Mercedes Popularity Drives Daimler’s Success in China

Daimler AG (NYSE:DAI) recently reported a 56% year-on-year increase in sales in China for the month of April. China is currently the third biggest market for Daimler following Germany and the U.S. Increasing market share of Daimler in China and continued growth in China’s automotive market indicates strong upside potential for Daimler brands such as Mercedes-Benz, Smart and Maybach that compete with automakers like BMW (GR:BMW), GM (NYSE:GM), Ford (NYSE:F),  Honda (NYSE:HMC) and Toyota (NYSE:TM) among others.

We have a price estimate of $63.20 for Daimler.

Localization strategy paying in China

Daimler started local production of two models, the E-Class and the C-Class, through its venture Beijing Benz Automotive Co Ltd (BBAC). They ranked as the top volume leaders for Mercedes-Benz and while the E-Class experienced 10% growth, the C-Class grew by 14% year on year in April. ^[1]

In April, Daimler also launched its Star Elite Trade-in Plan for the locally produced E-Class. This plan is designed to help more drivers experience Mercedes, which enjoys a strong brand presence in China. In the meantime, Daimler is planning to launch a new locally produced C-Class model in China in the second half of 2011.

More than 10% upside potential to stock price

Based on increased sales of Mercedes cars in China, the global sales of Mercedes-Benz vehicles can increase more than our base case estimates. If 2012 total vehicles sold increase by 15% ahead of our forecast and then maintains the current trend line we anticipate, this adds just around 10% to our price estimate. You can test this scenario and others by dragging the trend line in the interactive chart above.

See our complete analysis for Daimler AG stock is here.

1. Mercedes-Benz Enjoys Continued Growth in China with a 56% Increase in Sales for April [↩]