VALUATION HIGHLIGHTS
- Mercedes Benz Cars & Vans constitute 69% of the Trefis price estimate for Mercedes-Benz Group AG's stock.
- Mercedes-Benz Mobility constitutes 18% of the Trefis price estimate for Mercedes-Benz Group AG's stock.
WHAT HAS CHANGED?
- Latest Earnings
Mercedes-Benz group saw revenues for Q4 2023 decline by 1.8% year-over-year to Euro 40.26 billion ($43.44 billion) due to a weak macro environment, high interest rates, and considerable price competition, particularly in the electric vehicle space. Q4 earnings stood at 2.99 euros per share.
- Mercedes Delays EV Targets
Mercedes-Benz has delayed its electrification goal by five years, amid a weaker-than-expected uptake for battery-powered cars. The company now expects sales of electrified vehicles, which includes hybrids, to account for up to 50% of total sales by 2030 - five years later than its earlier forecast which aimed to reach the 50% milestone by 2025.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
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Total Mercedes Benz Cars Sold Globally: Growth in total Mercedes Benz Cars sold globally is strong and we expect this growth to continue over our forecast period. We expect this number to grow steadily once the coronavirus pandemic situation gets clearer. A faster growth can lead to a significant upside in our price estimate.
BUSINESS SUMMARY
Mercedes-Benz engaged in developing, manufacturing, distributing, and selling premium and luxury cars and vans under various brands including Mercedes-Benz, Mercedes-Maybach, and Mercedes-EQ. Additionally, Mercedes-Benz offers spare parts and accessories as well as services such as financing, leasing, car subscription and rental, fleet management, insurance brokerage, and mobility services. Mercedes-Benz Group was formerly known as Daimler AG and changed its name to Mercedes-Benz Group AG in early 2022.
SOURCES OF VALUE
The Mercedes Benz Cars division is the most valuable business for Daimler AG. It is more valuable than all the other divisions combined.
We estimate that the high prices and unit sales of Mercedes Benz contribute the maximum value to its business. Mercedes Benz can fetch higher prices because of its strong brand name. It hopes to tap into emerging markets such as China, India, Russia, and Latin America, to help increase sales and grow market share. The International vehicle market is three-and-a-half times larger than the North American vehicle market.
KEY TRENDS
Mercedes-Benz aims to penetrate the electric vehicle market
- Demand for electric vehicles is rapidly rising around the world mainly due to a relatively less harmful impact on the environment and lower running costs, as compared to gasoline-powered engines. In addition, governments around the world provide various incentives to boost electric vehicle sales. Moreover, plugin electric vehicles (PEVs) also have lower battery prices, adding to their appeal. However, sales of these vehicles haven't picked up as previously estimated primarily due to lower ranges, and a lack of infrastructure supporting battery charging.
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But with more and more companies developing electric cars with higher ranges and building charging stations, plug-in sales are expected to continue growing at a fast pace.
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Although Mercedes has seen some hiccups with the pace of its EV transition, we expect the company to see a higher uptake going forward.
Fast-growing luxury vehicle market in China to provide growth impetus
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Consumption of young-generation consumers (ages below 35) is growing at 14% annually, which is twice that of consumers older than 35. The newer generation also typically has a more sophisticated taste and is more free-spending. The growth in the upper-middle class and the emergence of the new generation are expected to increase sales of high-value products, including automobiles. In FY 2018, while the overall market was declining, the company gained momentum in China with a sales increase of nearly 11%.
