Daimler Trucks Poised For Growth Going Forward
Daimler AG derives almost two-thirds of its value from the Mercedes-Benz passenger cars division, by our estimates. The next most valuable division for the automaker is Daimler International, constituting 20% of the net valuation. Daimler International comprises the company’s trucks and buses business in international markets (Global-North America). In 2013, trucks constituted one-fifth of the overall volumes for Daimler, and formed over 90% of the net unit sales for Daimler International. Daimler’s trucks are manufactured and sold under brands such as Freightliner, Western Star, Thomas Built Buses, Mercedes Benz, Fuso, and BharatBenz. Due to stabilizing European economies and expansion into developing markets, we expect Daimler’s truck volumes to rise in the long term.
See Our Complete Analysis For Daimler AG
Ageing Vehicles Could Spur Truck Sales In Europe
Stabilizing economic conditions in some of the European markets are expected to boost sales for Daimler Trucks in the coming years. Western Europe is the most important market for Daimler Trucks, constituting 14% of the net volumes last year. The global commercial vehicle market comprising medium and heavy trucks, and buses grew by 5% in each of the last couple of years, reaching 22.75 million units in 2013. [1] Daimler’s truck volumes grew at a faster pace than the overall truck market, rising by 14% year-over-year to 65,900 units, thereby gaining market share. [2]
As infrastructure and construction activity picked up in Europe, overall truck registrations grew by 7% in the first four months of this year. With the Euro 6 emission standard going into effect at the beginning of 2014, large-scale pre-buys of Euro 5 vehicles and discounts offered on the new Euro 6 vehicles increased truck sales in the latter half of 2013. [3] Following the panic purchases at the tail-end of 2013, year-over-year volume growth is expected to slightly fall in the second half this year, as compared to 2013 levels. [4]
However, another trend that could boost truck sales going forward is the need for replacing older vehicles. Demand for trucks was high during pre-recession years, but has been lower in the last few years. This also means that these vehicles call for replacement as they are now late in their service life. The average age rose from 4.1 years in 2001 to 5.3 years in 2013. Daimler accounts for almost one-fourth of the total truck sales in Western Europe, and holds market share of around 40% in Germany. Replacement of older trucks could fuel growth for Daimler Trucks in Europe in the next few years.
BharatBenz Expanding In The Indian Automotive Market
Daimler Trucks has been producing trucks in India under the BharatBenz brand name since June 2012. Within a year of launch, BharatBenz became the fourth-largest commercial automaker in India, selling 6,500 vehicles in 2013. Furthermore, BharatBenz overtook Eicher Motors as the third largest commercial automaker in India by April, reaching 10,000 units sales since its launch. [5] The current range of BharatBenz products falls in the 9T-49T truck segment, which declined by 22% year-over-year in the first quarter. Truck sales in India have been declining due to rising diesel prices, lower infrastructure investments, lesser fleet utilization, and a decrease in construction projects, which utilize pickup trucks. However, volumes for BharatBenz trucks rose by 67% through March to 2,203 units, thereby gaining market share in the Indian commercial vehicle market as the overall industry volumes fell during this period. [6]
Presently, Tata Motors and Ashok Leyland lead the truck market in India, with 59% and 27% shares respectively. BharatBenz ranks third in this market with a 5.3% market share. A possible uptick in the housing industry, bolstered by a stable central government and push for increasing infrastructure investment could accelerate truck sales going forward. In addition, in the interim budget 2014-2015, excise duty on commercial vehicles was also decreased to 8% from 12%. ((“Tata Motors to cut vehicle prices by upto Rs.1.5 lakh“, February 2014, economictimes.com)) Reduction in excise duty has brought down prices of commercial vehicles, possibly providing an impetus to truck sales. BharatBenz will aim to further expand sales in India, fueled by new model launches, and increasing reach and availability. The company plans to launch new truck models in the country this year, and enter the bus market in 2015. BharatBenz also looks to expand its dealership network in India to over 80 locations, up from around 71 locations presently, as well as ramp-up production in the country for the purpose of export to other Asian and African countries going forward.
Daimler Truck Volumes To Be Impacted By Brazil Slowdown
Brazil is the third largest commercial vehicle market in the world after the U.S., China and Canada, with over 1 million unit sales in 2013. Over 8% of Daimler’s truck volumes were sold in Brazil last year, and the company is investing in the modernization of its product program in the country, in a bid to further improve its strong market position there. However, sales for Daimler Trucks decreased 22% in the first quarter of 2014 in Latin America due to weak economic conditions in Brazil. Lay-offs resulting in unemployment and lower consumer spending, as well as tighter credit availability have hurt demand for vehicles in Brazil this year. The automotive market in the country could decline by 4-5% in 2014. This could impact volumes for the Daimler International division this year. However, truck sales could improve in Brazil in the long term as the market recovers. Daimler is investing approximately one billion Brazilian real ($450 million) in the next couple of years in Brazil for the purpose of production optimization, in order to achieve steady volume-growth in the country.
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Get Trefis Technology
- Commercial vehicle sales [↩]
- Daimler annual report [↩]
- Europe will rebound, scania.com [↩]
- Volvo press release [↩]
- Daimler displaces Eicher, economictimes.com [↩]
- BharatBenz press release [↩]