Daimler Rationalizes, Shuts Maybach to Focus on Mercedes

DAI: DAIMLER AG logo
DAI
DAIMLER AG

Daimler AG (NYSE:DAI) has decided to shut down its super luxury brand, Maybach, by 2013 and focus on its Mercedes brand instead. [1] Ford (NYSE:F) has made similar moves in the past when it axed its Mercury brand to focus on Ford and Lincoln while GM (NYSE:GM) has dropped several of its brands to focus only on its four core products – GMC, Chevrolet, Buick and Cadillac.

Daimler’s super luxury Maybach and SL Class contribute around 7% to the company’s stock value, as per our estimates. Daimler is hoping to replace Maybach with new models of Mercedes S Class, which also competes in the super-luxury segment. We believe this can provide further upside to our price estimate not only as it cuts a decade of losses on Maybach but also as it boosts sales with concerted marketing efforts for the Mercedes brand. Daimler’s Mercedes-Benz competes globally with BMW (GR:BMW), GM, Ford,  Honda (NYSE:HMC) and Toyota (NYSE:TM) among others.

We currently have a price estimate of $72 for Daimler’s stock, much higher than its current market price.

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See our full analysis for Daimler’s stock here.

Cost rationalization

Maybach usually takes around 60 days to build while Mercedes, on average, takes 3-4 days to produce. [1] Even though Daimler will look at maintaining the same level of quality for Mercedes S Class models that will replace Maybach, we believe Daimler will be able to save on production costs as the new models will potentially be based on the existing Mercedes platform. A common platform will help accrue massive cost savings for Daimler through the use of common sets of vehicles parts and spares. This will also help reduce costs in terms of engineering time, parts and services, and tools & machinery, as well as boost margins in the long term.

Moreover, by focusing on one brand, the company will also save on marketing costs. A concerted marketing effort will also support sales growth of Daimler’s super luxury S-Class.

Drag the trend lines in the modifiable charts above to see the impact on Daimler’s stock value.

Understand How a Company’s Products Impact its Stock Price at Trefis.

Notes:
  1. Daimler to Drop Maybach, Focus on S-Class [] []