India is an important market for Daimler (ETR:DAI) that is hoping to wrestle back market share from BMW (GR:BMW) with the upcoming launch of its new B-Class. Model changes and new launches such as the C-Class coupe which started deliveries in June, the M-Class that will start being delivered in September and the roadster version of the Mercedes-Benz SLS AMG that starts deliveries in the fourth quarter are driving Daimler growth. In July 2011, the company delivered more than 100,000 cars to customers worldwide. [1] In India, Mercedes-Benz will also compete in the compact-car segment through the new B-Class that the company plans to launch in November. Daimler brands such as Mercedes-Benz, Smart, Maybach and Daimler compete globally with the likes of BMW, GM (NYSE:GM), Ford (NYSE:F), Honda (NYSE:HMC) and Toyota (NYSE:TM) among others.
We currently have a price estimate of $82.70 for Daimler’s stock, which is about 15% above market price.
Mercedes-Benz B-Class to Take on BMW’s Best-Selling X1
We expect India’s auto market to witness steep growth driven by improving infrastructure, higher disposable incomes and an increase in aspirational spending. In India, BMW replaced Mercedes as the market leader in the premium car segment in 2009 and recently introduced a locally assembled X1 compact sport-utility vehicle that has now become the company’s best-selling model in the country. [2]
Daimler hopes to recoup some of the lost market share in the country by competing with BMW in the entry-level luxury vehicle segment through the new B-Class. Because duties on locally made vehicle is much lower than imported vehicles in India, Daimler will plan to control costs by assembling the B-Class cars locally.
Upside from Higher International Market Share
Even though margins on entry-level luxury cars will be lower, these cars will help Daimler in acquiring new customers and growing its international market share. A client buying the entry-level B-Class is more likely to trade up to Daimler’s luxury cars when replacing this car, thus helping Daimler increase its international market share over our forecast horizon. This growth will yield further upside to our present estimate of Daimler’s stock price.
You can drag the trend lines in the modifiable charts above to see the impact of these trends on Daimler’s stock value.
See our full analysis for Daimler’s stock here.
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