
a total of €61.8 billion. The total value of all new contracts
rose by 7% compared with the previous year. The sales and
leasing activities at Daimler Financial Services supported
approximately half of all new-vehicle sales by our automotive
divisions in 2016. More than 4.3 million financed or leased
vehicles were on the books at the end of 2016; this corresponds
to a 14% increase in contract volume to €132.6 billion. The
acquisition of Athlon Car Lease International accounted for
€3.7 billion of the increase in contract volume. Adjusted
for Athlon and exchange-rate effects, the increase amounted
to 10%. EBIT rose to a new high of €1,739 million (2015:
€1,619 million).  C.09

Significant increase in new business in Europe
During the year under review, Daimler Financial Services
concluded approximately 840,900 new financing and leasing
contracts worth €26.9 billion (+9%) in the Europe region.
Particularly high rates of growth were recorded in Spain (+29%)
and Italy (+25%). In Germany, Mercedes-Benz Bank’s new
business increased by 11% to €11.9 billion; the volume of deposits
in the direct banking business totaled €11.5 billion (+11%).
During the year under review, Daimler Financial Services’ total
contract volume in Europe rose by 17% to €53.4 billion; this
development was due in part to the acquisition of Athlon Car
Lease International.

Slight decrease in new business in North and
South America
Daimler Financial Services brokered about 447,200 new
financing and leasing contracts worth €21.5 billion in North
and South America in 2016 (-2%). New business was thus
slightly below the figure for the prior year; this decrease was
largely due to a decline in business in Brazil and Argentina.
However, business developed very positively in Mexico (+9%).
All in all, contract volume in the Americas rose by 7% to €54.2
billion in the year under review.

200 C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES

True to the motto of “Mobility at your fingertips,” Daimler Financial Services is a leader in the provision of digital mobility services.

Strong growth in new business in Africa &
Asia-Pacific region
New business in the Africa & Asia-Pacific region increased
sharply once again in the reporting year, by 18% to €13.3 billion.
Business development was especially strong in China (+25%)
and Japan (+23%). At the end of 2016, contract volume in the
Africa & Asia-Pacific region totaled €24.9 billion, which corre-
sponds to a 23% increase over the previous year.

Ongoing high level of insurance business
Daimler Financial Services brokered approximately 1.8 million
insurance policies in 2016, in line with the high level of the
previous year. Our insurance business continued to be successful
in China, where an average of 75% of Daimler vehicles were
delivered with an insurance policy brokered by us. In 2016, the
newly founded Mercedes-Benz Versicherung AG started
with great success in Germany. More than 150,000 warranty-
extension contracts were concluded in its first year.

Continued success for mobility services
Daimler Financial Services once again expanded its range of
innovative mobility services in 2016. The number of customers
using the car2go car sharing service increased to more than
2.2 million, thereby enabling car2go to maintain its position as
the world’s leading flexible car sharing company. car2go began
operating also in China in 2016, and 140,000 customers are now
using the service in the metropolis of Chongqing. In addition,
car2go has expanded its fleet to include Mercedes-Benz brand
vehicles in Berlin, the Rhineland, Munich, Hamburg and
Frankfurt.

We also further developed our moovel app in 2016. moovel
allows customers in Germany to compare various mobility and
transport-system options and then choose the best way to
get from point A to point B. The app can also be used to book
and directly pay for services provided by companies such as
car2go, mytaxi and Deutsche Bahn. In April, Hamburg was inte-
grated into the moovel app as the first city with more than
one million inhabitants. moovel users in Hamburg can now book
and pay for trips taken throughout the city’s entire public
transport network. The moovel Group also consolidated its
activities in North America in the second quarter of 2016 by
merging Globe Sherpa and RideScout and renaming the merged
company moovel North America. With moovel transit, moovel
North America is the leading provider of mobile ticket solutions
for the apps of public transport companies in the United States.
moovel has a total of more than 2.2 million users.

C | THE DIVISIONS | DAIMLER FINANCIAL SERVICES 201

In July 2016, mytaxi and Hailo – two leading app-based taxi
ordering services – joined forces to create a new merged
company that has linked 100,000 drivers in more than 50 cities
and nine countries to create Europe’s largest taxi network,
which now serves approximately six million customers. The
company has its headquarters in Hamburg and operates under
the mytaxi brand name. In the third quarter of 2016, Daimler
increased its stake in the exclusive Blacklane chauffeur service
portal to 31% in order to further expand its global limousine
services business. Blacklane currently operates limousine
services in approximately 250 cities in more than 50 countries,
as well as at 500 airports.

Fleet business expanded through the acquisition of Athlon
Daimler Fleet Management brokered a total of 53,000 new
vehicles to commercial fleet customers in 2016, equivalent to
growth of 9% compared with the previous year. In addition,
Daimler Financial Services invested strategically in the European
multi-brand fleet management sector at the beginning of
December by acquiring Athlon Car Lease International from
the DLL Group, which is part of Rabobank in the Netherlands.
At the end of December, Athlon had a contract volume of
€3.7 billion and managed 268,000 vehicles. With the acquisition
of Athlon, Daimler Financial Services has repositioned itself
as a broad-based international provider of multi-brand fleet
management services. In the future, all fleet management
operations are to be carried out under the Athlon brand name.
With the inclusion of the Athlon portfolio, Daimler Financial
Services had a total of 361,000 contracts with fleet customers
on its books in Europe at the end of 2016.

Focus on customer and employee satisfaction
Customer and employee satisfaction is a top priority at Daimler
Financial Services. In 2016, independent surveys once again
showed that we are a leader in numerous countries around the
world with regard to customers’ and dealers’ assessments of
our service quality. In the United States, Mercedes-Benz Financial
Services once again finished at the top in three categories
of a J.D. Power study of dealer satisfaction. The basis for these
and many other successes is formed by our highly motivated
employees. In many countries, Daimler Financial Services also
ranked among the top companies in the independent Great
Place to Work Institute survey to determine the world’s best
employers. Daimler Financial Services made it onto the list of
the 25 best multinational employers worldwide for the second
time in October 2016, finishing in fifth place.

Toll Collect system successfully expanded
The automatic system for truck-toll collection on German
autobahns and selected federal highways continued to operate
smoothly and reliably in 2016. The system recorded a total of
32.5 billion kilometers driven in the year under review. Daimler
Financial Services holds a 45% equity interest in the Toll Collect
consortium. The Federal Republic of Germany has collected
a total of more than €48 billion in tolls since Toll Collect went
into operation at the beginning of 2005. In June 2016, Toll Collect
was contracted to develop and implement the required modi-
fications to the existing toll system so that tolls can be collected
on all federal highways as of July 2018.

Whether online or in direct dialog – customers of Daimler Financial Services can conveniently find out about financing and
leasing offers on all channels.

We act responsibly and sustainably

The Board of Management and the Supervisory Board of Daimler
are committed to the principles of good corporate governance.
All of our actions take place within the framework of responsible,
transparent and sustainable corporate governance.

D | CORPORATE GOVERNANCE | CONTENTS 203

D | Corporate Governance

Report of the Audit Committee

204 – 206

– Responsibilities and composition
– Meetings and participants
– Topics dealt with

Declaration on Corporate Governance,
Corporate Governance Report

207 – 215

– Declaration of compliance with the German Corporate
Governance Code

D & O insurance deductible for the Supervisory Board
Targets for the composition of the Supervisory Board

– Corporate government in practice

German Corporate Governance Code
Principles of our actions
Guidelines for behaving with integrity
What we expect of our business partners
Risk management at the Group
Accounting principles

– Composition and mode of operation of the
Board of Management and the Supervisory Board
– Composition and mode of operation of the committees
of the Supervisory Board

Presidential Committee
Nomination Committee
Audit Committee
Mediation Committee

– Law on the equal participation of women and men

in executive positions

– Shares of and share transaction by the
Board of Management and the Supervisory Board
– Shareholders and the Annual Shareholders’ Meeting

204 D | CORPORATE GOVERNANCE | REPORT OF THE AUDIT COMMITTEE

Report of the Audit Committee

Dear Shareholders,

As Chairman of the Audit Committee, I am very pleased
to report to you on the tasks and activities performed by that
body in financial year 2016.

Responsibility
On the basis of applicable law, the German Corporate Gover
nance Code and the Rules of Procedure of the Supervisory
Board and its committees, the Audit Committee deals primarily
with questions of accounting and financial reporting. In addi
tion, it deals with the annual audit and reviews the qualifications
and independence of the external auditors. Furthermore, it
discusses the effectiveness and functional capabilities of the risk
management system, the internal control system, the internal
auditing system and the compliance management system. After
the external auditors are elected by the Annual Shareholders’
Meeting, the Audit Committee engages the external auditors
to conduct the annual audit and the auditors’ review of interim
financial statements, determines the important audit issues
and negotiates the audit fees with the external auditors.

Equal representation
Audit Committee Chairman Dr. Clemens Börsig and Joe Kaeser
served as the shareholder representatives on the Audit
Committee in financial year 2016. Both are independent and
have expertise in the field of financial reporting, as well as
special knowledge of and experience in the auditing of financial
statements and the application of methods of internal control.
During financial year 2016, the employees were represented
on the Audit Committee by Michael Brecht as the Deputy
Chairman of the Committee and by Dr. Sabine Maaßen. Dr. Sabine
Maaßen resigned from her position as a member of the Super
visory Board of Daimler AG, effective June 30, 2016, and thus
relinquished her membership in the Audit Committee as well.
In a meeting held on June 17, 2016, the members of the Super
visory Board elected Ergun Lümali as an employee represen
tative member of the Audit Committee, effective July 1, 2016.

Meetings and participants
The Audit Committee met six times in the financial year 2016.
All of these meetings were also attended by the Chairman
of the Supervisory Board, Dr. Manfred Bischoff, as a permanent
guest. The meetings were also attended by the Chairman of
the Board of Management, the members of the Board of Manage
ment responsible for Finance and Controlling and for Integrity
and Legal Affairs, and the external auditors. The heads of
specialist departments such as Accounting, Corporate Audit,
Group Compliance and Legal, as well as other experts,
were also present for the appropriate items of the agenda.

In addition, the Chairman of the Audit Committee held regular
individual discussions, for example with the external auditors,
the members of the Board of Management responsible for
Finance and Controlling and for Integrity and Legal Affairs,
and, if required, the heads of the specialist departments.
Such individual discussions were mainly held to prepare for
the next committee meetings.

Reporting to the Supervisory Board
The Chairman of the Audit Committee informed the Supervisory
Board about the activities of the Committee and about the
contents of its meetings and discussions in the following Super
visory Board meetings.

Topics in 2016
In a meeting held on February 3, 2016, the Audit Committee
dealt with the preliminary figures of the annual financial
statements and the annual consolidated financial statements
for the year 2015, as well as with the proposal on the appro
priation of profits made by the Board of Management. Following
an indepth review, the Audit Committee took positive note
of the presented figures and determined that no objections could
be made to their proposed publication. The Committee further
recommended that the Supervisory Board, which met imme
diately thereafter, adopt the same view. The preliminary key
figures and the proposal on the appropriation of profits were
announced at the Annual Press Conference on February 4, 2016.

In another meeting on February 16, 2016, the Audit Committee
dealt with the annual financial statements, the consolidated
financial statements and the combined management report for
Daimler AG and the Daimler Group for the financial year 2015,
each of which had been issued with an unqualified auditor’s
opinion by the external auditors, as well as with the proposal
on the appropriation of profits. At the meeting, the external
auditors reported on the results of their audit and were available

Dr. Clemens Börsig, Chairman of the Audit Committee

to answer supplementary questions and to provide additional
information. The audit reports on the annual company and
consolidated financial statements and on the internal control
system (ICS), the report on the risk management system for
the year 2015, the Annual Report 2015 and important issues
related to financial reporting were discussed with the external
auditors. Following an indepth review and discussion, the
Audit Committee recommended that the Supervisory Board
approve the financial statements and the combined management
report, and on this basis adopt the recommendation of the
Board of Management to pay a dividend of €3.25 per share
entitled to a dividend. Furthermore, the Audit Committee
approved the Report of the Audit Committee for the financial
year 2015.

Also in this meeting, the Audit Committee discussed the report
on the total fees paid to the external auditors in the financial
year 2015 for auditing and nonauditing services. The Audit
Committee also decided to recommend to the Supervisory Board,
and subsequently to the Annual Shareholders’ Meeting, that
KPMG be engaged to conduct the annual external audit and the
external auditors’ review of interim financial reports for the
financial year 2016. Among other things, the Audit Committee
based this recommendation on the quality of the annual audit
and the results of the independence review, for which no indica
tions of partiality or a threat to independence could be found.
Subject to the election of the proposed external auditors by the
Annual Shareholders’ Meeting, the Committee discussed
the proposal for the fees to be agreed upon with the external
auditors for the financial year 2016. Finally, within the frame
work of its responsibility, the Audit Committee dealt with the
draft agenda for the 2016 Annual Shareholders’ Meeting
and the annual audit plan for 2016 of the Internal Auditing
department.

In the meetings during 2016 related to the quarterly results,
the Audit Committee discussed the interim financial reports
before their publication with the Board of Management and
with the external auditors engaged to carry out the auditors’
review of interim financial statements. In addition, the Committee
received reports from the Group Compliance, Legal and
Corporate Audit departments. In this connection, the Audit
Committee dealt, for example, with the current status of
pending legal proceedings. In addition, the Audit Committee
dealt with notifications concerning possible violations of
rules submitted by employees and third parties to the Group’s
own whistleblower system BPO (Business Practices Office).

On April 21, 2016, the Audit Committee approved the fees
agreed upon with the external auditors for the financial year 2016
after the Annual Shareholders’ Meeting made its decision
on April 6, 2016 regarding the election of the proposed external
auditors for the annual financial statements and the conso
lidated financial statements.

In its meeting on June 14, 2016, the Audit Committee discussed
the Group’s risk management system and dealt in particular
with its changes and further development. It also discussed
the methods and processes of, and possible changes to, the
internal control system, which along with accounting also
encompasses the internal auditing function and the compliance
management system. Furthermore, the Committee received
a report on the nonauditing services provided by the external
auditors. In this meeting, the Committee also defined key
audit issues for the external audit of the reporting period and
the framework of approval for engaging the external auditors
to provide nonaudit services. In this connection, the Committee
extensively addressed the EU audit reforms and the effect
they will have on Daimler. This meeting was also used to discuss
the results of the internal quality analysis of the external
audit for the financial year 2015.

In another meeting on February 10, 2017, the Audit Committee
reviewed and discussed in detail the annual financial state
ments, the consolidated financial statements and the combined
management report for Daimler AG and the Daimler Group
for the financial year 2016, each of which had been issued with
an unqualified auditor’s opinion by the external auditors, as
well as the proposal on the appropriation of profits. At the meet
ing, the external auditors reported on the results of their
audit and were available to answer supplementary questions
and to provide additional information. The audit reports on
the company and consolidated financial statements and on the
internal control system (ICS), the report on the risk manage
ment system for the year 2016, the Annual Report 2016 and
important issues related to financial reporting were discussed
with the external auditors. Following an indepth review
and discussion, the Audit Committee recommended that the
Supervisory Board approve the financial statements and
the combined management report, and on this basis adopt the
recommendation of the Board of Management to pay a divi
dend of €3.25 per share entitled to a dividend. Furthermore,
the Audit Committee approved the Report of the Audit
Committee for the financial year 2016.

Efficiency review
As in previous years, the Audit Committee once again conducted
a selfevaluation of its own activities in 2016 on the basis of
an extensive companyspecific questionnaire. The very positive
results of this efficiency review were presented and discussed
in the meeting in midFebruary 2017. This did not result in any
need for action with regard to the Committee’s tasks, or with
regard to the content, frequency or procedure of its meetings.

Stuttgart, February 2017

The Audit Committee

Dr. Clemens Börsig
Chairman

206 D | CORPORATE GOVERNANCE | REPORT OF THE AUDIT COMMITTEE

Also in the meeting on June 14, 2016, the Audit Committee
dealt in depth with new developments in accounting and
financial reporting, such as the new financial reporting standards
IFRS 9 and 15, and other auditrelevant areas such as tax law.
Furthermore, the Committee was informed in detail about the
Group Legal System and Group Legal Risk Reporting. Finally,
the Committee was informed in detail about the currency hedging
and interestrate management system utilized by the Group’s
Treasury department and also discussed with the Board of
Management the annual report produced by the Group’s Data
Protection Officer. The Audit Committee then drew up a
recommendation for action for the Supervisory Board that
calls for the Group’s shares in Renault and Nissan to be
contributed into the Daimler AG pension fund in Germany.

The meeting of the Audit Committee on July 20, 2016 took
place within the framework of the Supervisory Board meeting
that was held abroad in Portland, Oregon in the United States.
In this meeting, the Committee primarily dealt with the results
of the second quarter of 2016 and with the risk report. In this
connection, the members of the Committee discussed production
and technology risks, the effects of the conclusion of the
European Commission’s antitrust proceedings against Daimler
and other truck manufacturers, and the current status of the
internal examination of the emissions certification and approval
process for Daimler vehicles in the United States that was
requested by the US Department of Justice.

In a meeting held on October 20, 2016, the Audit Committee
dealt with, among other things, audit reform legislation once
again, which has led to changes in the requirements that
members of the Committee have to meet. The new legal stipu
lations require the Audit Committee to more closely monitor
the external auditors’ independence as defined by the new and
more restrictive legislation. This affects the monitoring of the
process for selecting the external auditors (external rotation),
the requirements for approving permitted nonauditing ser
vices, and measures to ensure compliance with the fee ceiling
for nonauditing services of 70% of the average external
auditors’ fee paid throughout the Group. In this context, the
Audit Committee discussed proposals for altering its Rules
of Procedure and drew up a corresponding recommendation
for action for the Supervisory Board. The Audit Committee
also dealt with the strategy and content of insurance programs
around the world that are used to protect the company and
its employees.

Company and consolidated ﬁnancial statements 2016
In a meeting held on February 1, 2017, the Audit Committee
dealt with the preliminary figures of the annual company and
consolidated financial statements for the year 2016, as well
as with the proposal on the appropriation of profits made by the
Board of Management. Following an indepth review, the
Audit Committee took positive note of the presented figures
and determined that no objections could be made to their
proposed publication. The Committee further recommended
that the Supervisory Board, which met immediately thereafter,
adopt the same view. The preliminary key figures and the
proposal on the appropriation of profits were announced at the
Annual Press Conference on February 2, 2017.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 207

Declaration on Corporate Governance,
Corporate Governance Report

The declaration on corporate governance pursuant to Section 289a and Section 315 Subsection 5
of the German Commercial Code (HGB) is part of the combined management report for Daimler AG
and the Daimler Group. The following statements thus apply to Daimler AG and the Daimler Group
insofar as not otherwise stated. The declaration on corporate governance, which is combined with
the corporate governance report, can also be viewed on the Internet at w daimler.com/corpgov_e.
Pursuant to Section 317 Subsection 2 Sentence 4 of the German Commercial Code (HGB), the contents
of the declaration pursuant to Section 289a and Section 315 Subsection 5 of the HGB are not
included in the audit carried out by the external auditors.

Specific objectives for the composition of the Supervisory
Board (Clause 5.4.1 Paragraph 2)
The Supervisory Board has limited its target objective for
its composition regarding the number of independent members
of the Supervisory Board, in consideration of potential conflicts
of interest, to the appointments for the shareholders’ side,
in the light of the German Codetermination Act and due to the
lack of influence on the appointments for the employee side.

Stuttgart, December 2016

For the Supervisory Board
Dr. Manfred Bischoff
Chairman

For the Board of Management
Dr. Dieter Zetsche
Chairman

This declaration and previous, no longer applicable, declarations
of compliance from the past five years are also available at our
website at w daimler.com/dai/gcgc.

Declaration by the Board of Management and
the Supervisory Board of Daimler AG pursuant
to Section 161 of the German Stock Corporation
Act (AktG) regarding the German Corporate
Governance Code

Daimler AG satisfies the recommendations of the German
Corporate Governance Code published by the Federal Ministry
of Justice in the official section of the German Federal Gazette
on June 12, 2015 in the Code version dated May 5, 2015, with
the exception of Clause 3.8 Paragraph 3 (D & O insurance deduct
ible for the Supervisory Board) and one deviation from Clause
5.4.1 Paragraph 2 (Specific objectives for the composition of the
Supervisory Board), which was declared as a precautionary
measure, and will continue to observe the recommendations
with the aforesaid deviations. Since the issuance of the last
compliance declaration in December 2015, Daimler AG has
observed the recommendations of the German Corporate
Governance Code in the version dated May 5, 2015, published
on June 12, 2015, with the aforementioned exceptions.

D & O insurance deductible for the Supervisory Board
(Clause 3.8, Paragraph 3)
As in previous years, the Directors’ & Officers’ liability insurance
(D & O insurance) also contains a provision for a deductible
for the members of the Supervisory Board, which is appropriate
in the view of Daimler AG. However, this deductible does
not correspond to the legally required deductible for members
of the Board of Management in the amount of at least 10% of
the damage up to at least one and a half times the fixed annual
remuneration. Since the remuneration structure of the Super
visory Board is limited to fixed remuneration without performance
bonus components, setting a deductible for Supervisory Board
members in the amount of 1.5 times the fixed annual remunera
tion would have a disproportionate economic impact when
compared with the members of the Board of Management,
whose compensation consists of fixed and performance
bonus components.

208 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The main principles applied in our corporate
governance

German Corporate Governance Code
With the exceptions disclosed and justified in the declaration
of compliance, Daimler AG has followed and continues to follow
the recommendations of the German Corporate Governance
Code beyond the legal requirements of German securities, code
termination and capital market legislation. Daimler AG has
followed and continues to follow the suggestions of the Code
with just one exception: Deviating from the suggestion in
Clause 2.3.3, which stipulates that companies should enable
shareholders to view the Annual Shareholders’ Meeting with
modern communications media such as the Internet, the Annual
Shareholders’ Meeting is not transmitted in its entirety on the
Internet, but only until the end of the report by the Board of
Management, in order to protect the character of the Annual
Shareholders’ Meeting as a meeting attended by our share
holders in person. An additional factor is that conti nuing the
broadcast after that point, in particular broadcasting
comments made by individual shareholders, could impair
the discussion between shareholders and management.

The principles guiding our conduct
Our business conduct is based on Groupwide standards that
go beyond the requirements of relevant legislation and the
German Corporate Governance Code. These standards are based
on the four company values integrity, respect, passion and
discipline. If we are to achieve viable and thus sustainable busi
ness success on this basis, our activities must also be in
harmony with the environment and society. This is in fact the
only way to ensure that we as one of the world’s leading
automakers can remain a leader in sustainability as well.
We have defined the most important principles in our Integrity
Code, which serves as a frame of reference for compliant
and ethical conduct in everyday activities for all employees
at Daimler AG and the Group.

Integrity Code
Our Integrity Code is based on a shared understanding of
values, which we developed together with Daimler employees.
The Code defines our principles of behavior. This applies to
interpersonal conduct within the company as well as conduct
toward customers and business partners. Fairness, respon
sibility and compliance with laws are among the key principles
in this context. In addition to general principles of behavior,
the Code includes requirements and regulations concerning
the protection of human rights and the handling of conflicts
of interest. It also prohibits all forms of corruption. The Integrity
Code is an integral part of every employment contract
and applies to all employees at Daimler AG and the Group.
The Integrity Code is available on the Internet at
w daimler.com/dai/caag.

We have also agreed on “Principles of Social Responsibility”
with the World Employee Committee. They are binding for
Daimler AG and the Group as a whole. In the “Principles of
Social Responsibility,” Daimler commits itself to the principles
of the UN Global Compact and thus to internationally recog
nized human and workers’ rights, such as the prohibition of child
labor and forced labor, as well as freedom of association and
sustainable protection of the environment. Daimler also commits
itself to guaranteeing equal opportunities and adhering to
the principle of “equal pay for equal work.”

Expectations for our business partners
We also require our business partners to adhere to compliance
stipulations because we regard our business partners’ integrity
and behavior in conformity with regulations as an indispensable
prerequisite for trusting cooperation. When selecting our direct
business partners, we therefore ensure that they comply with
the law and follow ethical principles. For the expectations we
place on our business partners, see also
w daimler.com/sus/obr.

Risk management at the Group
Daimler has a risk management system commensurate with
its size and position as a company with global operations.
E pages 158 ff The risk management system is one component
of the overall planning, controlling and reporting process.
Its goal is to enable the company’s management to recognize
significant risks at an early stage and to initiate appropriate
countermeasures in a timely manner. At least once a year, the
Audit Committee discusses the effectiveness and functionality
of the risk management system with the Board of Management.
The Chairman of the Audit Committee reports to the Supervisory
Board on the committees’ work at the latest in the meeting
of the Supervisory Board following each committee meeting.
The Supervisory Board also deals with the risk management
system with regard to the approval of the operational planning
and the audit of the company and consolidated financial state
ments. In addition, the Board of Management regularly informs
the Audit Committee and the Supervisory Board of the most
important risks facing the company and the Group as a whole.
The Chairman of the Supervisory Board has regular contacts
between Supervisory Board meetings with the Board of Manage
ment, and in particular with the Chairman of the Board of
Management, to discuss not only the Group’s strategy and busi
ness development, but also the issue of risk management.
The Internal Auditing department monitors adherence to
the legal framework and to Group standards by means of tar
geted audits and initiates appropriate actions as required.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 209

The Board of Management manages Daimler AG and the Daimler
Group. With the consent of the Supervisory Board, the Board
of Management determines the Group’s strategic focus, defines
the corporate goals, and makes decisions concerning opera
tional planning issues. The members of the Board of Management
must represent the interests of the Company and share respon
sibility for managing the Group’s entire business.

D.01
Governance structure

Annual Shareholders’ Meeting

ratiﬁes
the actions of

elects members
representing the
shareholders,
ratiﬁes the
actions of

reports

Supervisory Board
20 members

appoints,
advises and
monitors

reports

Board of Management
8 members

Accounting policies
The consolidated financial statements of the Daimler Group
are prepared in accordance with the International Financial
Reporting Standards (IFRS), as adopted by the European Union,
and with the supplementary standards to be applied according
to Section 315a Subsection 1 of the German Commercial
Code (HGB). Details of the IFRS are provided in this Annual
Report in the Consolidated Financial Statements. E See
Note 1 of the Notes to the Consolidated Financial Statements.
The annual financial statements of Daimler AG, which is the
parent company, are prepared in accordance with the account
ing standards of the German Commercial Code (HGB). Both
sets of financial statements are audited by a firm of accountants
elected by the Annual Shareholders’ Meeting to conduct the
external audit.

Interim reports for the Daimler Group are prepared in accor
dance with IFRS for interim reporting, as adopted by the Euro
pean Union, as well as with the applicable provisions of the
German Securities Trading Act (WpHG). Interim financial reports
are reviewed by the external auditors elected by the Annual
Shareholders’ Meeting.

Composition and mode of operation of the
Board of Management and the Supervisory
Board  D.01

Daimler AG is obliged by the German Stock Corporation Act
(AktG) to apply a dual management system featuring strict
personal and functional separation between the Board of
Management and the Supervisory Board (twotier board).
Accordingly, the Board of Management manages the company
while the Supervisory Board monitors and advises the Board
of Management.

Board of Management
In accordance with the Articles of Incorporation of Daimler AG,
the Board of Management has at least two members. The
precise number of Board of Management members is deter
mined by the Supervisory Board. The Board of Management
had eight members on December 31, 2016. In accordance with
the German law requiring women and men to be equally
represented in executive positions, the Supervisory Board has
defined a target for the proportion of women on the Board
of Management as well as a deadline when this target must
be met. The details are described in a separate section:
E pages 214 f.

Information on the areas of responsibility and curricula vitae
of the Board of Management members are posted on our
website at w daimler.com/dai/bom. The members of the Board
of Management and their areas of responsibility are also listed
on E pages 64 f. of this Annual Report. No member of the Board
of Management is a member of more than three supervisory
boards of listed companies outside the Daimler Group or of simi
lar boards or committees at companies outside the Daimler
Group that have comparable requirements.

210 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

When making appointments to executive positions at the Group,
the Board of Management also gives due consideration to
the issue of diversity with regard to age and internationality.
The management of teams with a varied makeup requires
a conscious approach to the teams’ inherent diversity. A key
element of our approach here is therefore to make managers
more aware of the importance of diversity. For this purpose,
we also use mentoring programs, communication activities,
conferences, workshops and elearning tools. By continually
addressing diversity management issues, we help to further
develop our corporate culture.

Supervisory Board
In accordance with the German Codetermination Act (MitbestG),
the Supervisory Board of Daimler AG comprises 20 members.
Half of them are elected by the shareholders at the Annual Share
holders’ Meeting. The other half comprises members who
are elected by the Company’s employees who work in Germany.
The members representing the shareholders and the members
representing the employees are equally obliged by law to act in
the Company’s best interests.

Information on the individual members of the Supervisory
Board is available on the Internet at w daimler.com/
supervisoryboard and on E pages 72 f of this Annual Report.

The Supervisory Board is to be composed so that its members
together are knowledgeable about the business sector in which
the Company operates and also dispose of the knowledge,
skills and specialist experience that are required for the proper
execution of their tasks. Proposals by the Supervisory Board
of candidates for election by the Shareholders’ Meeting as
members representing the shareholders of Daimler AG, for which
the Nomination Committee makes recommendations, take
diversity into account. They also take into consideration not
only the requirements of applicable law, the Articles of Incor
poration and the German Corporate Governance Code, but also
a list of criteria of qualifications and experience. They include,
for example, market knowledge in the regions important to
Daimler, expertise in the management of technologies and
experience in certain management functions. Other important
conditions for productive work in the Supervisory Board
and for being able to properly supervise and advise the Board
of Management are, in the view of the Supervisory Board,
the members’ personality and integrity as well as individual
diversity with regard to age, internationality, gender and
other personal characteristics.

Irrespective of this overall responsibility, the individual
members of the Board of Management manage their allocated
areas on their own responsibility and within the framework of
the instructions approved by the entire Board of Management.
Affairs of fundamental or essential importance as well as
issues that affect the areas of responsibility of several Board
of Management members are dealt with by the Board as a
whole, which must approve all related decisions. The Chairman
of the Board of Management coordinates the work of the
Board of Management.

The Board of Management prepares the consolidated interim
reports, the annual company financial statements of Daimler AG,
the annual consolidated financial statements, and the combined
management report of the Company and the Group. It ensures
that the provisions of applicable law, official regulations and the
Group’s internal guidelines are adhered to, and works to make
sure that the companies of the Group comply with those rules
and regulations. The tasks of the Board of Management also
include establishing and monitoring an appropriate and efficient
risk management system.

For certain types of transaction of fundamental importance
defined by the Supervisory Board, the Board of Management
requires the prior consent of the Supervisory Board. At regular
intervals, the Board of Management reports to the Supervisory
Board on corporate strategy, corporate planning, profitability,
business development and the situation of the Group, as well
as on the internal control system, the risk management system
and the compliance management system. The Supervisory
Board has specified the information and reporting duties of the
Board of Management.

The Board of Management has also given itself a set of rules
of procedure, which can be seen on our website at
w daimler.com/dai/rop. Those rules describe, for example,
the procedure to be observed when passing resolutions
and ways to avoid conflicts of interest.

The Board of Management has not formed any committees.

The Board of Management has committed to diversity
management as a strategic success factor.

The targeted advancement of women had been a key area
of action of Daimler’s diversity management even before
Germany’s law on the equal participation of women and men
in executive positions came into force. Among other things,
the Company continues to promote this goal with flexible working
time arrangements, companyowned daycare centers and
special mentoring programs. To meet the new legal require
ments, the Board of Management has defined targets and
deadlines for the proportion of women at the two management
levels below the Board of Management. The details are
described in a separate section. Independently of the legal
requirements, Daimler continues to affirm the goal it already
set itself in 2006 of increasing the proportion of women
in executive positions at the Group to 20% by 2020. At the end
of 2016, this proportion amounted to 16.7% (2015: 15.4%).

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 211

In addition to Germany’s legal requirements for equal partici
pation by women and men in executive positions, the Supervisory
Board has also taken the recommendations of the German
Corporate Governance Code into account with regard to the
Board’s composition and has therefore set itself the following
goals:

In the case of at least half of the shareholder representatives
on the Supervisory Board, there were no instances of
a potential conflict of interest during the reporting period.
No actual instances of conflicts of interest were reported
during the reporting period.

– In order to ensure sufficient internationality, for example by

means of many years of international experience, the Super
visory Board has set a target of a proportion of at least 30%
of international members representing the shareholders, and
the resulting proportion of the entire Supervisory Board
of at least 15%. Irrespective of the many years of international
experience of a large majority of members of the Super
visory Board, this target is currently significantly overachieved
due to the international origins of Dr. Paul Achleitner, Sari
Baldauf, Petraea Heynike and Andrea Jung on the shareholders’
side (40%) and Valter Sanches on the employees’ side, with
25% for the entire Supervisory Board.

– At least half of the members of the Supervisory Board

representing the shareholders should have
· neither an advisory nor a board function for a customer,

supplier, creditor, or other third party nor

· a business or personal relationship to the company

or its boards

whose specific details could cause a conflict of interests.

In the period between March 11, 2016 and July 4, 2016,
Dr. Bernd Bohr served as Chairman of the Supervisory Board
of Knorr Bremse AG. During this time, the Supervisory Board
of Daimler AG addressed no issues that could be construed as
constituting a conflict of interest in this situation.

As described in the report of the Supervisory Board on
E pages 66 ff of this Annual Report, there was one isolated
individual case in a particular situation during the reporting
period where there might have been the appearance of a poten
tial conflict of interest during a specific vote. A second case
involved three Supervisory Board members in relation to the
presentation of a Board of Management report. As a highly
precautionary measure, the Supervisory Board members in
question in these cases refrained from taking part in the
discussions and voting process – or being present during the
presentation of the report – regarding the issue that might
have led to a conflict of interest.

– In order to ensure the independent advice and supervision
of the Board of Management by the Supervisory Board,
the rules of procedure of the Supervisory Board stipulate
that more than half of the members of the Supervisory
Board representing the shareholders are to be independent
as defined by the German Corporate Governance Code and
that no person may be a member of the Supervisory Board
who is a member of a board of, or advises, a signi ficant com
petitor of the Daimler Group. In the view of the Supervisory
Board, there are at present no indications for any of the
members of the Supervisory Board representing the share
holders that relevant relationships or circumstances exist,
in particular with the Company, members of the Board of
Management or other Supervisory Board members, that could
be construed as a true and permanent conflict of interest
that would compromise their independence. No member of
the Supervisory Board is a member of a board of, or advises,
a significant competitor.

– The rules of procedure of the Supervisory Board further
stipulate that candidates for election as members of the
Supervisory Board who are to hold the position for a full
period of office should generally not be over the age of 72
at the time of their election. In specifying this age limit,
the Supervisory Board has intentionally refrained from stipu
lating a strict upper age limit and instead decided in favor
of a flexible general limit that ensures each individual case is
appropriately assessed, the range of potential Supervisory
Board candidates is sufficiently broad and members can be
reelected. After careful consideration and proper assess
ment, the Supervisory Board made the decision in October
2015 to propose to the Annual Shareholders’ Meeting
in 2016 that Dr. Manfred Bischoff be reelected as a share
holder representative on the Supervisory Board. All other
members of the Supervisory Board and the candidates to be
proposed for election at the 2017 Annual Shareholders’
Meeting, Dr. Clemens Börsig and Bader Mohammad Al Saad,
had not or will have not reached the age limit at the time
of their election.

– The rules of procedure of the Supervisory Board also define
a general time limit for Supervisory Board membership.
As a result, only candidates who have not yet been members
of the Supervisory Board for three full terms of office at
the time of their election should generally be nominated for
membership of the Supervisory Board for a full term of
office. This general length of service on the Supervisory
Board had not been exceeded by Dr. Manfred Bischoff and
Petraea Heynike, who were nominated for reelection at
the Annual Shareholders’ Meeting in 2016. The same applies
to Dr. Clemens Börsig, whose nomination for reelection
to the Supervisory Board will be submitted to the Annual
Shareholders’ Meeting in 2017.

In accordance with another recommendation of the Code, the
Supervisory Board made sure when it submitted its nominations
to the Annual Shareholders’ Meeting in 2016 and 2017 that
the candidates in question would be able to continue to devote
the time required for their Supervisory Board activities.

212 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The Chairman of the Supervisory Board, Dr. Manfred Bischoff,
is a former member of the Board of Management. One member
of the Supervisory Board is a member of the board of manage
ment of a listed company. Including his membership of that
Supervisory Board of Daimler AG, he is a member of no more
than three supervisory boards of listed companies or similar
company boards or committees at other companies with compa
rable requirements that are not part of the Group. The mem
bers of the Supervisory Board attend on their own responsibil
ity courses of training and further training that might be
necessary for the performance of their tasks and are supported
by the Company in doing so. Such courses may address cor
porate governance, changes brought about by new legislation,
or the launch of new products and pioneering technologies,
for example. New members of the Supervisory Board participate
in an “Onboarding” program that offers them the opportunity
to exchange views with members of the Board of Management
and other executives on current issues related to the various
areas of responsibility of the Board of Management, and thus
obtain an overview of important topics at the Company.

The Supervisory Board monitors and advises the Board of
Management with regard to its management of the Company.
At regular intervals, the Board of Management reports to the
Supervisory Board on corporate strategy, corporate planning,
revenue development, profitability, business development
and the situation of the Group, as well as on the internal control
system, the risk management system, and the compliance
management system. The Supervisory Board has retained the
right of approval for transactions of fundamental importance.
Furthermore, the Supervisory Board has specified the informa
tion and reporting duties of the Board of Management to
the Supervisory Board, to the Audit Committee and – between
the meetings of the Supervisory Board – to the Chairman
of the Supervisory Board.

The Supervisory Board’s duties include appointing and recalling
the members of the Board of Management. Initial appoint
ments are usually made for a period of three years. In connec
tion with the composition of the Board of Management, the
Supervisory Board pays attention not only to the members’
appropriate specialist qualifications, with due consideration
of the Group’s international operations, but also to diversity.
This applies in particular to age, nationality and other personal
characteristics.

In accordance with the German law requiring women and
men to be equally represented in executive positions, the
Supervisory Board has defined a target for the proportion
of women on the Board of Management as well as a deadline
when this target must be met. The details are described
in a separate section.

The Supervisory Board decides on the system of remuneration
for the Board of Management, reviews it regularly, and deter
mines the individual remuneration of each member of the Board
of Management with consideration of the ratio of Board of
Management remuneration to the remuneration of the senior
executives and the workforce as a whole, as well as with
regard to development over time. For this comparison, the
Supervisory Board has defined the senior executives by apply
ing Daimler’s internal terminology for the hierarchical levels
and has defined the workforce of Daimler AG in Germany as the
relevant workforce. The Supervisory Board has set upper
limits for the individual Board of Management remuneration
in total and with regard to its variable components. Further
information on Board of Management remuneration can be found
in the Remuneration Report of this Annual Report
E pages 142 ff.

The Supervisory Board reviews the annual financial statements,
the annual consolidated financial statements and the combined
management report of the Company and the Group, as well
as the proposal for the appropriation of distributable profits.
Following discussions with the external auditors and taking
into consideration the audit reports of the external auditors
and the results of the review by the Audit Committee, the
Supervisory Board states whether, after the final results of its
own review, any objections are to be raised. If that is not the
case, the Supervisory Board approves the financial statements
and the combined management report. Upon being approved,
the annual financial statements are adopted. The Supervisory
Board reports to the Annual Shareholders’ Meeting on the
results of its own review and on the manner and scope of its
supervision of the Board of Management during the previous
financial year. The Report of the Supervisory Board for the year
2016 is available on E pages 66 ff of this Annual Report
and on the Internet at w daimler.com/supervisoryboard.

The Supervisory Board has given itself a set of rules of proce
dure, which regulate not only its duties and responsibilities
and the personal requirements placed upon its members, but
above all the convening and preparation of its meetings and
the procedure of passing resolutions. The rules of procedure
of the Supervisory Board can be viewed on our website at
w daimler.com/dai/rop.

Meetings of the Supervisory Board are regularly prepared in
separate discussions of the members representing the employ
ees and of the members representing the shareholders with
the members of the Board of Management. Each Supervisory
Board meeting includes an executive session for discussions
of the Supervisory Board in the absence of the members of
the Board of Management. The Supervisory Board members can
also take part in the meetings by means of conference calls
or video conferences. However, this is generally not the case.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 213

Composition and mode of operation
of the committees of the Supervisory Board

The Supervisory Board has formed four committees, which
perform to the extent legally permissible the tasks assigned
to them in the name of and on behalf of the entire Supervisory
Board. The committee chairpersons report to the entire
Supervisory Board on the committees’ work at the latest in the
meeting of the Supervisory Board following each committee
meeting. The Supervisory Board has issued rules of procedure
for each of its committees. Those rules of procedure can be
viewed on our website at w daimler.com/dai/rop. Information
on the current composition of these committees can be
viewed at w daimler.com/dai/sbc and is also available on
E page 73 of this Annual Report.

Presidential Committee
The Presidential Committee is composed of the Chairman of
the Supervisory Board, his Deputy and two other members,
who are elected by a majority of the votes cast on the relevant
resolution of the Supervisory Board.

The Presidential Committee makes recommendations to the
Supervisory Board on the appointment of members of the
Board of Management, whereby it especially takes into account
the requirements of the position to be filled as well as the
Supervisory Board’s target for the proportion of women on the
Board of Management. It submits proposals to the Supervisory
Board on the design of the remuneration system for the Board
of Management and on the appropriate total individual remu
neration of its members. In this context, it follows the relevant
recommendations of the German Corporate Governance Code.
The Presidential Committee is also responsible for the Board
of Management members’ contractual affairs. In addition,
it decides on the granting of approval for sideline activities
of the members of the Board of Management, reports to the
Supervisory Board regularly and without delay on consents
it has issued, and once a year submits to the Supervisory
Board for its approval a complete list of the sideline activities
of each member of the Board of Management.

In addition, the Presidential Committee decides on questions
of corporate governance, on which it also makes recommenda
tions to the Supervisory Board. It supports and advises the
Chairman of the Supervisory Board and his Deputy, and prepares
the meetings of the Supervisory Board within the limits of its
responsibilities.

Nomination Committee
The Nomination Committee is composed of at least three
members, who are elected by a majority of the votes cast by the
members of the Supervisory Board representing the share
holders. It is the only Supervisory Board Committee consisting
solely of members representing the shareholders and makes
recommendations to the Supervisory Board concerning persons
to be proposed for election as members of the Supervisory
Board representing the shareholders at the Annual Shareholders’
Meeting. In doing so, the Nomination Committee takes into
consideration the requirements of the German law regulating
equal participation of women and men in executive positions,
the German Corporate Governance Code and the rules of proce
dure of the Supervisory Board, as well as the specific goals
that the Supervisory Board has set for its own composition.
Furthermore, it defines the requirements for each specific
position to be occupied.

Audit Committee
The Audit Committee is composed of four members, who
are elected by a majority of the votes cast on the relevant
resolution of the Supervisory Board. The Chairman of the
Supervisory Board is not simultaneously the Chairman of the
Audit Committee.

Both the Chairman of the Audit Committee, Dr. Clemens Börsig,
and the other shareholder representative on the Audit Com
mittee, Joe Kaeser, fulfill the criteria for independence and have
expertise in the field of financial reporting, as well as special
knowledge and experience with regard to auditing and methods
of internal control. Due to his work at Robert Bosch GmbH
and his longstanding membership of the Supervisory Board
of Daimler AG, Dr. Börsig is furthermore very familiar with
the automotive industry.

The Audit Committee deals with the supervision of the accounting
process and the annual external audit. At least once a year,
it discusses with the Board of Management the effectiveness
and functionality of the risk management system, the internal
control and auditing system and the compliance management
system. It regularly receives reports on the work of the
Internal Auditing department and the Compliance Organization.
At least four times a year, the Audit Committee receives a
report from the whistleblower system BPO (Business Practices
Office) on complaints and information about any breaches
of regulations or guidelines by highlevel executives. It regularly
receives information about the handling of these complaints
and notifications.

214 D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT

The Audit Committee discusses with the Board of Management
the interim reports before they are published. On the basis
of the report of the external auditors, the Audit Committee
reviews the annual company financial statements and the annual
consolidated financial statements, as well as the combined
management report of the Company and the Group, and dis
cusses them with the external auditors. Since 2014, the respon
sible auditor at KPMG AG Wirtschaftsprüfungsgesellschaft,
the company of auditors commissioned to carry out the external
audit 2016, has been Dr. Axel Thümler. KPMG AG Wirtschafts
prüfungsgesellschaft has been conducting the audit of the annual
company financial statements and the annual consolidated
financial statements of Daimler AG since the 1998 financial year.
The Audit Committee makes a proposal to the Supervisory
Board on the adoption of the annual company financial state
ments of Daimler AG, on the approval of the annual consoli
dated financial statements, and on the appropriation of profits.
The Committee also makes recommendations for the proposal
on the election of external auditors, assesses those auditors’
suitability, qualifications and independence, and, after the exter
nal auditors are elected by the Annual Shareholders’ Meeting,
it engages them to conduct the annual audit of the company and
consolidated financial statements and to review the interim
reports, negotiates an audit fee and determines the focus of the
annual audit. The external auditors report to the Audit Commit
tee on all accounting matters that might be regarded as critical
and on any material weaknesses of the internal control and
risk management system with regard to accounting that might
be discovered during the audit.

Finally, the Audit Committee approves permitted services
that are not directly related to the annual audit and which
are provided by the firm of external auditors or its affiliates
to Daimler AG or to companies of the Daimler Group.

Mediation Committee
The Mediation Committee is composed of the Chairman of the
Supervisory Board and his Deputy, as well as one member of
the Supervisory Board representing the employees and one
member of the Supervisory Board representing the shareholders,
each elected with a majority of the votes cast. It is formed
solely to perform the functions laid down in Section 31 Sub
section 3 of the German Codetermination Act (MitbestG).
Accordingly, the Mediation Committee has the task of making
proposals on the appointment of members of the Board of
Management if in the first vote the majority required for the
appointment of a Board of Management member of two
thirds of the members of the Supervisory Board is not achieved.
As in previous years, the Mediation Committee did not have
to take any action in financial year 2016.

Germany’s law on the equal participation
of women and men in executive positions

In accordance with the German law requiring women and men
to be equally represented in executive positions in both the
private and the public sector, the supervisory boards of listed
companies or companies subject to Germany’s system
of codetermination have to set a target for the proportion of
women on the board of management. The board of management
of such a company has to set a target for the proportion of
women at the two management levels below that of the board
of management. If the proportions of women at the time
when these targets are set by the Board of Management and
the Supervisory Board are below 30%, the targets may not be
lower than the proportions already reached. At the same time
that the targets are set, the boards have to set periods for
their achievement, which may not be longer than five years.
In the first step, targets had to be set by no later than
September 30, 2015, and deadlines fixed for no later than
June 30, 2017.

To meet these legal requirements, the Supervisory Board of
Daimler AG passed a resolution on April 28, 2015 that the target
figure for the proportion of women on the Board of Manage
ment of Daimler AG would be 12.5% (the same as the status quo
at the time when the resolution was passed), while the dead
line would be December 31, 2016. As of December 31, 2016,
the eightmember Board of Management included a woman,
Renata Jungo Brüngger. As a result, women account for 12.5%
of the Board of Management members, which means the
current target has been met. This also means that the status
quo for the next target will be 12.5%.

In its last meeting in the reporting period on December 8, 2016,
the Supervisory Board set a target for the proportion of
women on the Board of Management of 12.5% with a deadline
of December 31, 2020.

With the appointment of Britta Seeger as a member of the
Board of Management, effective January 1, 2017, the proportion
of women on the Board of Management rose to 25%.

On June 23, 2015, the Board of Management passed a resolution
stipulating a target of 6.5% women for the first management
level below the Board of Management of Daimler AG (the actual
proportion was 5.3% at the time of the resolution) and of 10.0%
for the second management level below the Board of Manage
ment (the actual proportion was 9.9% at the time of the
resolution). The Board of Management set December 31, 2016
as the deadline for both of these targets.

At the time of the deadline on December 31, 2016, the
proportion of women in the first management levels below the
Board of Management was 8.1% and 12.4% in the second
management levels, respectively, which means the targets
we set for ourselves were surpassed.

On November 8, 2016, the Board of Management passed
a resolution stipulating a target of 15% women for both
the first and second management levels below the Board
of Management, with a deadline of December 31, 2020.

D | CORPORATE GOVERNANCE | DECLARATION ON CORPORATE GOVERNANCE, CORPORATE GOVERNANCE REPORT 215

Shareholders and the Annual Shareholders’
Meeting

The shareholders exercise their membership rights, in particular
their information and voting rights, at the Annual Shareholders’
Meeting. Each share in Daimler AG entitles its owner to one vote.
There are no multiple voting rights, preferred stock, or maxi
mum voting rights at Daimler AG. Documents and information
relating to the Annual Shareholders’ Meeting can be found on
our website at w daimler.com/ir/am. The Annual Shareholders’
Meeting is generally held within four months of the end of
a financial year. The Company facilitates the personal exercise
of the shareholders’ rights and proxy voting in a variety of
ways, such as by appointing proxies who are strictly bound by
the shareholders’ voting instructions and who can be con
tacted also during the Annual Shareholders’ Meeting. Absentee
voting is also possible. It is possible to authorize the Daimler
appointed proxies and give them voting instructions or to cast
absentee votes by using the eservice for shareholders.

We maintain close contacts with our shareholders in the
context of our comprehensive investor relations and public
relations activities. We regularly and comprehensively inform
our shareholders, financial analysts, shareholder associations,
the media and the interested public about the situation of
the Group, and inform them without delay about any significant
changes in its business.

In addition to other methods of communication, we also make
extensive use of the Company’s website. All of the important
information disclosed in 2016, including annual and interim
reports, press releases, voting rights notifications from major
shareholders, presentations, and audio recordings of analyst
and investor events and conference calls, as well as the financial
calendar, can be found at w daimler.com/investors. All the
dates of important disclosures such as annual reports and interim
reports and the dates of the Annual Shareholders’ Meeting,
the annual press conference and the analyst conferences are
announced in advance in the financial calendar. The financial
calendar is also included in this Annual Report as a bookmark.
Disclosures are made in English as well as in German.

Since 2016, listed companies that have supervisory boards
in which shareholders and employees are equally represented
are required to a have proportion of at least 30% women and
30% men. This requirement has to be fulfilled by the Supervisory
Board as a whole. If the side of the Supervisory Board repre
senting the shareholders or the side representing the employees
objects to the Chairman of the Supervisory Board about the
application of the ratio to the entire Supervisory Board, the mini
mum ratio is to apply separately to the shareholders’ side
and to the employees’ side for that election.

On December 31, 2016, 30% of the shareholder representatives
in the Supervisory Board of Daimler AG were women (Sari
Baldauf, Andrea Jung and Petraea Heynike), while 70% were men.
On that date, 20% of the employee representatives on the
Supervisory Board were women (Elke TönjesWerner and Sibylle
Wankel), while 80% were men. In its meetings on December 8,
2016, and February 10, 2017, the Supervisory Board consid
ered its nominations for the election at the Annual Sharehold
ers’ Meeting 2017 and came to the conclusion that the share
holders and employee representatives should achieve the
legally required share of women board members separately.
Before this background the shareholder representatives declared
in both meetings that they object to the Supervisory Board’s
joint fulfillment of the legally required gender ratio. Thereafter,
the Supervisory Board decided to nominate Dr. Clemens Börsig
and Bader Mohammad Al Saad for election to the Supervisory
Board by the Annual Shareholders’ Meeting 2017. The next
election of employee representatives to the Supervisory Board
will take place in 2018.

Along with Daimler AG itself, there are other Group companies
subject to codetermination law. These companies have
defined their own targets for the proportion of women on their
supervisory boards, executive management bodies and the
two levels below the board or executive management level, and
have also set deadlines for target achievement. All relevant
information here has been published in accordance with appli
cable law.

Shares and share transactions by Board of
Management and Supervisory Board members

As of December 31, 2016, the members of the Board
of Management held a total of 0.25 million shares or options
on shares of Daimler AG (0.024% of the shares issued).
On the same date, the members of the Supervisory Board
held a total of 0.02 million shares or options on shares
of Daimler AG (0.002% of the shares issued).

Members of the Board of Management and the Supervisory
Board, as well as natural or legal persons closely related
to them, are required to report business transactions involving
financial instruments of Daimler AG, particularly shares
or bonds or derivatives of these financial instruments, once
a total transaction volume of €5,000.00 has been reached
or exceeded within a calendar year. All such transactions reported
in 2016 have been published at the Company’s website
w daimler.com/dai/dd/en.

We have a sound ﬁ nancial basis

The Consolidated Financial Statements presented as follows have been prepared
in accordance with the International Financial Reporting Standards (IFRS), as
adopted by the European Union (EU). They also comply with additional requirements
set forth in Section 315a (1) of the German Commercial Code (HGB).

E | CONSOLIDATED FINANCIAL STATEMENTS | CONTENTS 217

E | Consolidated Financial Statements

Consolidated Statement of Income
Consolidated Statement
of Comprehensive Income/Loss
Consolidated Statement
of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement
of Changes in Equity

Notes to the Consolidated Financial
Statements

1. Signiﬁ cant accounting policies
2. Accounting estimates and assessments
3. Consolidated Group
4. Revenue
5. Functional costs
6. Other operating income and expense
7. Other ﬁ nancial income/expense, net
8. Interest income and interest expense
9. Income taxes
10. Intangible assets
11. Property, plant and equipment
12. Equipment on operating leases
13. Equity-method investments
14. Receivables from ﬁ nancial services
15. Marketable debt securities
16. Other ﬁ nancial assets
17. Other assets
18. Inventories
19. Trade receivables
20. Equity
21. Share-based payment

218

219

220

221

222

224

224
235
236
238
238
240
240
240
241
244
245
246
247
250
251
251
252
252
252
253
255

22. Pensions and similar obligations
23. Provisions for other risks
24. Financing liabilities
25. Other ﬁ nancial liabilities
26. Deferred income
27. Other liabilities
28. Consolidated statement of cash ﬂ ows
29. Legal proceedings
30. Financial guarantees, contingent liabilities

and other ﬁ nancial obligations

31. Financial instruments
32. Management of ﬁ nancial risks
33. Segment reporting
34. Capital management
35. Earnings per share
36. Related party relationships
37. Remuneration of the members

of the Board of Management and
the Supervisory Board
38. Principal accountant fees
39. Subsequent events
40. Additional information

256
262
263
264
264
264
265
266

267
270
278
285
289
289
290

291
292
292
292

218 E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF INCOME

Consolidated Statement of Income

E.01

In millions of euros

Revenue
Cost of sales1

Gross profit

Selling expenses
General administrative expenses1

Research and non-capitalized
development costs

Other operating income

Other operating expense

Profit/loss on equity method
investments, net

Other financial income/expense, net

Interest income

Interest expense
Profit before income taxes2
Income taxes

Net profit

thereof profit attributable to
non-controlling interests

thereof profit attributable to
shareholders of Daimler AG

Earnings per share (in euros)
for profit attributable
to shareholders of Daimler AG

Basic

Diluted

Consolidated

Industrial Business
(unaudited additional
information)

Daimler Financial Services
(unaudited additional
information)

Note

2016

2015

2016

2015

2016

2015

132,601

-103,600

29,001

-11,577

-2,702

-5,257

2,200

-1,267

503

250

229

-540

10,840

-3,235

7,605

130,505

-101,869

28,636

-11,577

-2,646

-4,760

1,982

-530

474

-22

169

-595

11,131

-3,488

7,643

20,660

-17,698

2,962

-649

-717

–

150

-31

-1

-6

1,734

-555

1,179

18,962

-16,148

2,814

-570

-717

–

132

-25

-10

-5

-7

1,613

-545

1,068

153,261

-121,298

31,963

-12,226

-3,419

-5,257

2,350

-1,298

502

275

230

-546

12,574

-3,790

8,784

149,467

-118,017

31,450

-12,147

-3,363

-4,760

2,114

-555

464

-27

170

-602

12,744

-4,033

8,711

258

287

8,526

8,424

7.97

7.87

1 In the industrial business, €347 million was reclassified from general administrative expenses into cost of sales in the year 2015 (Note 5).
2 The reconciliation of Group EBIT to profit before income taxes is presented in Note 33.

The accompanying notes are an integral part of these consolidated financial statements.

E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/LOSS 219

Consolidated Statement of Comprehensive
Income/Loss1

E.02

In millions of euros

Net profit

Currency translation adjustments

Financial assets available-for-sale

Unrealized gains/losses (pre-tax)

Reclassifications to profit and loss (pre-tax)

Taxes on unrealized gains/losses
and on reclassifications

Financial assets available-for-sale (after tax)

Derivative financial instruments

Unrealized gains/losses (pre-tax)

Reclassifications to profit and loss (pre-tax)

Taxes on unrealized gains/losses
and on reclassifications

Derivative financial instruments (after tax)

Equity-method investments

Unrealized gains/losses (pre-tax)

Equity-method investments (after tax)

Items that may be reclassified to profit/loss

Actuarial gains/losses from pensions and
similar obligations (pre-tax)

Taxes on actuarial gains/losses from pensions
and similar obligations

Actuarial gains/losses from pensions and
similar obligations (after tax)

Items that will not be reclassified to profit/loss

Other comprehensive income/loss, net of taxes

Total comprehensive income

Daimler
Group

Shareholders
of Daimler AG

Non-
controlling
interests

Daimler
Group

Shareholders
of Daimler AG

Non-
controlling
interests

2016

2015

8,784

696

-448

-621

-1,068

123

1,512

-495

1,140

-12

756

8,526

697

-448

-621

-1,068

126

1,512

-496

1,142

-12

759

-1,994

748

-1,246

-490

8,294

-1,246

-487

8,039

258

-1

–

-3

–

-2

–

-3

–

-3

255

8,711

1,437

670

–

-8

662

-3,770

2,849

278

-643

-3

1,453

3,280

-579

2,701

4,154

12,865

8,424

1,370

669

–

-8

661

-3,775

2,849

279

-647

-3

1,381

3,280

-579

2,701

4,082

12,506

287

–

-1

–

359

1 See Note 20 for other information on comprehensive income/loss.

The accompanying notes are an integral part of these consolidated financial statements.

220 E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Consolidated Statement of Financial Position

E.03

In millions of euros

Assets
Intangible assets
Property, plant and equipment
Equipment on operating leases
Equity-method investments
Receivables from financial services
Marketable debt securities
Other financial assets
Deferred tax assets
Other assets

Total non-current assets
Inventories
Trade receivables
Receivables from financial services
Cash and cash equivalents
Marketable debt securities
Other financial assets
Other assets

Total current assets
Total assets

Equity and liabilities
Share capital
Capital reserves
Retained earnings
Other reserves
Treasury shares

Equity attributable to shareholders
of Daimler AG
Non-controlling interests

Total equity
Provisions for pensions and similar obligations

Provisions for income taxes
Provisions for other risks
Financing liabilities
Other financial liabilities
Deferred tax liabilities
Deferred income
Other liabilities

Total non-current liabilities
Trade payables
Provisions for income taxes
Provisions for other risks
Financing liabilities
Other financial liabilities
Deferred income
Other liabilities

Total current liabilities
Total equity and liabilities

Consolidated

Industrial Business
(unaudited additional
information)

Daimler Financial Services
(unaudited additional
information)

Note

At December 31,
2015

2016

At December 31,
2015

2016

At December 31,
2015

2016

10
11
12
13
14
15
16
9
17

18
19
14

15
16
17

23
24
25
9
26
27

23
24
25
26
27

12,098
26,381
46,942
4,098
42,881
1,100
2,899
3,870
667
140,936
25,384
10,614
37,626
10,981
9,648
2,837
4,962
102,052
242,988

3,070
11,744
40,794
2,342
–

57,950
1,183
59,133
9,034

966
6,632
70,398
3,327
3,467
5,559
15
99,398
11,567
751
9,427
47,288
9,542
3,444
2,438
84,457
242,988

10,069
24,322
38,942
3,633
38,359
1,148
4,908
3,284
654
125,319
23,760
9,054
35,155
9,936
7,125
2,546
4,271
91,847
217,166

3,070
11,917
36,991
1,583
–

53,561
1,063
54,624
8,663

875
6,120
59,831
2,876
2,215
4,851
30
85,461
10,548
777
9,710
41,311
9,484
2,888
2,363
77,081
217,166

11,199
26,314
17,433
4,043
-76
1
-3,043
3,128
-2,642
56,357
24,426
8,977
-11
8,751
9,497
-8,002
1,151
44,789
101,146

48,685
8,875

964
6,461
19,029
2,721
-941
4,605
15
41,729
10,853
604
8,864
-20,480
6,924
2,283
1,684
10,732
101,146

9,847
24,262
15,864
3,610
-58
1
-536
2,747
-2,371
53,366
22,862
8,215
-24
8,369
6,998
-7,435
952
39,937
93,303

44,752
8,546

874
5,994
18,805
2,301
-1,363
4,144
30
39,331
10,182
709
9,204
-21,417
7,133
1,886
1,523
9,220
93,303

899
67
29,509
55
42,957
1,099
5,942
742
3,309
84,579
958
1,637
37,637
2,230
151
10,839
3,811
57,263
141,842

10,448
159

2
171
51,369
606
4,408
954
–
57,669
714
147
563
67,768
2,618
1,161
754
73,725
141,842

222
60
23,078
23
38,417
1,147
5,444
537
3,025
71,953
898
839
35,179
1,567
127
9,981
3,319
51,910
123,863

9,872
117

1
126
41,026
575
3,578
707
–
46,130
366
68
506
62,728
2,351
1,002
840
67,861
123,863

The accompanying notes are an integral part of these consolidated financial statements.

E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CASH FLOWS 221

Consolidated Statement of Cash Flows1

E.04

In millions of euros

Profit before income taxes

Depreciation and amortization/impairments

Other non-cash expense and income

Gains (-)/losses (+) on disposals of assets

Change in operating assets and liabilities

Inventories

Trade receivables

Trade payables

Receivables from financial services

Vehicles on operating leases

Other operating assets and liabilities

Income taxes paid/refunded

Cash used for/provided by operating activities

Additions to property, plant and equipment

Additions to intangible assets

Proceeds from disposals of property, plant and
equipment and intangible assets

Acquisition of Athlon Car Lease International B.V.

Investments in shareholdings

Proceeds from disposals of shareholdings

Acquisition of marketable debt securities

Proceeds from sales of marketable debt securities

Other

Cash used for/provided by investing activities

Change in short-term financing liabilities

Additions to long-term financing liabilities

Repayment of long-term financing liabilities

Dividend paid to shareholders of Daimler AG

Dividends paid to non-controlling interests

Proceeds from the issue of share capital

Acquisition of treasury shares

Acquisition of non-controlling interests in subsidiaries

Internal equity and financing transactions

Cash used for/provided by financing activities

Effect of foreign exchange rate changes
on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Consolidated

Industrial Business
(unaudited additional
information)

Daimler Financial Services
(unaudited additional
information)

2016

2015

2016

2015

2016

2015

12,574

5,478

-1,064

-46

-1,272

-962

757

-6,848

-4,209

2,253

-2,950

3,711

-5,889

-2,944

366

-3,650

-334

-7,724

5,394

-14,666

503

50,723

-35,463

-3,477

-201

-38

-103

–

12,009

-9

1,045

9,936

10,981

12,744

5,384

-450

-229

-2,613

-205

142

-10,251

-3,924

2,197

-2,573

222

-5,075

-2,261

495

–

-1,223

-4,101

2,443

-39

-9,722

54,332

-41,904

-2,621

-274

-27

–

9,631

138

269

9,667

9,936

10,840

5,398

-1,113

-28

11,131

5,316

-522

-228

-1,356

-2,597

-697

581

194

-132

1,753

-2,797

12,643

-5,852

-2,868

338

–

-277

-7,592

5,281

-10,903

326

23,730

-14,180

-3,477

-197

-38

-103

-7,444

-1,353

-5

382

8,369

8,751

-193

111

-135

1,534

-2,715

11,735

-5,045

-2,186

480

–

-1,179

-89

-4,090

2,193

-20

-9,936

-157

21,647

-13,375

-2,621

-264

-27

–

-7,152

-1,922

151

8,341

8,369

1,734

1,613

-18

-265

176

-7,042

-4,077

500

-153

-1

-16

-12

-10,284

-3,789

663

142

-8,932

-11,513

-37

-76

-3,650

-57

-132

113

-3,763

177

26,993

-21,283

–

-4

–

7,444

13,362

-4

663

1,567

2,230

-30

-75

–

-44

128

-11

250

-19

214

193

32,685

-28,529

–

-10

–

7,152

11,553

-13

241

1,326

1,567

1 See Note 28 for other information on consolidated statements of cash flows.

The accompanying notes are an integral part of these consolidated financial statements.

222 E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity1

E.05

In millions of euros

Balance at January 1, 2015

Net profit

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

Total comprehensive income/loss

Dividends

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Other

Balance at January 1, 2016

Net profit

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

Total comprehensive income/loss

Dividends

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Changes in ownership interests in subsidiaries

Other

Share
capital

Capital
reserves

Retained
earnings2

Currency
translation

3,070

11,906

–

11,917

–

-170

-3

11,744

28,487

8,424

3,280

-579

11,125

-2,621

–

36,991

8,526

-1,994

748

7,280

-3,477

–

775

–

1,370

–

1,370

–

2,145

–

697

–

697

–

40,794

2,842

Financial
assets
available
for sale

460

–

669

-8

661

–

1,121

–

-1,069

-1,068

–

Balance at December 31, 2015

3,070

11,917

Balance at December 31, 2016

3,070

1 See Note 20 Equity for other information on changes in equity.
2 Retained earnings also include items that will not be reclassified to the consolidated income statement.

Actuarial losses from pensions and similar obligations amount to €7,437 million net of tax in 2016 (2015: €6,191 million net of tax).

The accompanying notes are an integral part of these consolidated financial statements.

E | CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 223

Other reserves
items that
may be reclassified
in profit/loss

Share of
investments
accounted
for using the
equity method

Derivative
financial
instruments

-1,032

–

-926

279

-647

–

-1,679

–

1,638

-496

1,142

–

-1

–

-3

–

-4

–

-12

–

-12

–

-537

-16

Equity
attributable to
shareholders
of Daimler AG

Treasury
share

Non-
controlling
interests

Total
equity

In millions of euros

–

-27

–

-38

–

43,665

8,424

4,390

-308

12,506

-2,621

–

-27

919

287

-1

359

-274

–

-9

44,584

Balance at January 1, 2015

8,711

4,463

-309

Net profit

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

12,865

Total comprehensive income/loss

-2,895

Dividends

-27

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

Other

53,561

1,063

54,624

Balance at December 31, 2015

53,561

8,526

-740

253

8,039

-3,477

–

-38

-170

-3

1,063

258

-4

255

-201

–

-4

54,624

Balance at January 1, 2016

8,784

-744

254

8,294

-3,678

-38

Net profit

Other comprehensive income/loss before taxes

Deferred taxes on other comprehensive income

Total comprehensive income/loss

Dividends

Capital increase/Issue of new shares

Acquisition of treasury shares

Issue and disposal of treasury shares

-135

Changes in ownership interests in subsidiaries

-7

Other

57,950

1,183

59,133

Balance at December 31, 2016

224 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

1. Significant accounting policies

General information

The consolidated financial statements of Daimler AG and
its subsidiaries (“Daimler” or “the Group”) have been prepared
in accordance with Section 315a of the German Commercial
Code (HGB) and comply with the International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU).

Daimler AG is a stock corporation organized under the laws
of the Federal Republic of Germany. The Company is entered
in the Commercial Register of the Stuttgart District Court
under No. HRB 19360 and its registered office is located at
Mercedesstraße 137, 70327 Stuttgart, Germany.

The consolidated financial statements of Daimler AG are
presented in euros (€). Unless otherwise stated, all amounts
are stated in millions of euros. All figures shown are rounded
in accordance with standard business rounding principles.

The Board of Management authorized the consolidated
financial statements for publication on February 10, 2017.

Basis of preparation

Applied IFRSs
The accounting policies applied in the consolidated financial
statements comply with the IFRSs required to be applied in the
EU as of December 31, 2016.

IFRSs issued, EU endorsed and initially adopted
in the reporting period
IFRSs with mandatory initial application in the EU as of
January 1, 2016 had no significant impact on the consolidated
financial statements.

IFRSs issued, EU endorsed and not yet adopted
In May 2014, the IASB published IFRS 15 Revenue from
Contracts with Customers. It replaces existing guidance
for revenue recognition, including IAS 18 Revenue, IAS 11
Construction Contracts and IFRIC 13 Customer Loyalty Pro-
grammes. The new standard lays down a comprehensive
framework for determining in which amount and at which date
revenue is recognized. The new standard specifies a uniform,
five-step model for revenue recognition, which is generally
to be applied to all contracts with customers. As a result
of IFRS 15, new items are introduced in the statement of financial
position: “Contract assets” and “Contract liabilities.” These
items can arise through advance payment or advance delivery
at the contract level. In addition, disclosure requirements
are extended.

Group-wide investigation of the effects on the consolidated
financial statements of adopting IFRS 15 has not yet been
completed. Effects on Daimler may occur, in particular with
regard to the date of recognition of sales incentives and also
with regard to the sale of vehicles for which the Group enters
into a repurchase obligation or grants a residual-value guarantee.
The latter are reported as operating leases. Under IFRS 15,
such vehicle sales can necessitate the reporting of a sale with
the right of return. The statement of financial position will
be changed in particular by the separate presentation of
“Contract liabilities.” From today’s perspective, the application
of IFRS 15 is not expected to have any major impact on
the Group’s profitability, liquidity and capital resources
or financial position.

Application of IFRS 15 is mandatory at the latest for reporting
periods beginning on or after January 1, 2018. Early adoption
is permitted. Daimler will apply IFRS 15 for the first time for the
financial year beginning on January 1, 2018. Daimler currently
plans for the first-time application to be retrospectively so that
the comparative period is presented according to IFRS 15.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 225

In July 2014, the IASB published IFRS 9 Financial Instruments,
which replaces IAS 39. IFRS 9 includes a uniform model for
classification and measurement methods (including impairments)
for financial instruments. It also includes regulations for
general hedge accounting. IFRS 9 requires additional notes
disclosure, resulting from the amendment to IFRS 7 Financial
Instruments – Disclosures.

Examination of the effects on the consolidated financial
statements of applying IFRS 9 is not yet completed. Effects can
result in particular from the fact that the new regulations
for recognizing impairments also include expected future losses,
whereas IAS 39 only requires the recognition of impairments
that have already occurred. Especially receivables from financial
services in the Daimler Financial Services segment can
be affected.

In the future, all equity instruments are to be measured at
fair value through profit or loss or at fair value through other
comprehensive income. If changes in carrying amounts are
recognized in other comprehensive income, they are no longer
to be reclassified to profit or loss when these instruments are
sold. Possible effects can be in sharp fluctuations in carrying
amounts and fluctuations in the income statement and/or the
statement of other comprehensive income.

Additional effects can result from the possibility to exclude
certain components of derivatives from designation to a
hedging instrument and to recognize the changes in these
components’ fair value in other comprehensive income.
This change applies for example to the fair value of options
whose changes in carrying amounts are regularly remeasured
through profit and loss during the term of the options
according to IAS 39.

Daimler will apply IFRS 9 for the first time for the financial year
beginning on January 1, 2018. Daimler currently plans, in
compliance with the transitional regulations, not to adjust the
prior-year figures and to present the accumulated transitional
effects in retained earnings. One exception to this is the recog-
nition through other comprehensive income of the non-
designated portion of derivatives, which is to be applied retro-
spectively to the comparative figures. Overall, Daimler does
not currently anticipate any material impact on the Group’s
profitability, liquidity and capital resources or financial position
from the transition to IFRS 9.

IFRSs issued but neither EU endorsed nor yet adopted
In January 2016, the IASB published IFRS 16 Leases, replacing
IAS 17 and IFRIC 4 and other interpretations. IFRS 16 abolishes
for lessees the previous classification of leasing agreements
as either operating or finance leases. Instead, IFRS 16 introduces
a single lessee accounting model, requiring lessees to recog-
nize assets for the right to use as well as leasing liabilities
for leases with a term of more than twelve months. This means
that leases that were previously not reported will have to
be reported in the future – very similar to the current account-
ing of finance leases. Lease accounting for lessors has
been taken over almost identically from IAS 17 into IFRS 16.

IFRS 16 is to be applied to annual reporting periods beginning
on or after January 1, 2019; early adoption is permitted
if IFRS 15 is already applied.

The effects on the consolidated financial statements of the
application of IFRS 16 are currently being examined. Daimler will
probably apply IFRS 16 for the first time for the financial year
beginning on January 1, 2019. A decision on the alternatives
allowed for by the standard for the transition to IFRS 16, with
full or partial retrospective effect, has not yet been taken.

Other IFRSs issued but not EU endorsed are not expected to
have a significant impact on the Group’s profitability, liquidity
and capital resources or financial position.

Presentation
Presentation in the consolidated statement of financial
position differentiates between current and non-current assets
and liabilities. Assets and liabilities are classified as current
if they are expected to be realized or settled within one year
or within a longer and normal operating cycle. Deferred
tax assets and liabilities as well as assets and provisions
for pensions and similar obligations are generally presented
as non-current items.

The consolidated statement of income is presented using
the cost-of-sales method.

The Group’s consolidated financial statements are significantly
influenced by the activities of its financial services business.
To enhance readers’ understanding of the Group’s profitability,
liquidity and capital resources and financial position, unaudited
information with respect to the Group’s industrial and financial
services business activities (Daimler Financial Services) is
provided in addition to the audited consolidated financial state-
ments. Such information is not required by IFRS and is not
intended to, and does not represent the separate IFRS profit-
ability, liquidity and capital resources and financial position
of the Group’s industrial or financial services business activities.
Eliminations of the effects of transactions between the
industrial and financial services businesses have generally
been allocated to the industrial business columns.

226 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Measurement
The consolidated financial statements have been prepared
on the historical cost basis with the exception of certain items
such as available-for-sale financial assets, derivative financial
instruments, hedged items, and pensions and similar obligations.
The measurement models applied to those exceptions are
described below.

Principles of consolidation
The consolidated financial statements include the financial
statements of Daimler AG and the financial statements of all
subsidiaries, including structured entities which are directly
or indirectly controlled by Daimler AG. Control exists if the
parent company has the power of decision over a subsidiary
based on voting rights or other rights, if it participates in
positive and negative variable returns from a subsidiary, and
if it can affect these returns by its power of decision.

Structured entities which are controlled also have to be conso-
lidated. Accordingly, the assets and liabilities remain in the
consolidated statement of financial position. Structured entities
are entities which have been designed so that voting or similar
rights are not relevant in deciding who controls the entity.
This is the case for example if voting rights relate to adminis-
trative tasks only and the relevant activities are directed
by means of contractual arrangements.

The financial statements of consolidated subsidiaries which
are included in the consolidated financial statements are
generally prepared as of the reporting date of the consolidated
financial statements. The financial statements of Daimler AG
and its subsidiaries included in the consolidated financial state-
ments are prepared using uniform recognition and measure-
ment principles. All intercompany assets and liabilities, equity,
income and expenses as well as cash flows from transactions
between consolidated entities are entirely eliminated in the
course of the consolidation process.

Business combinations are accounted for using the purchase
method.

Changes in equity interests in Group subsidiaries that reduce
or increase Daimler’s percentage ownership without loss
of control are accounted for as an equity transaction between
owners.

Investments in associated companies,
joint ventures or joint operations
An associated company is an entity over which the Group has
significant influence. Significant influence is the power
to participate in the financial and operating policy decisions
of the investee. Associated companies are generally accounted
for using the equity method.

For entities over which Daimler has joint control together with
a partner (joint arrangements), it is necessary to differentiate
whether a joint operation or a joint venture exists. In a joint
venture, the parties that have joint control of the arrangement
have rights to the net assets of the arrangement. For joint
ventures, the equity method has to be applied. A joint operation
exists when the jointly controlling parties have direct rights
to the assets and obligations for the liabilities. In this case, the
prorated assets and liabilities and the prorated income and
expenses are generally to be recognized (proportionate consol-
idation). Joint operations that have no significant impact on
the consolidated financial statements are generally accounted
for using the equity method.

In the special event that the financial statements of associated
companies, joint ventures or joint operations should not
be available in good time, the Group’s proportionate share of
the results of operations is included in Daimler’s consolidated
financial statements with a one to three-month time lag.
Significant events or transactions are accounted for without
a time lag, however (see also Note 13).

Subsidiaries measured at amortized cost
Subsidiaries, associated companies, joint ventures and joint
operations whose business is non-active or of low volume
and that individually and in sum are not material for the Group
and the fair presentation of financial position, liquidity
and capital resources, and profitability are generally measured
at amortized cost in the consolidated financial statements.

Foreign currency translation
Transactions in foreign currency are translated at the relevant
foreign exchange rates prevailing at the transaction date.
In subsequent periods, assets and liabilities denominated
in foreign currency are translated into euros using period-
end exchange rates; gains and losses from this measurement
are recognized in profit and loss (except for gains and losses
resulting from the translation of available-for-sale equity
instruments, which are recognized in other comprehensive
income/loss).

Assets and liabilities of foreign companies for which the
functional currency is not the euro are translated into euros
using period-end exchange rates. The translation adjustments
are presented in other comprehensive income/loss. The
components of equity are translated using historical rates.
The statements of income and cash flows are translated
into euros using average exchange rates during the respective
periods.

The exchange rates of the US dollar, the British pound, the
Japanese yen, the Chinese renminbi and the Russian ruble
– the most significant foreign currencies for Daimler – were
as shown in table  E.06.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 227

Accounting policies

Revenue recognition
Revenue from sales of vehicles, service parts and other related
products is recognized when the risks and rewards of owner-
ship of the goods are transferred to the customer, the amount
of revenue can be estimated reliably and collectability is rea-
sonably assured. Revenue is recognized net of sales reductions
such as cash discounts and sales incentives granted.

Daimler uses a variety of sales promotion programs dependent
on various market conditions in individual countries as well
as the respective product life cycles and product-related factors
(such as amounts of discounts offered by competitors, excess
industry production capacity, the intensity of market competition
and consumer demand for the products). These programs
comprise cash offers to dealers and customers as well as lease
subsidies or loans at reduced interest rates.

Revenue also includes revenue from the rental and leasing
business as well as interest from the financial services business
at Daimler Financial Services. The revenue from the rental
and leasing business results from operating leases and is recog-
nized on a straight-line basis over the periods of the contracts.
In addition, sales revenue is generated at the end of lease
contracts from the subsequent sale of the vehicles. Revenue
from receivables from financial services is recognized using
the effective interest method. When loans are issued below
market rates, related receivables are recognized at present
value and revenue is reduced for the interest incentive granted.
If subsidized leasing fees are agreed upon in connection with
finance leases, revenue from the sale of a vehicle is reduced by
the amount of the interest incentive granted.

The Group offers extended, separately priced warranties
for certain products. Revenue from these contracts is deferred
and recognized over the contract period in proportion to the
costs expected to be incurred based on historical information.
In circumstances in which there is insufficient historical infor-
mation, income from extended warranty contracts is recognized
on a straight-line basis. A loss on these contracts is recognized
in the current period if the sum of the expected costs for services
under the contract exceeds unearned revenue.

For multiple-element arrangements, such as when vehicles
are sold with free or reduced-in-price maintenance programs
or with free online services, the Group allocates revenue
to the various elements based on their estimated fair values.

Research and non-capitalized development costs
Expenditure for research and development that does not meet
the conditions for capitalization according to IAS 38 Intangible
Assets is expensed as incurred.

Borrowing costs
Borrowing costs are expensed as incurred unless they
are directly attributable to the acquisition, construction
or production of a qualifying asset and are therefore
part of the cost of that asset. Depreciation of the capitalized
borrowing costs is presented within cost of sales.

Government grants
Government grants related to assets are deducted from
the carrying amount of the asset and are recognized in
earnings over the life of a depreciable asset as a reduced
depreciation expense. Government grants which compensate
the Group for expenses are recognized as other operating
income in the same period as the expenses themselves.

E.06
Exchange rates

Average exchange
rate on December 31

Average exchange rates
during the respective period

First quarter

Second quarter

Third quarter

Fourth quarter

USD

1 € =

GBP

1 € =

JPY

1 € =

CNY

1 € =

2016

RUB

1 € =

USD

1 € =

GBP

1 € =

JPY

1 € =

CNY

1 € =

2015

RUB

1 € =

1.0541

0.8562

123.4000

7.3202

64.3000

1.0887

0.7340

131.0700

7.0608

80.6736

1.1020

1.1292

1.1166

1.0789

0.7704 127.0000

7.2101

82.4506

0.7868 121.9500

7.3788

74.3348

0.8497 114.2900

7.4431

72.1154

0.8691 117.9200

7.3691

67.9975

1.1261

1.1053

1.1116

1.0953

0.7434

134.1200

7.0231

70.9608

0.7211

134.2900

6.8572

58.2187

0.7173

135.8600

7.0083

70.3033

0.7220

132.9500

7.0003

72.4051

228 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Profit/loss from equity-method investments
This item includes all income and expenses in connection with
investments accounted for using the equity method. In addition
to the prorated profits and losses from financial investments,
it also includes profits and losses resulting from the sale of equity
interests or the remeasurement of equity interests following
a loss of significant influence. Daimler’s share of dilution gains
and losses occurring if the Group or other owners do not
participate in capital increases of companies in which shares
are held and accounted for using the equity method are
also included in profit/loss from equity-method investments.
This item also includes losses on the impairment of an
investment’s carrying amount and/or gains on the reversal
of such impairments.

Other financial income/expense, net
Other financial income/expense, net includes all income
and expense from financial transactions which are not included
in interest income and/or interest expense, and for Daimler
Financial Services are not included in revenue and/or cost of
sales. For example, expense from the compounding of interest
on provisions for other risks is recorded in this line item.

Furthermore, income and expenses from equity interests are
included in other financial income/expense, net, if such
income or expenses are not presented under equity-method
investments.

Interest income and interest expense
Interest income and interest expense include interest income
from investments in securities, cash and cash equivalents as
well as interest expense from liabilities. Furthermore, interest
and changes in fair values related to interest rate hedging
activities as well as income and expense resulting from the
allocation of premiums and discounts are included. The inter-
est components of defined benefit pension obligations and
other similar obligations as well as of the plan assets available
to cover these obligations are also presented in this line item.

For the segment Daimler Financial Services interest income
and expense and gains or losses from derivative financial
instruments from financial services business are disclosed
under revenue and cost of sales respectively.

Income taxes
Income taxes are comprised of current income taxes and
deferred taxes.

Current income taxes are calculated based on the respective
local taxable income and local tax rules for the period.
In addition, current income taxes presented for the period
include adjustments for uncertain tax payments or tax
refunds for periods not yet finally assessed including interest
expense and penalties on the underpayment of taxes.
For the case that amounts included in the tax return might
not be realized (uncertain tax positions), a provision for income
taxes is recognized. The amount is based on the best possible
assessment of the expected tax payment. Tax refund claims
from uncertain tax positions are recognized when it is predom-
inantly likely and thus reasonably expected that they can be
realized. Only in the case of tax loss carryforwards or unused
tax credits, no provision for taxes or tax claim is recognized
for these uncertain tax positions. Instead, the deferred tax assets
for the unused tax loss carryforwards or tax credits are
to be adjusted.

Changes in deferred tax assets and liabilities are generally
recognized through profit and loss in deferred taxes in the
consolidated statement of income, except for changes recognized
in other comprehensive income/loss or directly in equity.

Deferred tax assets or liabilities are calculated on the basis
of temporary differences between the tax basis and the
financial reporting of assets and liabilities including differences
from consolidation, on unused tax loss carryforwards and
unused tax credits. Measurement is based on the tax rates
expected to be effective in the period in which an asset is
recognized or a liability is settled. For this purpose, the tax
rates and tax rules are used which have been enacted at the
reporting date or are soon to be enacted. Daimler recognizes
a valuation allowance for deferred tax assets when it is unlikely
that a corresponding amount of future taxable profit will be
available against which the deductible temporary differences,
tax loss carryforwards and tax credits can be utilized. Deferred
tax liabilities for taxable temporary differences in connection
with investments in subsidiaries, branches, associates and
interests in joint arrangements are not recognized if the Group
is able to control the timing of the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 229

Earnings per share
Basic earnings per share are calculated by dividing profit
attributable to shareholders of Daimler AG by the weighted
average number of shares outstanding. As nothing occurred in
the years 2016 and 2015 that resulted in any dilution, diluted
earnings per share were the same as basic earnings per share
in those years.

Intangible assets
Intangible assets acquired are measured at acquisition
or manufacturing cost less accumulated amortization.
If necessary, accumulated impairment losses are recognized.

Intangible assets with indefinite lives are reviewed annually
to determine whether indefinite-life assessment continues
to be appropriate. If not, the change in the useful-life assess-
ment from indefinite to finite is made on a prospective basis.

Intangible assets other than development costs with finite
useful lives are generally amortized on a straight-line basis
over their useful lives (three to ten years). The amortization
period for intangible assets with finite useful lives is reviewed
at least at each year-end. Changes in expected useful lives are
treated as changes in accounting estimates. The amortization
expense on intangible assets with finite useful lives is recorded
in functional costs.

Development costs for vehicles and components are recognized
if the conditions for capitalization according to IAS 38 are
met. Subsequent to initial recognition, the asset is carried at
cost less accumulated amortization and accumulated impair-
ment losses. Capitalized development costs include all direct
costs and allocable overheads and are amortized on a straight-
line basis over the expected product life cycle (a maximum
of ten years). Amortization of capitalized development costs
is an element of manufacturing costs and is allocated to those
vehicles and components by which they were generated and
is included in cost of sales when the inventory (vehicles) is sold.

Property, plant and equipment
Property, plant and equipment are measured at acquisition
or manufacturing costs less accumulated depreciation.
If necessary, accumulated impairment losses are recognized.

The costs of internally produced equipment and facilities
include all direct costs and allocable overheads. Acquisition
or manufacturing costs include the estimated costs, if any,
of dismantling and removing the item and restoring the site.

Property, plant and equipment are depreciated over
the useful lives as shown in table  E.07.

Leasing
Leasing includes all arrangements that transfer the right to
use a specified asset for a stated period of time in return
for a payment, even if the right to use such asset is not explicitly
described in an arrangement. The Group is a lessee of prop-
erty, plant and equipment and a lessor of its products. It is eval-
uated on the basis of the risks and rewards of a leased asset
whether the ownership of the leased asset is attributed to the
lessee (finance lease) or to the lessor (operating lease).

Daimler as lessee
In the case of an operating lease, the lease payments
or rental payments are immediately expensed.

Assets carried as finance leases are measured at the beginning
of the (lease) contract at the lower of the present value of
the minimum lease payments and the fair value of the leased
object, and in the following periods less accumulated deprecia-
tion and other accumulated impairment losses. Depreciation
is on a straight-line basis; residual values of the assets are given
due consideration. Payment obligations resulting from future
lease payments are discounted and disclosed under financing
liabilities.

Goodwill
For acquisitions, goodwill represents the excess of the
consideration transferred over the fair values assigned
to the identifiable assets proportionally acquired and liabilities
assumed. Goodwill is accounted for at the subsidiaries
in the functional currency of those subsidiaries.

E.07
Useful lives of property, plant and equipment

Buildings and site improvements

Technical equipment and machinery

Other equipment, factory and office equipment

10 to 50 years

6 to 25 years

3 to 30 years

In connection with obtaining control, non-controlling interest
in the acquiree is principally recognized at the proportionate
share of the acquiree’s identifiable assets, which are measured
at fair value.

230 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Sale and lease back
The same accounting principles apply to assets if Daimler
sells such assets and leases them back from the buyer.

Daimler as lessor
Operating leases relate to vehicles that the Group produces
itself and leases to third parties or to vehicles that the Group
sells and grants a buy-back or residual-value guarantee.
These vehicles are capitalized at (depreciated) cost of production
under leased equipment in the industrial business and are
depreciated over the contract term on a straight-line basis
with consideration of the expected residual values. Changes
in the expected residual values lead either to prospective
adjustments of the scheduled depreciation or to an impairment
loss if necessary.

Operating leases also relate to Group products that Daimler
Financial Services acquires from non-Group dealers or other
third parties and leases to end customers. These vehicles are
presented at (depreciated) cost of acquisition under leased
equipment in the Daimler Financial Services segment. If these
vehicles are subsidized, the subsidies are deducted from
the cost of acquisition. After revenue is received from the sale
to independent dealers, these vehicles generate revenue
from lease payments and subsequent resale on the basis of the
separate leasing contracts. The revenue received from the
sale of these vehicles to the dealers is estimated by the Group
as being of the magnitude of the addition to leased equip-
ment at Daimler Financial Services. In 2016, additions to leased
equipment at Daimler Financial Services amounted to
approximately €13 billion (2015: approximately €12 billion).

In the case of finance leases, the Group presents the receiv-
ables in amount of the net investment of the lease agreements
under receivables from financial services. The net investment
of a lease agreement is the gross investment (future minimum
lease payments and non-guaranteed residual value) discounted
at the rate upon which the lease agreement is based.

Equity-method investments
On the date of acquisition, a positive difference between
cost of acquisition and Daimler’s share of the fair values of the
identifiable assets and liabilities of the associated company
or joint venture is determined and recognized as investor level
goodwill. The goodwill is included in the carrying amount of
the equity-method investment. With step acquisition of an equity
interest by which significant influence or joint control is
achieved for the first time, the investment is generally accounted
for on the basis of IFRS 3 Business Combinations. This means
that the previously held equity interest is remeasured on the
date of acquisition; any resulting gain or loss is recognized
through profit and loss. If an equity interest in an existing asso-
ciated company is increased without any resulting change
in significant influence, goodwill is determined only for the
additionally acquired interest; the previous investment
is not remeasured at fair value.

Daimler reviews on each reporting date whether there is any
objective indication of impairments or impairments reversal
of equity-method investments. If such indications exist, the
Group determines the impairment loss or reversal to be recog-
nized. If the carrying amount exceeds the recoverable amount
of an investment, the carrying amount is written down to the
recoverable amount. The recoverable amount is the greater
of fair value less costs to sell and value in use. An impairment
reversal is carried out if there is an objective evidence for an
impairment reversal. If such an assessment is made, the recov-
erable amount is remeasured. The amount of an impairment
reversal is limited to the amount by which an asset has been
impaired. An impairment or impairment reversal is recognized
in the consolidated statement of income under income/loss
on equity-method investments; this also includes any gains and/
or losses on the sale of equity-method investments.

Interim gains or losses (to be eliminated) from transactions
with companies accounted for at-equity are recognized
through profit and loss with corresponding adjustments
of the investments’ carrying amounts.

Impairment of non-current non-financial assets
Daimler assesses at each reporting date whether there is an
indication that an asset may be impaired or whether there
is an indication that a previously recognized impairment loss may
have decreased. If such indication exists, Daimler estimates
the recoverable amount of the asset. The recoverable amount
is determined for each individual asset unless the asset
generates cash inflows that are not largely independent of
those from other assets or groups of assets (cash-generating
units). In addition, goodwill and other intangible assets
with indefinite useful lives are tested annually for impairment;
this takes place at the level of the cash-generating units.
If the carrying amount of an asset or of a cash-generating
unit exceeds the recoverable amount, an impairment loss
is recognized for the difference.

The recoverable amount is the higher of fair value less costs
to sell and value in use. For cash-generating units, Daimler
in a first step determines the respective recoverable amount
as value in use and compares it with the respective carrying
amount (including goodwill). The cash-generating units are
generally defined as the reporting segments. At Daimler Financial
Services, impairment tests have been carried out below
the segment level since the year 2016. There is a differentiation
between the two cash-generating units Daimler Financial
Services Classic (typical financial services business) and Daimler
Financial Services Mobility (innovative mobility services).

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 231

Value in use is measured by discounting expected future cash
flows from the continuing use of the cash-generating units
using a risk-adjusted interest rate. Future cash flows are deter-
mined on the basis of the long-term planning, which is
approved by the Management and which is valid at the date
when the impairment test is conducted. This planning is based
on expectations regarding future market share, the growth
of the respective markets as well as the products’ profitability.
The multi-year planning comprises a planning horizon until
2023 and therefore mainly covers the product life cycles
of our automotive business. The rounded risk-adjusted interest
rates used to discount cash flows, which are calculated for
each segment, are currently unchanged from the previous year
at 8% after taxes for the cash-generating units of the industrial
business. For the cash-generating unit Daimler Financial
Services Classic, a risk-adjusted interest rate of 9% after taxes
is applied (unchanged from the previous year); for Daimler
Financial Services Mobility, the risk-adjusted interest rate is
14% after taxes. Whereas the discount rate for the cash-
generating unit Daimler Financial Services Classic represents
the cost of equity, the risk-adjusted interest rate for the
other cash-generating units is based on the weighted average
cost of capital (WACC). These are calculated based on the
capital asset pricing model (CAPM) taking into account current
market expectations. In calculating the risk-adjusted interest
rate for impairment test purposes, specific peer group informa-
tion for beta factors, capital-structure data and cost of debt
are used. Periods not covered by the forecast are taken into
account by recognizing a residual value (terminal value),
which does not consider any growth rates. In addition, several
sensitivity analyses are conducted. These show that generally
even in the case of more unfavorable premises for main influenc-
ing factors with respect to the original planning, no need
for impairment exists. If value in use is lower than the carrying
amount, fair value less costs to sell is additionally calculated
to determine the recoverable amount.

An assessment for assets other than goodwill is made at each
reporting date as to whether there is any indication that previ-
ously recognized impairment losses may no longer exist or may
have decreased. If this is the case, Daimler records a partial
or entire reversal of the impairment; the carrying amount
is thereby increased to its recoverable amount. However, the
increased carrying amount may not exceed the carrying
amount that would have been determined (net of depreciation),
had no impairment loss been recognized in prior years.

Non-current assets held for sale and disposal groups
The Group classifies non-current assets or disposal groups
as held for sale if the conditions of IFRS 5 Non-current assets
held for sale and discontinued operations are fulfilled. In this
case, the assets or disposal groups are no longer depreciated
but measured at the lower of carrying amount and fair value
less costs to sell. If fair value less costs to sell subsequently
increases, any impairment loss previously recognized is
reversed, this reversal is restricted to the impairment loss previ-
ously recognized for the assets or disposal group concerned.
The Group generally discloses these assets or disposal groups
separately in the consolidated statement of financial position.

Inventories
Inventories are measured at the lower of acquisition or manu-
facturing cost and net realizable value. The net realizable value
is the estimated selling price less any remaining costs to sell.
The acquisition or manufacturing costs of inventories are gener-
ally based on the specific identification method and include
costs incurred in acquiring the inventories and bringing them
to their existing location and condition. Costs for large
numbers of inventories that are interchangeable are allocated
under the average cost formula. In the case of manufactured
inventories and work in progress, acquisition or manufacturing
cost also includes production overheads based on normal
capacity.

Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. Financial instruments in the
form of financial assets and financial liabilities are generally
presented separately. Financial instruments are recognized
as soon as Daimler becomes a party to the contractual provi-
sions of the financial instrument. In the case of purchases
or sales of financial assets through the regular market, Daimler
uses the transaction date as the date of initial recognition
or derecognition.

Upon initial recognition, financial instruments are measured
at fair value. For the purpose of subsequent measurement,
financial instruments are allocated to one of the categories
mentioned in IAS 39 Financial Instruments: Recognition and
Measurement. Transaction costs directly attributable to acqui-
sition or issuance are considered by determining the carrying
amount if the financial instruments are not measured at fair
value through profit or loss.

232 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Impairment of financial assets
At each reporting date, the carrying amounts of financial
assets other than those to be measured at fair value through
profit or loss are assessed to determine whether there is
objective evidence of impairment. Objective evidence may exist
for example if a debtor is facing serious financial difficulties
or there is a substantial change in the debtor’s technological,
economic, legal or market environment. For quoted equity
instruments, a significant or prolonged decline in fair value
is additional objective evidence of possible impairment.
Daimler has defined criteria for the significance and duration
of a decline in fair value. A decline in fair value is deemed
significant if it exceeds 20% of the carrying amount of the invest-
ment; a decline is deemed prolonged if the carrying amount
exceeds the fair value for a period longer than nine months.

Loans and receivables. If there are objective indications that
the value of a loan or receivable has to be impaired, the
amount of the impairment loss is measured as the difference
between the carrying amount of the asset and the present
value of expected future cash flows (excluding expected future
credit losses that have not yet been incurred), discounted
at the original effective interest rate of the financial asset. The
amount of the impairment loss is recognized in profit or loss.

If, in a subsequent reporting period, the amount of the
impairment loss decreases and the decrease can be attributed
objectively to an event occurring after the impairment was
recognized, the impairment loss recorded in prior periods is
reversed and recognized in profit or loss.

In most cases, an impairment loss on loans and receivables
(e.g. receivables from financial services including finance lease
receivables and trade receivables) is recorded using allowance
accounts. The decision to account for credit risks using an
allowance account or by directly reducing the receivable depends
on the estimated probability of the loss of receivables.

Available-for-sale financial assets. If an available-for-sale
financial asset is impaired, the difference between its cost
(net of any principal payment and amortization) and its current
fair value (less any impairment loss previously recognized
in the statement of income) is reclassified from other compre-
hensive income/loss to the statement of income. Reversals
with respect to equity instruments classified as available for
sale are recognized in other comprehensive income/loss.
Reversals of impairment losses on debt instruments are recog-
nized through the statement of income if the increase in fair
value of the instrument can be objectively attributed to an event
occurring after the impairment losses were recognized in
the consolidated statement of income.

Financial assets
Financial assets primarily comprise receivables from financial
services, trade receivables, receivables from banks, cash on
hand, derivative financial assets and marketable securities and
financial investments.

Financial assets at fair value through profit or loss. Financial
assets at fair value through profit or loss include those finan-
cial assets designated as held for trading.

Derivatives, including embedded derivatives separated from
the host contract, which are not classified as hedging instru-
ments in hedge accounting, as well as shares and marketable
debt securities acquired for the purpose of selling in the near
term are classified as held for trading. Gains or losses on these
financial assets are recognized in profit or loss.

Loans and receivables. Loans and receivables are non-derivative
financial assets with fixed or determinable payments that
are not quoted in an active market, such as receivables from
financial services or trade receivables. After initial recognition,
loans and receivables are subsequently carried at amortized
cost using the effective interest method less any impairment
losses. Gains and losses are recognized in the statement of
income when the loans and receivables are impaired or derec-
ognized. Interest effects on the application of the effective
interest method are also recognized in profit or loss.

Available-for-sale financial assets. Available-for-sale financial
assets are non-derivative financial assets that are designated
as available for sale or that are not classified in any of the
preceding categories. This category includes equity instruments
and debt instruments such as government bonds, corporate
bonds and commercial paper.

After initial measurement, available-for-sale financial assets
are measured at fair value, with unrealized gains or losses being
recognized in other comprehensive income/loss. If objective
evidence of impairment exists or if changes occur in the fair
value of a debt instrument resulting from currency fluctuations,
these changes are recognized in profit or loss. Upon disposal
of financial assets, the accumulated gains and losses recognized
in other comprehensive income/loss resulting from measure-
ment at fair value are recognized in profit or loss. If a reliable
estimate cannot be made of the fair value of an unquoted
equity instrument, such as an investment in a German limited
liability company, this instrument is measured at cost (less
any impairment losses). Interest earned on available-for-sale
financial assets is generally reported as interest income using
the effective interest method. Dividends are recognized in
profit or loss when the right of payment has been established.

Cash and cash equivalents. Cash and cash equivalents consist
primarily of cash on hand, checks and demand deposits at
banks, as well as debt instruments and certificates of deposits
with a remaining term when acquired of up to three months,
which are not subject to any material value fluctuations. Cash
and cash equivalents correspond with the classification
in the consolidated statement of cash flows.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 233

Offsetting financial instruments
Financial assets and financial liabilities are offset and the net
amount is presented in the consolidated statement of financial
position provided that an enforceable right currently exists
to offset the amounts involved, and there is an intention either
to carry out the offsetting on a net basis or to settle a liability
when the related asset is sold.

Financial liabilities
Financial liabilities primarily include trade payables,
liabilities to banks, bonds, derivative financial liabilities
and other liabilities.

Financial liabilities measured at amortized cost. After initial
recognition, financial liabilities are subsequently measured
at amortized cost using the effective interest method.

Financial liabilities at fair value through profit or loss. Financial
liabilities at fair value through profit or loss include financial
liabilities held for trading. Derivatives (including embedded
derivatives separated from the host contract) which are not
used as hedging instruments in hedge accounting, are classified
as held for trading. Gains or losses on liabilities held for trading
are recognized in profit or loss.

Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments exclusively for
hedging financial risks that arise from its commercial business
or refinancing activities. These are mainly interest rate risks,
currency risks and commodity price risks.

Embedded derivatives are separated from the host contract,
which is not measured at fair value through profit or loss,
if an analysis shows that the economic characteristics and
risks of embedded derivatives are not closely related to those
of the host contract.

Derivative financial instruments are measured at fair value
upon initial recognition and at each subsequent reporting date.
The fair value of listed derivatives is equal to their positive
or negative market value. If a market value is not available, fair
value is calculated using standard financial valuation models
such as discounted cash flow or option pricing models. Deriva-
tives are presented as assets if their fair value is positive and
as liabilities if the fair value is negative.

If the requirements for hedge accounting set out in IAS 39 are
met, Daimler designates and documents the hedge relationship
from the date a derivative contract is entered into as a fair
value hedge, a cash flow hedge or a hedge of a net investment
in a foreign business operation. In a fair value hedge, the fair
value of a recognized asset or liability or an unrecognized firm
commitment is hedged. In a cash flow hedge, the variability
of cash flows to be received or paid from expected transactions
related to a recognized asset or liability or a highly probable
forecast transaction are hedged. The documentation of the
hedging relationship includes the objectives and strategy of
risk management, the type of hedging relationship, the nature
of the risk being hedged, the identification of the hedging
instrument and the hedged item, as well as a description of the
method used to assess hedge effectiveness. Hedging transac-
tions are expected to be highly effective in achieving offsetting
risks from changes in fair value or cash flows and are regularly
assessed to determine that they have actually been highly
effective throughout the financial reporting periods for which
they are designated.

Changes in the fair value of derivative financial instruments
are recognized periodically in either profit or loss or other compre-
hensive income/loss, depending on whether the derivative
is designated as a hedge of changes in fair value or cash flows.
For fair value hedges, changes in the fair value of the hedged
item and the derivative are recognized in profit or loss. For cash
flow hedges, fair value changes in the effective portion of the
hedging instrument after taxes are recognized in other compre-
hensive income/loss. Amounts recognized in other compre-
hensive income/loss are reclassified to the statement of income
when the hedged underlying transaction affects the statement
of income. The ineffective portions of fair value changes are
recognized in profit or loss.

If derivative financial instruments do not or no longer qualify
for hedge accounting because the qualifying criteria for hedge
accounting are not or are no longer met, the derivative
financial instruments are classified as held for trading and
are measured at fair value through profit or loss.

234 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pensions and similar obligations
The measurement of defined benefit plans for pensions and
other post-employment benefit obligations (medical care)
in accordance with IAS 19 Employee Benefits is based on the
projected unit credit method. Plan assets invested to cover
defined benefit pension obligations and other post-employment
benefit obligations (medical care) are measured at fair value
and offset against the corresponding obligations. For the valua-
tion of defined benefit plans, differences between actuarial
assumptions used and actual developments as well as changes
in actuarial assumptions result in actuarial gains and losses,
which have a direct impact on the consolidated statement
of financial position or on the consolidated statement of com-
prehensive income/loss.

The balance of defined benefit plans for pensions and other
post-employment benefit obligations and plan assets (net
pension obligation or net pension assets) accrues interest
at the discount rate used as a basis for the measurement of
the gross pension obligation. The resulting net interest
expense or income is recognized in profit and loss under inter-
est expense or interest income in the consolidated statement
of income. The other expenses resulting from pension obligations
and other post-employment benefit obligations (medical care),
which mainly result from entitlements acquired during the year
under review, are taken into consideration in the functional
costs in the consolidated statement of income.

The discount factors used to calculate the present values of
defined benefit pension obligations are to be determined –
with maturities and currencies matching the pension payments
– by reference to market yields at the end of the reporting
period on high-quality corporate bonds in the respective markets.
For very long maturities, there are no high-quality corporate
bonds available as a benchmark. The respective discount factors
are estimated by extrapolating current market rates along the
yield curve. At December 31, 2016, within the scope of a change
in accounting estimates for the calculation of discount factors,
the criteria for the selection of high-quality corporate bonds
with AA ratings to be included was adjusted in order to improve
the statistical significance of the calculation of return. The
reduction in pension obligations due to the amended calculation
of the discount rate was approximately €0.2 billion at
December 31, 2016. This had no impact on the consolidated
statement of income.

Gains or losses on the curtailment or settlement of
a defined benefit plan are recognized in profit or loss
when the curtailment or settlement occurs.

Provisions for other risks
A provision is recognized when a liability to third parties
has been incurred, an outflow of resources is probable and
the amount of the obligation can be reasonably estimated.
The amount recognized as a provision represents the best
estimate of the obligation at the reporting date. Provisions
with an original maturity of more than one year are discounted
to the present value of the expenditures expected to settle
the obligation at the end of the reporting period. If the criteria
of the regulations on recognition and measurement of provi-
sions are not fulfilled and the possibility of a cash outflow upon
settlement is not unlikely, the item is to be presented as a
contingent liability. Provisions and contingent liabilities are reg-
ularly reviewed and adjusted as further information becomes
available or circumstances change.

A provision for expected warranty costs is recognized when
a product is sold or when a new warranty program is initiated.
Estimates for accrued warranty costs are primarily based
on historical experience.

Restructuring provisions are set up in connection with programs
that materially change the scope of business performed
by a segment or business unit or the manner in which business
is conducted. In most cases, restructuring expenses include
termination benefits and compensation payments due to the
termination of agreements with suppliers and dealers.
Restructuring provisions are recognized when the Group
has a detailed formal plan that has either commenced
implementation or been announced.

Share-based payment
Share-based payment comprises cash-settled liability awards.

Liability awards are measured at fair value at each balance
sheet date until settlement and are classified as provisions.
The profit or loss of the period equals the addition to and/or
the reversal of the provision during the reporting period and
the dividend equivalent paid during the period, and is included
in the functional costs.

Presentation in the consolidated statement of cash flows
Interest paid as well as interest and dividends received are
classified as cash provided by/used for operating activities.
The cash flows from short-term marketable debt securities
with high turnover rates and significant amounts are offset and
presented within cash provided by/used for investing activities.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 235

2. Accounting estimates and assessments

In the consolidated financial statements, to a certain degree,
estimates, assessments and assumptions have to be made
which can affect the amounts and reporting of assets and liabili-
ties, the reporting of contingent assets and liabilities on the
balance sheet date and the amounts of income and expense
reported for the period. The major items affected by such
estimates, assessments and assumptions are described as
follows. Actual amounts may differ from the estimates.
Changes in the estimates, assessments and assumptions can
have a material impact on the consolidated financial statements.

Recoverable amounts of cash-generating units
and equity-method investments
In the context of impairment tests for non-financial assets,
estimates have to be made to determine the recoverable
amounts of cash-generating units. Assumptions have to be
made in particular with regard to future cash inflows and
outflows for the planning period and the following periods.
The estimates include assumptions regarding future market
share and the growth of the respective markets as well as
regarding the products’ profitability. On the basis of the impair-
ment tests carried out in 2016, the recoverable amounts are
larger than the net assets of the Group’s cash-generating units,
in most cases substantially larger.

When objective evidence of impairment or impairment reversal
is present, estimates and assessments also have to be made
to determine the recoverable amount of an equity method
financial investment. The determination of the recoverable
amount is based on assumptions regarding future business
developments for the determination of the expected future
cash flows of that financial investment. See Note 13 for the
presentation of carrying amounts and fair values of equity-
method financial investments in listed companies.

Recoverable amount of equipment on operating leases
Daimler regularly reviews the factors determining the values
of its leased vehicles. In particular, it is necessary to estimate
the residual values of vehicles at the end of their leases,
which constitute a substantial part of the expected future cash
flows from leased assets. In this context, assumptions have to
be made regarding the future supply of and demand for vehicles,
as well as the development of vehicle prices. Those assump-
tions are determined either by qualified estimates or by publica-
tions provided by expert third parties; qualified estimates are
based, as far as they are publicly available, on external data
with consideration of internally available additional information
such as historical experience of price developments and
recent sale prices. The residual values thus determined serve
as a basis for depreciation; changes in residual values lead
either to prospective adjustments of the depreciation or, in the
case of a significant decline in expected residual values, to
impairment. If depreciation is prospectively adjusted, changes
in estimates of residual values do not have a direct effect
but are equally distributed over the remaining periods of the
lease contracts.

Collectability of receivables from financial services
The Group regularly estimates the risk of default on receivables
from financial services. Many factors are taken into consider-
ation in this context, including historical loss experience, the size
and composition of certain portfolios, current economic events
and conditions and the estimated fair values and adequacy of
collaterals. Changes in economic conditions can lead to changes
in our customers’ creditworthiness and to changes in used
vehicle prices, which would have a direct effect on the market
values of the vehicles assigned as collateral. Changes to the
estimation and assessment of these factors influence the allow-
ance for credit losses with a resulting impact on the Group’s
net profit. See also Notes 14 and 32 for further information.

Product warranties
The recognition and measurement of provisions for product
warranties is generally connected with estimates.

The Group provides various types of product warranties depend-
ing on the type of product and market conditions. Provisions
for product warranties are generally recognized when vehicles
are sold or when new warranty programs are initiated. Based
on historical warranty claim experience, assumptions have
to be made on the type and extent of future warranty claims
and customer goodwill, as well as on possible recall campaigns
for each model series. These assessments are based on expe-
rience of the frequency and extent of vehicle faults and defects
in the past. In addition, the estimates also include assumptions
on the amounts of potential repair costs per vehicle and the
effects of possible time or mileage limits. The provisions are
regularly adjusted to reflect new information.

Further information on provisions for other risks is provided
in Note 23.

Legal proceedings
Various legal proceedings, claims and governmental investiga-
tions are pending against Daimler AG and its subsidiaries on
a wide range of topics. If the outcome of such legal proceedings
is detrimental to Daimler, the Group may be required to pay
substantial compensatory and punitive damages, to undertake
service actions or recall campaigns, to pay fines or to carry
out other costly actions. Litigation and governmental investiga-
tions often involve complex legal issues and are connected
with a high degree of uncertainty. Accordingly, the assessment
of whether an obligation exists on the balance sheet date as
a result of an event in the past, and whether a future cash out-
flow is likely and the obligation can be reliably estimated,
largely depends on estimations by the management. Daimler
regularly evaluates the current stage of legal proceedings, also
with the involvement of external legal counsel. It is therefore
possible that the amounts of provisions for pending or potential
litigation will have to be adjusted due to future developments.
Changes in estimates and premises can have a material effect
on the Group’s future profitability. It is also possible that
provisions accrued for some legal proceedings may turn out to
be insufficient once such proceedings have ended. Daimler
may also become liable for payments in legal proceedings no
provisions were established for. Although the final resolution
of any such proceedings could have a material effect on Daimler’s
operating results and cash flows for a particular reporting
period, Daimler believes that it should not materially affect
the Group’s financial position.

236 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Pensions and similar obligations
The calculation of provisions for pensions and similar obliga-
tions and the related pension cost are based on various
actuarial valuations. The calculations are subject to various
assumptions on matters such as current actuarially developed
probabilities (e.g. discount factors and cost-of-living increases),
future fluctuations with regard to age and period of service,
and experience with the probability of occurrence of pension
payments, annuities or lump sums. As a result of changed
market or economic conditions, the probabilities on which the
influencing factors are based, may differ from current develop-
ments. The financial effects of deviations of the main factors
are calculated with the use of sensitivity analyses. See Note 22
for further information.

Income taxes
The calculation of income taxes of Daimler AG and its subsid-
iaries is based on the legislation and regulations applicable
in the various countries. Due to their complexity, the tax items
presented in the financial statements are possibly subject to
different interpretation by taxpayers on the one hand and local
tax authorities on the other hand. For the calculation of
deferred tax assets, assumptions have to be made regarding
future taxable income and the time of realization of the
deferred tax assets. In this context, Daimler takes into consid-
eration, among other things, the projected earnings from
business operations, the effects on earnings of the reversal of
taxable temporary differences, and realizable tax strategies.
As future business developments are uncertain and are some-
times beyond Daimler’s control, the assumptions to be made
in connection with accounting for deferred tax assets are
connected with a substantial degree of uncertainty. On each
balance sheet date, Daimler carries out impairment tests on
deferred tax assets on the basis of the planned taxable income
in future financial years; if Daimler assesses that the proba-
bility of future tax advantages being partially or fully unrealized
is more than 50%, the deferred tax assets are impaired.
Further information is provided in Note 9.

3. Consolidated Group

Composition of the Group
Table  E.08 shows the composition of the Group.

The aggregate balance sheet totals of the subsidiaries, associated
companies, joint ventures and joint operations accounted
for at amortized cost whose business is non-active or of low
volume and which are not material for the Group and the fair
presentation of its profitability, liquidity and capital resources
and financial position would amount to approximately 1%
of the Group’s balance sheet total; the aggregate revenues and
the aggregate net profit would amount to approximately 1%
of the Group’s revenue and net profit.

A detailed list of the companies included in the consolidated
financial statements and of the equity investments of Daimler
Group pursuant to Section 313 of the German Commercial
Code (HGB) is provided in the statement of investments. Further
information is provided in Note 40.

Structured entities
The structured entities of the Group are rental companies, asset-
backed-securities (ABS) companies and special funds. The
purpose of the rental companies primarily is the acquisition,
renting and management of assets. The ABS companies
are primarily used for the Group’s refinancing. The assets
transferred to structured entities usually result from the
Group’s leasing and sales financing business. Those entities
refinance the purchase price by issuing securities. The special
funds are set up in particular in order to diversify the capital
investment strategy.

At the reporting date, the Group has business relationships
with 20 (2015: 11) controlled structured entities, of which
18 (2015: 9) are fully consolidated. In addition, the Group has
relationships with 5 (2015: 5) non-controlled structured
entities. The unconsolidated structured entities are not material
for the Group’s profitability, liquidity and capital resources
and financial position.

Consolidated subsidiaries

On June 30, 2016, Daimler signed the agreements for the acqui-
sition of 100% of the shares of Athlon Car Lease International
B.V. (Athlon), based in Eindhoven, Netherlands, a subsidiary
of the Dutch Rabobank Group. Athlon is one of the leading pro-
viders of mobility solutions in Europe, especially of leasing and
fleet management for commercial customers. With the acqui-
sition of Athlon, Daimler Financial Services has repositioned
itself in fleet management as a multi-brand service provider
with a broad international presence. Athlon is allocated to the
Daimler Financial Services segment.

The transaction was closed on December 1, 2016. Upon closing,
the purchase price of €1.1 billion was paid and financial
liabilities of the Athlon companies in an amount of approxi-
mately €2.7 billion were settled.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 237

Due to closeness in time to the balance sheet date, the purchase-
price allocation is preliminary. Purchase price allocation will
be finalized in the year 2017. In the context of the preliminary
purchase-price allocation, €637 million was allocated to intan-
gible assets, €56 million to leased equipment and €72 million
to deferred tax liabilities. The amount allocated to intangible
assets includes €153 million for the acquired customer base,
€27 million for the Athlon brand, €21 million for acquired
software and €436 million for provisional goodwill.

The Athlon Group did not make a significant contribution to the
Daimler Group’s revenue or earnings in December. If Athlon
had been included in the Daimler Group’s consolidated financial
statements at January 1, 2016, Group revenue would have
increased by €2.2 billion and net profit by €0.1 billion.

Effective as of June 30, 2016, Daimler placed its 3.1% interest
in each of Renault S.A. (Renault) and Nissan Motor Company
Ltd. (Nissan) into the Daimler Pension Trust e.V. for the pur-
pose of strengthening the German pension plan assets over
the long term. Before this transfer, the investments in Renault
and Nissan were presented under other financial assets.
The investments were measured at fair value, whereby unrecog-
nized gains were shown under other comprehensive income.

The extraordinary contribution to the German pension plan
assets is equal to the fair value of the assets transferred
at the time of transfer and amounts to €1,800 million. In 2016,
the contribution of the shares led to other financial income in
an amount of €605 million, which is shown in the reconciliation.
There was no impact on liquidity and capital resources.

There Holding B.V. is accounted for in the consolidated financial
statements of Daimler AG as an associated company using
the equity method, and is allocated to the Mercedes-Benz Cars
segment.

In December 2016, There Holding B.V. signed contracts for the
sale of shares in HERE International B.V. The sale of a 15% equity
interest to Intel Holdings B.V. was completed in January 2017.
An equity interest of 10% was sold to a Chinese consortium
consisting of NavInfo Co. Ltd., Tencent Holdings Ltd. and GIC
Private Ltd. The transaction is expected to be closed in the
first half of 2017, after the approval of the relevant authorities
is granted.

See Note 13 for further information on the companies
accounted for using the equity method.

E.08
Composition of the Group

Consolidated subsidiaries

Germany

International

Unconsolidated subsidiaries

Germany

International

Joint operations accounted for
using proportionate consolidation

Joint operations accounted for using proportionate
consolidation

Germany

International

Joint operations accounted for
using the equity method

Germany

International

Joint ventures accounted for
using the equity method

Germany

International

Associated companies accounted
for using the equity method

Germany

International

Joint operations, joint ventures
and associated companies
accounted for at (amortized) cost

Germany

International

Daimler AG together with Nissan Motor Company Ltd. founded
the joint operation Cooperation Manufacturing Plant Aguas-
calientes, S.A.P.I. de C.V. in Mexico in 2015. In the future, the
company will produce cars for the brands Mercedes-Benz and
Infiniti. Daimler and Nissan each hold a 50% interest. The joint
operation has been accounted for using proportionate con-
solidation since July 1, 2016. The company is allocated to the
Mercedes-Benz Cars segment.

Equity-method investments

There Holding B.V. (THBV) was founded in 2015; Daimler,
Audi and BMW each hold 33.3% of the shares of the company.
Each of the shareholders provided a capital contribution
of €668 million.

Effective as of December 4, 2015, HERE International B.V.
(formerly There Acquisition B.V.) based in Rijswijk, Netherlands,
a 100% subsidiary of There Holding B.V., acquired the mapping
provider HERE from Nokia Corporation for a purchase price
of €2,593 million. The acquisition was financed by capital
contributions of €2,000 million and by bank loans taken out
by There Acquisition B.V. of €593 million.

At December 31,
2015

2016

359

297

–

329

270

–

513

470

238 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. Revenue

Table  E.09 shows the composition of revenue at Group level.

Revenue by segment  E.81 and region  E.83 is presented
in Note 33.

5. Functional costs

Cost of sales
Items included in cost of sales are shown in table  E.10.

Amortization expense of capitalized development costs in
the amount of €1,268 million (2015: €1,245 million) is presented
in expense of goods sold.

Selling expenses
In 2016, selling expenses amounted to €12,226 million (2015:
€12,147 million). Selling expenses include direct selling costs
as well as selling overhead expenses and consist of personnel
expenses, material costs and other selling costs.

General administrative expenses
General administrative expenses amounted to €3,419 million
in 2016 (2015: €3,363 million) and comprise expenses which
are not attributable to production, sales or research and devel-
opment functions and include personnel expenses, deprecia-
tion and amortization of fixed and intangible assets, and other
administrative costs.

The redefinition of cost allocations in 2016 led in 2015 to retro-
spective reclassifications of €347 million from administrative
expenses to cost of sales. If the original definition of cost
allocations had been retained administrative expenses in 2016
would have been €386 million higher and cost of sales by
the same amount lower.

Research and non-capitalized development costs
Research and non-capitalized development costs were
€5,257 million in 2016 (2015: €4,760 million) and primarily
comprise personnel expenses and material costs.

Optimization programs
Measures and programs with implementation costs that
materially impacted EBIT of the segments are briefly described
below.

E.09
Revenue

In millions of euros

Revenue from sales of goods

Revenue from the rental and
leasing business

Interest from the financial services
business at Daimler Financial Services

Revenue from sales of other services

E.10
Cost of sales

In millions of euros

Expense of goods sold

Depreciation of equipment
on operating leases

Refinancing costs at
Daimler Financial Services

Impairment losses on receivables from
financial services

Other cost of sales

E.11
Optimization programs

In millions of euros

Mercedes-Benz Cars

EBIT

Cash flow
Provisions for optimization programs1

Daimler Trucks

EBIT

Cash flow
Provisions for optimization programs1

Mercedes-Benz Vans

EBIT

Cash flow
Provisions for optimization programs1

Daimler Buses

EBIT

Cash flow
Provisions for optimization programs1

2016

2015

132,577

130,705

15,997

14,462

4,146

541

3,853

447

153,261

149,467

2016

2015

-107,925

-105,990

-6,652

-5,946

-1,789

-1,666

-499

-4,433

-502

-3,913

-121,298

-118,017

2016

2015

-33

253

-105

-68

-49

–

-9

-3

–

-64

180

-105

-64

-29

-4

-1

1 Amounts of provisions for optimization programs

as of December 31.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 239

In the course of the organizational focus on the divisions,
Daimler started a restructuring program for its sales organization
in Germany in 2014. Selected sales-and-service centers and
outlets were combined into passenger car and commercial
vehicle outlets in order to steadily increase the profitability
of Daimler’s own dealer activities in the highly competitive
German market. The restructuring program for the sales orga-
nization in Germany was concluded in the third quarter
of 2016. In addition, programs for restructuring the Group’s
dealer network abroad were initiated in 2015. The restructur-
ing programs also include the sale of selected operations
of the Group’s current sales network in Germany and abroad.
Those programs affect all automotive segments, but especially
the Mercedes-Benz Cars segment. In the reporting period
2016, these measures resulted in a net expense of €58 million
(2015: €144 million).

At December 31, 2016, the disposal group’s assets for the
locations abroad amounted to €240 million (December 31,
2015: €248 million) and its liabilities amounted to €135 million
(December 31, 2015: €12 million). Due to their minor impact
on the Group’s profitability, liquidity and capital resources, and
financial position, the assets and liabilities held for sale
are not presented separately in the consolidated statement
of financial position.

Table  E.11 shows the effects of the optimization programs
on the key figures of the segments.

Beside gains and/or losses from the sale of selected operations
of the Group’s current sales network, the EBIT effects listed
in table  E.11 primarily relate to personnel measures and are
included in the line items within the consolidated statement
of income as shown in table  E.12.

Cash effects resulting from the optimization programs
are expected in the years 2017 and 2018.

Personnel expenses and average number of employees
Personnel expenses included in the consolidated statement
of income amounted to €21,141 million in 2016 (2015: €20,949
million). The personnel expenses are composed of wages and
salaries in the amount of €17,150 million (2015: €16,963 million),
social contributions in the amount of €3,242 million (2015:
€3,197 million) and expenses from pension obligations in the
amount of €749 million (2015: €789 million). The average
numbers of people employed are shown in table  E.13.

Information on the total remuneration of the current and
former members of the Board of Management and the current
members of the Supervisory Board is provided in Note 37.

In the Daimler Trucks segment, a redundancy program was
launched in Brazil in 2013. That program led to a reduction
of approximately 3,200 jobs in the administrative and
productive areas as of December 31, 2015, mostly through
voluntary severance agreements.

Furthermore, another severance program was initiated
in Brazil in 2016. So far, that program has led to a reduction
of approximately 2,200 jobs, mostly through voluntary
severance agreements. In the Daimler Trucks segment,
that program resulted in expenses of €91 million in the
year ended December 31, 2016.

The aforementioned workforce adjustments in Brazil also
affect the Daimler Buses segment to a small extent. In 2016,
an expense of €9 million was recognized in this respect
at Daimler Buses.

In addition, in non-productive areas of Daimler Trucks in
Germany, a program based on socially acceptable voluntary
measures ran between May 2013 and December 2014, which
was continued in the third quarter of 2015 and led to a total
reduction of approximately 700 jobs as of December 31, 2015.

Mainly in 2017, Daimler Trucks anticipates expenses of up to
€500 million from measures relating to the further optimization
of fixed costs, especially for the Mercedes-Benz brand.

Mercedes-Benz Vans initiated a socially acceptable voluntary
severance program for the Düsseldorf plant in 2016. Approxi-
mately 200 severance agreements were signed, leading
to an expense of €38 million in 2016. Total expenses of up to
€0.1 billion are expected in the years 2016 through 2018.

E.12
Income and expenses associated with optimization programs

In millions of euros

Cost of sales

Selling expenses

General administrative expenses

Research and non-capitalized
development costs

Other operating expenses

Other operating income

E.13
Average number of employees

Mercedes-Benz Cars1

Daimler Trucks

Mercedes-Benz Vans

Daimler Buses

Daimler Financial Services

Other

2016

2015

-127

-108

-8

-2

-45

-196

-46

-119

-7

-3

-137

110

-202

2016

2015

140,591

137,431

81,810

23,763

17,937

10,880

9,976

87,707

22,430

17,755

9,665

9,574

284,957

284,562

1 337 employees from proportionately consolidated company

are proportionate included in 2016.

240 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

E.14
Other operating income

In millions of euros

Income from costs recharged
to third parties

Government grants and subsidies

Gains on sales of property,
plant and equipment

Rental income not relating
to sales financing

Income associated with optimization
programs

Other miscellaneous income

E.15
Other operating expense

In millions of euros

Losses on sales of property,
plant and equipment

Expenses associated with
optimization programs

Other miscellaneous expenses

E.16
Other financial income/expense, net

In millions of euros

Income and expense from compounding
and effects from changes in discount rates
of provisions for other risks

Miscellaneous other financial
income/expense, net

E.17
Interest income and interest expense

In millions of euros

Interest income

Net interest income on the net assets
of defined benefit pension plans

Interest and similar income

Interest expense

Net interest expense on the net obligation
from defined benefit pension plans

Interest and similar expense

2016

2015

1,219

144

126

743

2,350

1,131

107

125

110

560

2,114

6. Other operating income and expense

The composition of other operating income is shown
in table  E.14.

Income from costs recharged to third parties includes income
from licenses and patents, shipping costs and other costs
charged to third parties, with related expenses primarily within
the functional costs.

Government grants and subsidies mainly comprise
reimbursements relating to current part-time early retirement
contracts and subsidies for alternative drive systems.

Gains on sales of property, plant and equipment in 2015
included gains of €87 million from the sale of real-estate
properties in the United States.

The composition of other operating expense is shown
in table  E.15.

2016

2015

Further information on income and expenses associated with
optimization programs is provided in Note 5.

Other miscellaneous expense includes losses from disposals
of current assets, changes in other provisions (partially in
connection with legal proceedings of €400 million), expenses
for the settlement of a patent dispute of €64 million and
additional miscellaneous items.

7. Other financial income/expense, net

Table  E.16 shows the components of other financial
income/expense, net.

Other financial income in 2016 comprises the gains of
€605 million recognized from the contribution of the equity
interests in Renault and Nissan to the pension plan assets
at fair value. Those gains were previously presented within
other comprehensive income/loss.

8. Interest income and interest expense

Table  E.17 shows the components of interest income
and interest expense.

-111

-45

-1,142

-1,298

-127

-137

-291

-555

2016

2015

-124

399

275

-20

-7

-27

2016

2015

225

230

-227

-319

-546

167

170

-293

-309

-602

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 241

9. Income taxes

Profit before income taxes is comprised as shown
in table  E.18.

Profit before income taxes in Germany includes profit/
loss from equity-method investments if the equity interests
in those companies are held by German companies.

Table  E.19 shows the components of income taxes.

The current tax expense includes tax benefits at German
and foreign companies of €292 million (2015: €731 million)
recognized for prior periods.

The deferred tax expense is comprised of the components
shown in table  E.20.

For German companies, in 2016 and 2015, deferred taxes
were calculated using a federal corporate income tax rate
of 15%, a solidarity tax surcharge of 5.5% on each year’s federal
corporate income taxes, and a trade tax rate of 14%. In total,
the tax rate applied for the calculation of German deferred
taxes in both years amounted to 29.825%.

For non-German companies, the deferred taxes at period-end
were calculated using the tax rates of the respective countries.

Table  E.21 shows a reconciliation of expected income
tax expense to actual income tax expense determined using
the unchanged applicable German combined statutory tax
rate of 29.825%.

E.18
Profit before income taxes

In millions of euros

German companies

Non-German companies

E.19
Components of income taxes

In millions of euros

Current taxes

German companies

Non-German companies

Deferred taxes

German companies

Non-German companies

E.20
Components of deferred tax expense

In millions of euros

Deferred taxes

due to temporary differences

due to tax loss carryforwards
and tax credits

2016

2015

5,775

6,799

4,980

7,764

12,574

12,744

2016

2015

-1,396

-1,690

-155

-549

-3,790

-918

-1,558

-444

-1,113

-4,033

2016

2015

-704

-44

-660

-1,557

-595

-962

E.21
Reconciliation of expected income tax expense
to actual income tax expense

In millions of euros

Expected income tax expense

Foreign tax rate differential

Trade tax rate differential

Tax law changes

Change of valuation allowance
on deferred tax assets

Tax-free income and non-deductible
expenses

Other

2016

2015

-3,750

-41

-3,801

-126

-49

-225

-147

113

Actual income tax expense

-3,790

-4,033

242 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

E.22
Deferred tax assets and liabilities

In millions of euros

Deferred tax assets

Deferred tax liabilities

Deferred tax assets, net

At December 31,
2015

2016

3,870

-3,467

403

3,284

-2,215

1,069

E.23
Split of tax assets and liabilities before offset

In millions of euros

Intangible assets

Property, plant and equipment

Equipment on operating leases

Inventories

Receivables from financial services

Other financial assets

Tax loss carryforwards and
unused tax credits

Provisions for pensions and
similar obligations

Other provisions

Liabilities

Deferred income

Other

Valuation allowances

Deferred tax assets, gross

Development costs

Other intangible assets

Property, plant and equipment

Equipment on operating leases

Inventories

Receivables from financial services

Other financial assets

Other assets

Provisions for pensions and
similar obligations

Other provisions

Other

Deferred tax liabilities, gross

Deferred tax assets, net

At December 31,
2015

2016

340

1,798

1,129

328

5,697

409

1,178

992

303

4,984

2,256

2,693

891

2,348

1,518

1,702

324

18,382

-1,248

17,134

-2,625

-274

-1,654

-7,919

-68

-1,124

-384

-236

869

2,304

1,645

1,611

331

17,371

-988

16,383

-2,317

-125

-1,742

-7,188

-63

-575

-363

-169

-2,098

-2,390

-139

-210

-16,731

403

-183

-199

-15,314

1,069

In 2016 and 2015, the Group impaired deferred tax assets
of foreign subsidiaries. The resulting tax expenses are included
in the line item change of valuation allowance on deferred
tax assets.

Tax-free income and non-deductible expenses include all other
effects at foreign and German companies relating to tax-free
income and non-deductible expenses, for instance tax-free gains
included in net periodic pension costs at the German com-
panies and tax-free results of our equity-method investments.
In 2016, tax-free gains recognized on the contribution of
our shares in Renault and Nissan into the German pension plan
assets are shown in this line item. Furthermore, in 2016
and 2015, the line item also includes tax benefits relating to tax
assessments of prior years. The tax benefits relating to tax
assessments of prior years consist of the current tax benefits
recognized for prior periods as well as partly offsetting deferred
tax expenses recognized for prior periods.

Deferred tax assets and deferred tax liabilities are offset
if the deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority and if there is the right
to set off current tax assets against current tax liabilities.
In the presentation of deferred tax assets and liabilities in the
consolidated statement of financial position, no difference
is made between current and non-current. In the consolidated
statement of financial position, deferred tax assets and liabili-
ties are presented as shown in table  E.22.

In respect of each type of temporary difference and in respect
of each type of unutilized tax loss carryforwards and unutilized
tax credits, the deferred tax assets and liabilities before offset
are summarized in table  E.23.

The development of deferred tax assets, net, is shown
in table  E.24.

Including the items recognized in other comprehensive
income/loss (including items from equity-method investments),
the expense for income taxes is comprised as shown
in table  E.25.

In the consolidated statement of financial position, the valuation
allowances on deferred tax assets, which are mainly attribut-
able to foreign companies, increased by €260 million compared
to December 31, 2015. This is primarily a result of the addi-
tional valuation allowances of €225 million recognized in net
profit. Furthermore, an increase of the valuation allowance
was recognized in equity, mainly due to currency translation.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 243

E.24
Change of deferred tax assets, net

In millions of euros

2016

2015

Deferred tax assets, net as of January 1

1,069

3,054

Deferred tax expense in the
financial statement of income

Change in deferred tax expense/benefit on
financial assets available-for-sale included
in other comprehensive income/loss

Change in deferred tax expense/benefit
on derivative financial instruments included
in other comprehensive income/loss

Change in deferred tax expense/benefit
on actuarial gains/losses from defined
benefit pension plans

Other changes1

Deferred tax assets, net
as of December 31

-704

-1,557

-8

-495

278

748

-216

-579

-119

403

1,069

1 Additions to the scope of consolidation in the amount of

€-112 million are included in 2016. The other changes primarily
relate to effects from currency translation.

E.25
Tax expense in equity

In millions of euros

Income tax expense in the consolidated
financial statement of income

Income tax expense/benefit
recorded in other reserves

2016

2015

-3,790

-4,033

254

-3,536

-309

-4,342

At December 31, 2016, the valuation allowance on deferred tax
assets relates, among other things, to corporate income tax
loss carryforwards (€824 million). €136 million of the deferred
tax assets for corporate income tax loss carryforwards adjusted
by a valuation allowance relates to tax loss carryforwards
which expire at various dates from 2017 through 2021, €153
million relates to tax loss carryforwards which expire at various
dates from 2022 through 2026, €8 million relates to tax loss
carryforwards which expire at various dates from 2032
through 2036 and €527 million relates to tax loss carryforwards
which can be carried forward indefinitely. Furthermore, the
valuation allowance primarily relates to temporary differences
at non-German companies as well as net operating losses
for state and local taxes at the US companies. Daimler believes
that it is more likely than not that those deferred tax assets
cannot be utilized. In 2016 and prior years, the Group had tax
losses at several subsidiaries in several countries. After
offsetting the deferred tax assets with deferred tax liabilities,
the deferred tax assets not subject to valuation allowances
amounted to €347 million for those subsidiaries. Daimler
believes it is more likely than not that future taxable income
will be sufficient to allow utilization of the deferred tax assets.
Daimler’s current estimate of the amount of deferred tax
assets that is considered realizable may change in the future,
necessitating higher or lower valuation allowances.

The retained earnings of non-German subsidiaries are largely
intended to be reinvested in those operations. The Group
did not recognize deferred tax liabilities on retained earnings
of non-German subsidiaries of €28,750 million (2015:
€27,005 million). If earnings are paid out as dividends, an
amount of 5% would be taxed under German taxation rules
and, if applicable, with non-German withholding tax. Additionally,
income tax consequences may arise if the dividends first
have to be distributed by a non-German subsidiary to a non-
German holding company. Normally, the distribution would
lead to an additional income tax expense. It is not practicable
to estimate the amount of taxable temporary differences
for these undistributed foreign earnings.

The Group has various unresolved issues concerning open
income tax years with the tax authorities in a number of
jurisdictions. Daimler believes that it has recognized adequate
provisions for any future income taxes that may be owed
for all open tax years.

As a result of future adjudications or changes in the opinions
of the fiscal authorities, it cannot be ruled out that Daimler might
receive tax refunds for previous years.

244 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. Intangible assets

Intangible assets developed as shown in table  E.26.

At December 31, 2016, goodwill of €480 million (2015:
€32 million) relates to the Daimler Financial Services segment,
goodwill of €456 million (2015: €425 million) relates to the
Daimler Trucks segment and goodwill of €185 million (2015:
€194 million) relates to the Mercedes-Benz Cars segment.
The increase in goodwill at the Daimler Financial Services
segment mainly results from the acquisition of the Athlon Group.
Further explanation is presented in Note 3.

Non-amortizable intangible assets primarily relate to goodwill
and development costs for projects which have not yet been
completed (carrying amount at December 31, 2016: €3,780
million; 2015: €2,137 million). In addition, other intangible
assets with a carrying amount of €266 million (2015: €258 million)
are not amortizable. Other non-amortizable intangible assets
are trademarks with indefinite useful lives, which relate to the
Daimler Trucks segment, as well as distribution rights of
Mercedes-Benz Cars with indefinite useful lives. The Group
plans to continue to use these assets unchanged.

Table  E.27 shows the line items of the consolidated
statement of income in which total amortization expense
for intangible assets is included.

E.26
Intangible assets

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2015

Additions due to business combinations

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions due to business combinations

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Amortization/impairment

Balance at January 1, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Carrying amount at December 31, 2015

Carrying amount at December 31, 2016

Development
costs
(internally
generated)2

Other intangible
assets
(acquired)

Goodwill
(acquired)

1,017

–

-4

1,015

449

–

1,481

277

–

-4

288

–

293

727

1,188

12,153

–

1,815

–

-1,018

12,962

–

2,323

–

-1,335

13,963

4,908

1,255

–

-999

5,173

1,280

–

-1,334

5,136

7,789

8,827

3,251

458

–

-298

146

3,582

221

629

–

-100

4,384

1,869

331

–

-261

2,029

320

–

-89

2,301

1,553

2,083

Total

16,421

2,273

–

-1,320

160

17,559

670

2,952

–

-1,435

19,828

7,054

1,590

–

-1,264

110

7,490

1,600

–

-1,423

7,730

10,069

12,098

1 Primarily changes from currency translation.
2 Including capitalized borrowing costs on development costs of €54 million (2015: €59 million).

Amortization amounted to €12 million (2015: €10 million).

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 245

11. Property, plant and equipment

Property, plant and equipment developed as shown
in table  E.28.

In 2016, government grants of €151 million (2015: €192 million)
were deducted from property, plant and equipment.

Property, plant and equipment also include buildings, technical
equipment and other equipment under finance lease arrange-
ments and thus deemed to be owned by the Group with a carry-
ing amount at December 31, 2016 of €178 million (2015:
€221 million). In 2016, additions to and depreciation expense
on assets under finance lease arrangements amounted to
€7 million (2015: €16 million) and €40 million (2015: €39 million),
respectively.

E.27
Amortization expense for intangible assets
in the consolidated statement of income

In millions of euros

Cost of sales

Selling expenses

General administrative expenses

Research and non-capitalized
development costs

Other operating expense

2016

2015

1,443

1,434

1,600

1,590

E.28
Property, plant and equipment

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2015

Additions due to business acquisitions

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions due to business acquisitions

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Depreciation/impairment

Balance at January 1, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Carrying amount at December 31, 2015

Carrying amount at December 31, 2016

1 Primarily changes from currency translation.

Land, leasehold
improvements and
buildings including
buildings on land
owned by others

Technical
equipment
and machinery

Other
equipment,
factory and
office
equipment

Advance
payments
relating to plant
and equipment
and construction
in progress

15,396

23,079

–

255

302

-334

144

15,763

–

588

591

-379

193

16,756

8,454

335

-275

-9

8,506

425

-8

-234

8,749

7,257

8,007

–

854

817

-738

-34

23,978

–

1,002

1,088

-670

226

25,624

14,959

1,358

-1

-730

-38

15,548

1,423

-13

-627

138

22,886

–

1,521

793

-686

259

24,773

1,407

607

-742

296

26,348

17,277

2,102

–

-612

216

18,983

2,043

-649

220

2,521

–

2,279

-1,913

-56

2,846

2,692

-2,286

-69

305

3,489

–

-19

–

-1

–

16,469

20,618

8,430

9,155

5,790

5,730

2,845

3,489

Total

63,882

–

4,909

-1

-1,814

384

67,360

5,689

–

-1,860

1,020

72,217

40,700

3,804

–

-1,636

170

43,038

3,891

–

-1,510

417

45,836

24,322

26,381

246 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. Equipment on operating leases

The development of equipment on operating leases
is shown in table  E.29.

At December 31, 2016, equipment on operating leases with
a carrying amount of €7,465 million were pledged as security
for liabilities from ABS transactions related to a securitization
transaction of future lease payments on leased vehicles
(December 31, 2015: €5,404 million) (see also Note 24).

Minimum lease payments
Non-cancelable future lease payments to Daimler
for equipment on operating leases are due as presented
in table  E.30.

E.29
Equipment on operating leases

In millions of euros

Acquisition or manufacturing costs

Balance at January 1, 2015

Additions due to business acquisitions

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions due to business acquisitions

Other additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Depreciation/impairment

Balance at January 1, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2015

Additions

Reclassifications

Disposals
Other changes1

Balance at December 31, 2016

Carrying amount at December 31, 2015

Carrying amount at December 31, 2016

1 Primarily changes from currency translation.

E.30
Maturity of minimum lease payments
for equipment on operating leases

In millions of euros

Maturity

within one year

between one and five years

later than five years

40,928

–

21,636

-16,637

2,163

48,091

3,560

23,504

–

-18,204

379

57,330

7,878

5,946

–

-5,073

398

9,149

6,652

–

-5,487

10,388

38,942

46,942

At December 31,
2015

2016

7,660

8,306

6,363

6,813

16,029

13,239

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 247

13. Equity-method investments

Table  E.31 shows the carrying amounts and profits/losses
from equity-method investments.

Table  E.32 presents key figures on interests in associated
companies accounted for using the equity method in the Group’s
consolidated financial statements.

E.31
Summarized carrying amounts and profits/losses from equity-method investments

In millions of euros

At December 31, 2016
Equity investment1
Equity result1

At December 31, 2015
Equity investment1
Equity result1

1 Including investor-level adjustments.

Associated
companies

Joint
ventures

Joint
operations

3,582

485

3,124

490

468

462

-34

Total

4,098

502

3,633

464

E.32
Key figures on interests in associated companies accounted for using the equity method

BBAC

BAIC Motor3

THBV4 (HERE)

Others

Total

In millions of euros

At December 31, 2016

Equity interest (in %)
Stock market price1
Equity investment2
Equity result2

Dividend payment to Daimler

At December 31, 2015

Equity interest (in %)
Stock market price1
Equity investment2
Equity result2
Dividend payment to Daimler5

49.0

–

2,141

678

–

49.0

–

1,418

441

208

10.1

647

557

-176

10.1

705

772

33.3

–

611

-56

–

33.3

–

668

–

273

266

-25

3,582

485

3,124

490

1 Proportionate stock market prices.
2 Including investor-level adjustments.
3 The proportionate share of earnings of BAIC Motor Corporation Ltd. (BAIC Motor) is included in Daimler’s consolidated financial

statements with a three-month time lag.

4 The proportionate share of earnings of There Holding B.V. (THBV) has so far been included in Daimler’s consolidated financial statements with

a one-month time lag. As the investment was acquired in December 2015, no proportionate share of earnings was included for 2015.
As of December 31, 2016 the time lag was cancelled.

5 The dividend from BBAC of €208 million was partly paid out in the year 2016 with an amount of €69 million.

248 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Table  E.33 shows summarized IFRS financial information
after purchase price allocation for the significant associated
companies which were the basis for equity-method accounting
in the Group’s consolidated financial statements.

Other minor equity-method investments
Table  E.34 shows summarized aggregated financial
information for the other minor equity-method investments
after purchase price allocation and on a pro rata basis.

Further information on equity-method investments
is provided in Notes 3 and 36.

BBAC
Beijing Benz Automotive Co., Ltd. (BBAC) produces and
distributes Mercedes-Benz passenger cars and spare parts
in China. The investment and the proportionate share
in the results of BBAC are allocated to the Mercedes-Benz
Cars segment.

In 2016, BBAC received capital increases of €101 million
from Daimler. Daimler plans to contribute additional equity
of €0.1 billion, in accordance with its shareholding ratio,
to BBAC in the coming years.

BAIC Motor
BAIC Motor Corporation Ltd. (BAIC Motor) is the passenger
car division of BAIC Group, one of the leading automotive
companies in China. Directly or via subsidiaries, BAIC Motor
is engaged in the business of researching, developing,
manufacturing, selling, marketing and servicing of automotive
vehicles and related parts and components and all related
services. Due to Daimler’s representation on the board of
directors of BAIC Motor and other contractual arrangements,
Daimler classifies this investment as an investment in an
associate, to be accounted for using the equity-method; in the
segment reporting, the investment’s carrying amount and
its proportionate share of profit or loss are presented in the
reconciliation of total segment’s assets to Group assets
and total segments’ EBIT to Group EBIT, respectively. In the
first quarter of 2016, due to the lower stock-exchange price,
the Group recognized an impairment loss of €244 million with
respect to its investment in BAIC Motor. The loss is included
in the line item profit/loss on equity-method investments, net.

THBV (HERE)
There Holding B.V. (THBV), based in Rijswijk, Netherlands, was
founded in 2015. Daimler, Audi and BMW each holds an inter-
est in the company of 33.3%. In 2015, each of the shareholders
made a cash contribution to the company of €668 million.

Effective December 4, 2015, HERE International B.V. (formerly
There Acquisition B.V.), based in Rijswijk, Netherlands, a 100%
subsidiary of There Holding B.V., acquired the roadmap service
HERE from Nokia Corporation for a price of €2,593 million.
HERE is one of the biggest manufacturers of digital roadmaps
for navigation systems worldwide. Future expected high
resolution maps will be one of the fundamentals for future
autonomous driving. The acquisition was funded by cash
contributions of €2,000 million and by bank loans to HERE
International B.V. of €593 million. There Holding B.V. is
accounted for in the consolidated financial statements of
Daimler AG as an associated company using the equity
method, and is allocated to the Mercedes-Benz Cars segment.
In 2015 Daimler’s proportionate share of its profits and
losses has been included with a one-month time lag which was
cancelled as of December 31, 2016. No proportionate share
of profit or loss was included in Daimler’s consolidated financial
statements for 2015 as the amount was not material.
Purchase price allocation was finalized in the first quarter 2016.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 249

E.33
Summarized IFRS financial information on significant associated companies
accounted for using the equity method

BBAC1
2015

2016

BAIC Motor2
2015

2016

THBV3 (HERE)
2015

2016

In millions of euros

Information on the statement of income

Revenue

Profit/loss from continuing operations after taxes

Profit/loss from discontinued operations after taxes

Other comprehensive income/loss

Total comprehensive income/loss

Information on the statement of financial position
and reconciliation to equity-method carrying amounts

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Equity (including non-controlling interest)

Equity (excluding non-controlling interests)
attributable to the Group

Unrealized profit (-)/loss (+) on sales to/purchases from

Equity-method goodwill

Other

11,673

1,449

–

-21

1,428

4,354

6,520

694

5,623

4,557

2,233

-91

–

-1

9,575

862

–

862

4,139

4,232

445

4,903

3,023

1,481

-63

–

Carrying amount of equity-method investment

2,141

1,418

15,117

1,285

11,336

1,005

–

1,285

1,005

13,280

10,005

2,333

11,584

9,368

12,072

7,028

2,434

8,095

8,571

1,240

-167

–

-4

-171

2,802

592

1,044

518

1,832

–

3,115

365

1,093

384

2,003

720

–

-237

557

691

–

772

611

668

–

611

668

1 BBAC:

Figures for the statement of income relate to the period of January 1 to December 31.
Figures for the statement of financial position and the reconciliation to equity-method carrying amounts relate
to the balance sheet date December 31.

2 BAIC Motor:

Daimler recognizes its proportionate share of the profits or losses of BAIC Motor Corporation Ltd. (BAIC Motor)
with a three-month time lag. Figures for the statement of income relate to the period of October 1 to September 30.
Figures for the statement of financial position and the reconciliation to equity-method carrying amounts relate to the balance sheet
date of September 30.

3 THBV:

Daimler has so far recognized its proportionate share of the profits or losses of There Holding B.V. (THBV) with a one-month time lag.
As of December 31, 2016 the time lag was cancelled. Figures for the statement of financial position at December 31, 2015 relate to the date
of acquisition of HERE of December 4, 2015. Figures for the statement of financial position at December 31, 2016 relate to December 31, 2016.
Figures for the 2016 statement of income relate to the period of December 5, 2015 to December 31, 2016.

E.34
Summarized aggregated financial information on minor
equity-method investments

In millions of euros

Summarized aggregated financial information (pro rata)

Profit/loss from continuing operations after taxes

Profit/loss from discontinued operations after taxes

Other comprehensive income/loss

Total comprehensive income/loss

Associated companies
2015

2016

Joint ventures
2015

2016

–

-1

–

-7

-1

-28

–

-28

-84

–

-84

250 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. Receivables from financial services

Table  E.35 shows the components of receivables
from financial services.

Types of receivables
Receivables from sales financing with customers include
receivables from credit financing for customers who purchased
their vehicle either from a dealer or directly from Daimler.

Receivables from sales financing with dealers represent loans
for floor financing programs for vehicles sold by the Group’s
automotive businesses to dealers or loans for assets purchased
by dealers from third parties, primarily used vehicles traded
in by dealers’ customers or real estate such as dealers’ show-
rooms.

Receivables from finance-lease contracts consist of receiv-
ables from leasing contracts for which all substantial risks
and rewards incidental to the leasing objects are transferred
to the lessee.

At December 31, 2016, finance-lease contracts included
non-automotive assets from contracts of the financial services
business with third parties (leveraged leases) in the amount
of €165 million (December 31, 2015: €238 million).

Maturities of the finance lease contracts are shown
in table  E.36.

All cash flow effects attributable to receivables from financial
services are presented within cash provided by/used for
operating activities in the consolidated statement of cash flows.

Allowances
Changes in the allowance account for receivables from
financial services are shown in table  E.37.

The total expense from the impairment of receivables
from financial services amounted to €499 million in 2016
(2015: €502 million).

Credit risks
Table  E.38 provides an overview of credit risks included
in receivables from financial services.

Receivables not subject to an individual impairment
assessment are grouped and subject to collective impairment
allowances to cover credit losses.

Further information on financial risks and nature of risks
is provided in Note 32.

At December 31, 2016, receivables from financial services
with a carrying amount of €5,909 million (31. December 2015:
€4,048 million) were pledged as collateral for liabilities from
ABS transactions (see also Note 24).

E.35
Receivables from financial services

In millions of euros

Sales financing with customers

Sales financing with dealers

Finance-lease contracts

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

E.36
Maturities of the finance lease contracts

Current Non-current

At December 31, 2016
Total

Current Non-current

At December 31, 2015
Total

14,803

16,302

7,012

38,117

-491

37,626

26,288

2,970

14,186

43,444

-563

42,881

41,091

19,272

21,198

81,561

-1,054

80,507

13,561

15,944

6,166

35,671

-516

35,155

23,900

2,588

12,371

38,859

-500

38,359

37,461

18,532

18,537

74,530

-1,016

73,514

In millions of euros

Contractual future lease payments

Unguaranteed residual values

Gross investment

Unearned finance income

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

At December 31, 2016

< 1 year

1 year up
to 5 years

> 5 years

Total

< 1 year

1 year up
to 5 years

At December 31, 2015

> 5 years

Total

7,407

393

7,800

-788

7,012

-156

6,856

13,175

1,880

15,055

-1,374

13,681

-225

13,456

583

594

-89

505

-5

500

21,165

2,284

23,449

-2,251

21,198

-386

20,812

6,315

501

6,816

-650

6,166

-176

5,990

11,308

1,954

13,262

-1,216

12,046

-201

11,845

407

419

-94

325

-2

323

18,030

2,467

20,497

-1,960

18,537

-379

18,158

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 251

15. Marketable debt securities

The marketable debt securities with a carrying amount
of €10,748 million (2015: €8,273 million) are part of the
Group’s liquidity management and comprise debt instruments
classified as available-for-sale. When a short-term liquidity
requirement is covered with quoted securities, those securities
are presented as current assets.

Further information on marketable debt securities is provided
in Note 31.

16. Other financial assets

The line item other financial assets presented in the
consolidated statement of financial position is comprised
as shown in table  E.39.

Until June 30, 2016, equity instruments recognized at fair
value predominantly comprised the investments in Renault
and Nissan (see Note 3).

Financial assets recognized at fair value through profit
or loss relate exclusively to derivative financial instruments
which are not used in hedge accounting.

At December 31, 2016, receivables with a carrying amount
of €648 million (2015: €633 million) were pledged as collateral
for liabilities (see also Note 24).

Further information on other financial assets is provided
in Note 31.

E.37
Changes in the allowance account
for receivables from financial services

In millions of euros

Balance at January 1

Additions

Amounts written off

Reversals

Currency translation and other changes

2016

2015

1,016

491

-290

-181

921

500

-212

-152

-41

Balance at December 31

1,054

1,016

E.38
Credit risks included in receivables
from financial services

In millions of euros

Receivables, neither past due
nor impaired individually

Receivables past due,
not impaired individually

less than 30 days

30 to 59 days

60 to 89 days

90 to 119 days

120 days or more

Total

Receivables impaired individually

At December 31,
2015

2016

76,127

69,746

1,796

403

138

2,486

1,894

1,534

287

2,028

1,740

Net carrying amount

80,507

73,514

E.39
Other financial assets

In millions of euros

Current

At December 31, 2016
Total

Non-current

Current

At December 31, 2015
Total

Non-current

Available-for-sale financial assets

thereof equity instruments recognized at fair value

thereof equity instruments carried at cost

Derivative financial instruments used in hedge accounting

Financial assets recognized at fair value through profit or loss

Other receivables and financial assets

–

653

2,103

2,837

811

166

645

1,077

986

2,899

811

166

645

1,730

106

3,089

5,736

–

397

164

1,985

2,546

3,049

2,303

746

966

854

4,908

3,049

2,303

746

1,363

203

2,839

7,454

252 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. Other assets

19. Trade receivables

Trade receivables are comprised as shown in table  E.42.

At December 31, 2016, €49 million of the trade receivables
mature after more than one year (2015: €67 million).

Allowances
Table  E.43 shows changes in the allowance account
for trade receivables.

The total expense from the impairment of trade receivables
amounted to €97 million in 2016 (2015: €109 million).

Credit risks
Table  E.44 provides an overview of credit risks included
in trade receivables.

Receivables not subject to an individual impairment
assessment are grouped and subject to collective impairment
allowances to cover credit losses.

Further information on financial risk and types of risk
is provided in Note 32.

Non-financial other assets are comprised as shown
in table  E.40.

Other expected reimbursements predominantly relate to
recovery claims from our suppliers in connection with issued
product warranties.

18. Inventories

Inventories are comprised as shown in table  E.41.

The amount of write-down of inventories to net realizable
value recognized as expense in cost of sales was €842 million
in 2016 (2015: €501 million). Inventories that are expected
to be recovered or settled after more than twelve months
amounted to €974 million at December 31, 2016 (December 31,
2015: €930 million) and are primarily spare parts.

As collateral for certain vested employee benefits in Germany,
the value of company cars at Daimler AG has until now
been pledged as collateral to the Daimler Pension Trust e.V.
At December 31, 2015, inventories in an amount of €718 million
were pledged as collateral. At December 31, 2016, the
pledged assets were supplemented with demonstration
cars at Mercedes-Benz Cars and Mercedes-Benz Vans.
At December 31, 2016, the total value of vehicles pledged
as collateral amounted to €1,008 million.

In addition, inventories with a carrying amount of €296 million
at December 31, 2016 (December 31, 2015: €235 million)
were pledged as collateral for liabilities from ABS transactions
(see also Note 24).

The carrying amount of inventories recognized during the period
by taking possession of collateral held as security amounted
to €126 million at December 31, 2016 (December 31, 2015:
€103 million). Those assets are utilized in the context of normal
business operations.

E.40
Other assets

In millions of euros

Current

At December 31, 2016
Total

Non-current

Current

At December 31, 2015
Total

Non-current

Reimbursements due to income tax refunds

Reimbursements due to other tax refunds

Reimbursements due to the Medicare Act (USA)

Other expected reimbursements

Prepaid expenses

Others

734

2,905

–

191

566

4,962

173

112

221

667

785

2,943

364

678

787

670

2,421

–

192

442

546

5,629

4,271

157

264

654

696

2,473

349

529

810

4,925

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 253

20. Equity

See also the consolidated statement of changes
in equity  E.05.

Share capital
The share capital (authorized capital) is divided into no-par-
value shares. All shares are fully paid up. Each share confers
the right to one vote at the Annual Shareholders’ Meeting
of Daimler AG and, if applicable, with the exception of any new
shares potentially not entitled to dividends, to an equal portion
of the profits as defined by the dividend distribution decided
upon at the Annual Shareholders’ Meeting. Each share
represents a proportionate amount of approximately €2.87
of the share capital.

E.41
Inventories

In millions of euros

Raw materials and manufacturing supplies

Work in progress

Finished goods, parts and products
held for resale

Advance payments to suppliers

Since January 1, 2015, there has been no change in the number
of shares outstanding/issued. The number at December 31,
2016 is 1,070 million, unchanged from December 31, 2015.

E.42
Trade receivables

At December 31,
2015

2016

2,723

3,814

18,609

238

25,384

2,643

3,371

17,609

137

23,760

At December 31,
2015

2016

Approved capital
The Annual Shareholders’ Meeting held on April 9, 2014,
authorized the Board of Management, with the consent of the
Supervisory Board, to increase the share capital of Daimler AG
in the period until April 8, 2019 by a total of €1.0 billion in
one lump sum or by separate partial amounts at different times
by issuing new, registered no-par-value shares in exchange
for cash and/or non-cash contributions (Approved Capital 2014).
The new shares are generally to be offered to the shareholders
for subscription (also by way of indirect subscription pursuant
to Section 186 Subsection 5 Sentence 1 of the German Stock
Corporation Act (AktG)). Among other things, the Board of
Management was authorized with the consent of the Supervisory
Board to exclude shareholders’ subscription rights under
certain conditions and within defined limits.

Approved Capital 2014 has not yet been utilized.

In millions of euros

Gross carrying amount

Allowances for doubtful accounts

Net carrying amount

10,954

-340

10,614

9,446

-392

9,054

E.43
Changes in the allowance account for trade receivables

In millions of euros

Balance at January 1

Charged to costs and expenses

Amounts written off

Currency translation and other changes

Balance at December 31

2016

2015

392

-10

-62

340

412

-80

-6

392

E.44
Credit risks included in trade receivables

In millions of euros

Receivables, neither past due
nor impaired individually

Receivables past due,
not impaired individually

less than 30 days

30 to 59 days

60 to 89 days

90 to 119 days

120 days or more

Total

Receivables impaired individually

Net carrying amount

At December 31,
2015

2016

7,081

5,554

813

127

142

1,148

2,385

10,614

1,096

113

1,367

2,133

9,054

254 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The authorization to acquire treasury shares was not exercised
in the reporting period.

As was the case at December 31, 2015, no treasury shares
are held by Daimler AG at December 31, 2016.

Employee share purchase plan
In 2016, 0.6 million Daimler shares representing €1.7 million
or 0.05% of the share capital were purchased for a price of
€38 million and reissued to employees (2015: 0.3 million Daimler
shares representing €0.9 million or 0.03% of the share capital
were purchased for a price of €27 million).

Capital reserves
Capital reserves primarily comprise premiums arising on the
issue of shares as well as expenses relating to the exercise
of stock option plans and the issue of employee shares, effects
from changes in ownership interests in consolidated entities
and directly attributable related transaction costs.

Retained earnings
Retained earnings comprise the accumulated net profits and
losses of all companies included in Daimler’s consolidated
financial statements, less any profits distributed. In addition,
the effects of remeasuring defined benefit plans as well as the
related deferred taxes are presented within retained earnings.

Dividend
Under the German Stock Corporation Act (AktG), the dividend
is paid out of the distributable profit reported in the annual
financial statements of Daimler AG (parent company only) in
accordance with the German Commercial Code (HGB). For
the year ended December 31, 2016, the Daimler management
will propose to the shareholders at the Annual Shareholders’
Meeting to pay out €3,477 million of the distributable profit of
Daimler AG as a dividend to the shareholders, equivalent
to €3.25 per no-par-value share entitled to a dividend (2015:
€3,477 million and €3.25 per no-par-value share entitled
to a dividend respectively).

Other reserves
Other reserves comprise accumulated unrealized gains/losses
from currency translation of the financial statements of the
consolidated foreign companies and accumulated unrealized
gains/losses on the measurement of financial assets available-
for-sale, derivative financial instruments and equity-method
investments.

Table  E.02 shows the details of changes in other reserves
in other comprehensive income/loss.

Conditional capital
By resolution of the Annual Shareholders’ Meeting on April 1,
2015, the Board of Management is authorized, with the
consent of the Supervisory Board, until March 31, 2020 to issue
convertible and/or warrant bonds or a combination of these
instruments (“bonds”) with a total face value of up to €10.0 billion
and a maturity of no more than ten years. The Board of Man-
agement is allowed to grant the holders of these bonds conver-
sion or warrant rights for new registered no-par-value shares
in Daimler AG with an allocable portion of the share capital
of up to €500 million in accordance with the details defined in
the terms and conditions of the bonds. The bonds can be
offered in exchange for cash and/or non-cash contributions, in
particular for shares in other companies. The terms and con-
ditions of the bonds can include warranty obligations or conver-
sion obligations. The bonds can be issued once or several
times, wholly or in installments, or simultaneously in various
tranches as well by affiliates of the Company within the meaning
of Sections 15 et seq. of the German Stock Corporation Act
(AktG). Among other things, the Board of Management was autho-
rized to exclude shareholders’ subscription rights for the
bonds under certain conditions and within defined constraints
with the consent of the Supervisory Board.

This authorization to issue convertible and/or warrant bonds
has not yet been utilized.

In order to fulfill the conditions of the above-mentioned autho-
rization, the Annual Shareholders’ Meeting on April 1, 2015
also resolved to increase the share capital conditionally
by an amount of up to €500 million (Conditional Capital 2015).

Treasury shares
By resolution of the Annual Shareholders’ Meeting on April 1,
2015 the Company is authorized until March 31, 2020 to acquire
treasury shares in a volume up to 10% of the share capital
issued as of the day of the resolution to be used for all legal
purposes. The shares can be used, amongst other things
excluding shareholders’ subscription rights, for business combi-
nations or to acquire companies or to be sold to third parties
for cash at a price that is not significantly lower than the stock-
exchange price of the Company’s shares. The acquired shares
can also be used to fulfill obligations from issued convertible
bonds and/or bonds with warrants and to be issued to employ-
ees of the Company and employees and board members
of the Company’s affiliates pursuant to Sections 15 et seq.
of the German Stock Corporation Act (AktG). The treasury
shares can also be canceled.

The Board of Management is further authorized, with the
consent of the Supervisory Board, to exclude shareholders’
subscription rights in other defined cases. In a volume up
to 5% of the share capital issued as of the day of the resolution,
the Company was authorized to acquire treasury shares
also by using derivatives (put options, call options, forward
purchases or a combination of these instruments), whereas
the term of a derivative must not exceed 18 months and must
not end later than March 31, 2020.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 255

21. Share-based payment

As of December 31, 2016 the Group has the 2013-2016
Performance Phantom Share Plans (PPSP) outstanding.
The PPSP are cash-settled share-based payment instruments
and are measured at their respective fair values at the balance
sheet date. The PPSP are paid out at the end of the stipulated
holding period; earlier, pro-rated payoff is possible in the case
of benefits leaving the Group only if certain defined conditions
are met. PPSP 2012 was paid out as planned in the first
quarter of 2016.

Moreover, 50% of the annual bonus of the members of the
Board of Management is paid out after a waiting period of one
year. The actual payout is determined by the development
of Daimler shares compared to an automobile related index
(Auto-STOXX). The fair value of this medium-term annual
bonus, which depends on this development, is measured by
using the intrinsic value at the reporting date.

Table  E.46 shows expenses in the consolidated statement
of income resulting from the rights of current members of the
Board of Management.

The details shown in table  E.46 do not represent any paid
or committed remuneration, but refer to expenses calculated
according to IFRS. Details of the remuneration of the members
of the Board of Management in 2016 can be found in the
Remuneration Report. E Management Report from page 142

E.45
Effects of share-based payment

Expense
2015

2016

Provision
At December 31,
2015
2016

In millions of euros

PPSP

-62

-177

284

409

The pre-tax effects of share-based payment arrangements
for the executive managers of the Group and the members
of the Board of Management of Daimler AG on the consolidated
statement of income and consolidated statement of financial
position are shown in table  E.45.

Medium-term compo-
nent of annual bonus of
the members of the
Board of Management

-5

-67

-9

-186

298

424

E.46
Expenses in the consolidated statement of income resulting from
share-based payments of current members of the Board of Management

In millions of euros

PPSP

Medium-term component
of the annual bonus

In millions of euros

PPSP

Medium-term component
of the annual bonus

In millions of euros

PPSP

Medium-term component
of the annual bonus

Dr. Dieter Zetsche
2015

2016

Dr. Wolfgang Bernhard
2015

2016

Dr. Christine Hohmann-Dennhardt1
2015

2016

-3.8

-1.4

-6.0

-2.3

-1.6

-0.6

-2.4

-0.9

–

-2.4

-0.9

Renata Jungo Brüngger2
2015
2016

2016

Ola Källenius
2015

2016

Wilfried Porth
2015

-0.5

-0.6

–

-0.7

-0.5

-0.6

-0.9

-1.6

-0.5

-2.4

-0.9

Hubertus Troska
2015

2016

Bodo Uebber
2015

Prof. Dr. Thomas Weber3
2015
2016

-1.5

-0.5

-1.9

-0.9

-1.8

-0.6

-2.9

-1.1

-1.6

-0.5

-2.5

-0.9

1 Appointment to the Board of Management ended on December 31, 2015.
2 Appointed to the Board of Management as of January 1, 2016.
3 Appointment to the Board of Management ended on December 31, 2016.

256 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Performance Phantom Share Plans
In 2016, the Group adopted a Performance Phantom Share
Plan (PPSP), similar to those used from 2005 to 2015, under
which eligible employees are granted phantom shares entitling
them to receive cash payments after four years. During the
four-year period between the allocation of the preliminary
phantom shares and the payout of the plan at the end of the
term, the phantom shares earn a dividend equivalent in the
amount of the actual dividend paid on ordinary Daimler shares.
The amount of cash paid to eligible employees at the end of
the holding period is based on the number of vested phantom
shares (determined over a three-year performance period)
multiplied by the quoted price of Daimler’s ordinary shares
(calculated as an average price over a specified period at the
end of the four–year plan period). The vesting period is there-
fore four years. For the plans granted as of 2009, the quoted
price of Daimler’s ordinary shares to be used for the payout is
limited to 2.5 times the Daimler share price at the date of
grant. For the plans granted as of the beginning of 2012, the
payout for the members of the Board of Management is also
limited to 2.5 times the allotment value used to determine the
preliminary number of phantom shares. The limitation of
the payout for the members of the Board of Management also
includes the dividend equivalents paid out after January 1, 2014.

Determination of the number of phantom shares that vest of the
existing PPSP 2013 is based on return on net assets derived
from internal targets and return on sales (RoS) compared with
benchmarks oriented towards competitors.

The number of phantom shares that vest of the PPSPs granted
in 2014 to 2016 will be based on the relative share performance,
which measures the development of the price of a share price
index based on a competitor group including Daimler, and the RoS
compared with benchmarks oriented towards competitors.
Special rules apply for the members of the Board of Management:
Daimler’s RoS must be not equal to but higher than that of the
competitors in order to achieve the same target achievement as
the other plan participants. For the PPSP granted since 2015,
an additional limit on target achievement was agreed upon for
the reference parameter RoS for the members of the Board
of Management. In the case of target achievement between 195%
and 200%, an additional compa rison is made on the basis of
the RoS achieved in absolute terms. If the actual RoS for the
automotive business is below the strategic target (currently 9%)
in the third year of the performance period, target achievement
is limited to 195%.

The Group recognizes a provision for awarding the PPSP in
the consolidated statement of financial position. Since payment
per vested phantom share depends on the quoted price of
Daimler’s ordinary shares, that quoted price essentially repre-
sents the fair value of each phantom share. The proportionate
remuneration expenses from the PPSP recognized in the
individual years are determined on the price of Daimler ordinary
shares and the estimated target achievement.

22. Pensions and similar obligations

Table  E.47 shows the composition of provisions for pension
benefit plans and similar obligations.

At the Daimler Group, defined benefit pension obligations exist
as well as, to a smaller extent, defined contribution pension
obligations, specific to the various countries. In addition, health-
care benefit obligations are recognized outside Germany.

Defined benefit pension plans

Provisions for pension obligations are made for defined
commitments to active and former employees of the Daimler
Group and their survivors. The defined benefit pension plans
provided by Daimler generally vary according to the economic,
tax and legal circumstances of the country concerned. Most
of the defined benefit pension plans also provide benefits in the
case of invalidity and death.

The Group’s main German and non-German pension plans
are described below.

German plans
Most employees in Germany have defined benefit pension
plans; most of the pension plans for the active workforce are
based on individual retirement benefit accounts, to which
the Company makes annual contributions. The amount of the
contributions for employees paid according to wage-tariff
agreements depends on the tariff classification in the respec-
tive year, and for executives it depends on their respective
income. For the commitments to retirement benefits made
until 2011, the contributions continue to be converted into
capital components and credited to the individual pension
account with the application of fixed factors related to each
employee’s age. The conversion factors include a fixed value
increase. The pension plans were newly structured for new
entrants in 2011 to reduce the risks associated with defined
benefit plans. New entrants now benefit from value increases
of the contributions through an investment fund with a special
lifecycle model. The Company guarantees at a minimum the
value of the contributions paid in. Pension payments are made
either as a life annuity, twelve annual installments, or a
single lump sum.

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 257

The fair value of plan assets is predominantly determined by
the situation on the capital markets. Unfavorable develop-
ments, especially of equity prices and fixed-interest securities,
could reduce that fair value. The diversification of fund assets,
the engagement of asset managers using quantitative and
qualitative analyses, and the continual monitoring of performance
and risk help to reduce associated investment risk. The Group
regularly makes additional contributions to the plan assets
in order to cover future obligations from defined benefit pension
plans. Effective June 30, 2016, the Group made an extraordi-
nary contribution of €1.8 billion into the German pension plan
assets, in order to sustainably strengthen them, in the form
of its shares in Renault and Nissan. In 2015, extraordinary con-
tributions of €1.0 billion were paid into the German pension
plan assets and contributions of €0.2 billion were made into
the US pension plan assets.

As a general principle, it is the Group’s objective to design
new pension plans as defined benefit plans based on capital
components or on annual contributions, or as defined
contribution plans.

E.47
Composition of provisions for pensions
and similar obligations

December 31,
2015

2016

In millions of euros

Provision for pension benefits

7,847

7,534

Provision for other
post-employment benefits

1,187

9,034

1,129

8,663

In addition, previously concluded defined benefit plans exist
which primarily depend on employees’ wage-tariff classification
upon transition into the benefit phase and which foresee
a life annuity.

As well as the employer-financed pension plans granted
by German companies, the employees of some companies
are also offered various earnings-conversion models.

Most of the pension obligations in Germany relating to defined
benefit pension plans are funded by assets invested in long-
term outsourced funds. Contractual trust arrangements (CTA)
exist between Daimler AG as well as some subsidiaries
in Germany and the Daimler Pension Trust e.V. The Daimler
Pension Trust e.V. acts as a collateral trust fund.

In Germany, there are no statutory or regulatory minimum
funding requirements.

Non-German plans
Significant plans exist primarily in the United States and Japan.
They comprise plans relating to final salaries as well as plans
relating to salary based components. Most of the obligations
outside Germany from defined benefit pension plans are
funded by assets outplaced into long-term investment funds.

Risks from defined benefit pension plans
The general requirements with regard to retirement benefit
models are laid down in the Pension Policy, which has Group-wide
validity. Accordingly, the committed benefits are intended
to contribute to additional financial security during retirement,
and in the case of death or invalidity to be capable of being
planned and fulfilled by the respective company of the Group
and to have a low-risk structure. In addition, a committee
exists that approves new pension plans and amendments
to existing pension plans as well as guidelines relating to com-
pany retirement benefits.

The obligations from defined benefit pension plans and the
pension plan assets can be subject to fluctuations over time.
This can cause the funded status to be negatively or positively
impacted. Fluctuations in the defined benefit pension obliga-
tions result at the Daimler Group in particular from changes
in financial assumptions such as discount rates and increases
in the cost of living, but also from changes in demographic
assumptions such as adjusted life expectancies. With most
of the German plans, expected long-term wage and salary
increases do not have an impact on the amount of the obligation.

258 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of the net obligation from
defined benefit pension plans
The development of the relevant factors is shown
in table  E.48.

Market prices are available for equities and bonds due
to their listing in active markets. Most of the bonds
have investment grade ratings. They include government
bonds of very good creditworthiness.

Composition of plan assets
Plan assets and income from plan assets are used solely
to pay pension benefits and to administer the plans.
The composition of the Group’s pension plan assets is
shown in table  E.49.

The investment strategy is reviewed regularly and adjusted
if deemed necessary. The investment strategy is determined
by Investment Committees, which are generally composed
of representatives of the Finance and Human Resources depart-
ments. Several pension plans use dedicated liability driven
investment approaches to take the structure of pension obliga-
tions into account in the investment process.

E.48
Present value of defined benefit pension obligations and fair value of plan assets

In millions of euros

Present value of the defined benefit obligation
at January 1

Current service cost

Interest cost

Contributions by plan participants

Actuarial gains (-)/losses from changes
in demographic assumptions

Actuarial gains (-)/losses from changes
in financial assumptions

Actuarial gains (-)/losses from experience
adjustments

Actuarial gains (-)/losses

Past service cost, curtailments and settlements

Pension benefits paid

Currency exchange-rate changes and other changes

Present value of the defined benefit obligation
at December 31

December 31, 2016
Non-German
Plans

German
Plans

Total

December 31, 2015
Non-German
Plans

German
Plans

Total

27,640

23,803

3,837

30,127

26,496

3,631

601

750

-11

512

595

3,021

2,733

3,015

-37

-932

-21

2,718

-748

155

-17

288

297

-57

-184

716

661

-464

602

509

-435

-2,762

-2,614

-94

-3,320

-15

-894

296

-99

-3,148

-733

-9

114

152

-29

-148

-172

-36

-161

305

31,173

26,982

4,191

27,640

23,803

3,837

Fair value of plan assets at January 1

20,226

17,306

2,920

18,581

15,973

2,608

Interest income from plan assets

Actuarial gains/losses (-)

Actual return on plan assets

Contributions by the employer

Contributions by plan participants

Settlements

Pension benefits paid

Currency exchange-rate changes and other changes

582

994

1,576

2,427

-52

-868

465

830

1,295

2,337

–

-705

Fair value of plan assets at December 31

23,384

20,315

Funded status

thereof recognized in other assets

thereof recognized in provisions for pensions
and similar obligations

-7,789

-6,667

–

117

164

281

-52

-163

-12

3,069

-1,122

419

-101

318

1,900

-12

-829

198

308

–

308

1,640

–

-688

111

-101

260

-12

-141

190

20,226

17,306

2,920

-7,414

120

-6,497

–

-917

120

-7,847

-6,667

-1,180

-7,534

-6,497

-1,037

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 259

Pension cost
The components of pension cost included in the consolidated
statement of income are shown in table  E.50.

E.49
Composition of plan assets

In millions of euros

Energy, commodities and utilities

Financials

Healthcare
Industrials1

Consumer goods

Technology and telecommunication

Others

Equities

Government bonds in EUR

Government bonds in USD

Government bonds in other currencies

Government bonds

Corporate bonds in EUR

Corporate bonds in USD

Corporate bonds in other currencies

Corporate bonds

Securitized bonds

Bonds

Other exchange-traded instruments

Total exchange-traded instruments
Alternative investments2

Real estate

Other non-exchange-traded instruments

Cash and cash equivalents

Total non-exchange-traded instruments

Fair value of plan assets

thereof fair value of own transferable
financial instruments

thereof fair value of self-used plan assets

At December 31, 2016
Non-German
Plans

German
Plans

Total

1,048

1,366

664

2,893

1,374

1,167

8,555

1,811

2,130

497

4,438

3,259

4,751

202

8,212

907

1,147

559

2,783

1,146

981

–

7,523

1,799

1,598

–

3,397

3,224

4,310

7,547

12,707

10,949

21,267

18,475

555

570

893

2,117

23,384

–

480

450

853

1,840

20,315

–

141

219

105

110

228

186

1,032

532

497

1,041

441

189

665

1,758

2,792

120

277

3,069

–

1 As of December 31, 2016, including the shares in Renault and Nissan in the amount of €2,178 million.
2 Alternative investments mainly comprise private equity.

E.50
Pension cost

In millions of euros

Current service cost

Past service cost, curtailments and settlements

Net interest expense

Net interest income

German
Plans

2016
Non-German
Plans

-512

-20

-130

–

-662

-89

-43

-122

Total

-601

-15

-173

-784

At December 31, 2015
Non-German
Plans

German
Plans

799

1,269

544

578

1,220

1,071

–

5,481

2,340

1,479

–

3,819

2,594

2,637

5,252

9,075

14,557

507

395

219

1,628

2,749

17,306

–

197

220

158

899

472

458

943

524

184

717

1,720

2,620

109

300

2,920

–

German
Plans

2015
Non-German
Plans

-602

-21

-201

–

-824

-114

-44

-131

Total

896

1,466

641

658

1,440

1,229

6,380

2,353

1,951

458

4,762

2,603

3,161

205

5,969

10,795

17,177

616

493

255

1,685

3,049

20,226

–

Total

-716

-245

-955

260 E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Measurement assumptions
The measurement date for the Group’s defined benefit pension
obligations and plan assets is generally December 31. The
measurement date for the Group’s net periodic pension cost
is generally January 1. The assumptions used to calculate
the defined benefit obligations vary according to the economic
conditions of the countries in which the pension plans
are situated.

Calculation of the defined benefit obligation uses life
expectancy for the German plans based on the 2005 G
mortality tables of K. Heubeck. For Non-German plans,
comparable country-specific calculation methods are used.

Table  E.51 shows the significant weighted average measure-
ment factors used to calculate pension benefit obligations.

Sensitivity analysis
An increase or decrease in the main actuarial assumptions
would affect the present value of the defined benefit pension
obligations as shown in table  E.52.

The calculations carried out by actuaries were done in isolation
for the evaluation parameters regarded as important. This
means that if there is a simultaneous change in several parame-
ters, the individual results cannot be summed due to correla-
tion effects. With a change in the parameters, the sensitivities
shown cannot be used to derive a linear development of the
defined benefit obligation.

For the calculation of the sensitivity of life expectancy,
by means of fixed (non-age-dependent) factors for a reference
person, a life expectancy one year higher or one year lower
was achieved.

Effect on future cash flows
Daimler currently plans to make contributions of €0.7 billion
to its pension plans for the year 2017; the final amount is
usually set in the fourth quarter of a financial year. In addition,
the Group expects to make pension benefit payments
of €1.0 billion in 2017.

The weighted average duration of the defined benefit
obligations is shown in table  E.53.

Defined contribution pension plans

Under defined contribution pension plans, Daimler makes
defined contributions to external insurance policies or invest-
ment funds. There are fundamentally no further contractual
obligations or risks for Daimler in excess of the defined contri-
butions. The Group also pays contributions to governmental
pension schemes. In 2016, the total cost from defined contri-
bution plans amounted to €1.5 billion (2015: €1.5 billion).
Of those payments €1.4 billion (2015: €1.4 billion) was related
to governmental pension plans.

Multi-employer plans
Daimler participates in some collectively bargained defined
benefit pension plans maintained by more than one employer.
The Group presents several of these plans in its consolidated
financial statements as defined contribution plans because the
information required to use defined benefit accounting is not
available in a timely manner or in sufficient detail. The Group
cannot exercise direct control over such plans and the plan
trustees have no legal obligation to share information directly
with participating employers. Higher contributions by the
Group to such a pension plan could be required in particular
when an underfunded status exceeds a specific level. Exit
from such a plan can lead to the companies involved having
to offset the potential future shortfall relating to their share
of the plan. Furthermore, the possibility exists that Daimler can
be liable for other participants’ obligations. The probability of
occurrence of the risk to the Group from these plans continues
to be classified as very low at December 31, 2016.