The Year That Was: Daimler

DAI: DAIMLER AG logo
DAI
DAIMLER AG

2016 has been a great year for Mercedes-Benz, the luxury vehicle division of Daimler AG. Mercedes is on track to overtake BMW as the global leader in sales of premium vehicles, a title it lost to the latter in 2005. Mercedes has sold 1.894 million vehicles through November, up 11.8% year-over-year, selling almost 70,000 more vehicles than BMW has so far in the year. Audi, on the other hand, has sold 1.714 million vehicles, up 4.2% year-over-year.

Mercedes’ lead has come on the back of solid sales for its SUV lineup, which formed 34% of the brand’s volume sales through the first eleven months of the year. Growth at Mercedes is expected to continue into the next couple of years, buoyed by strong sales of the GLC SUV and the C-Class sedan, which competes against BMW’s aging 3-Series.

Dai Q&A 18

Relevant Articles
  1. Will Johnson & Johnson Stock Rebound To Its Pre-Inflation Shock Highs of $185?
  2. Should You Pick Eli Lilly Stock After A 4x Rise In Three Years?
  3. Down 9% This Year, What’s Next For Lululemon’s Stock Past Q4 Results?
  4. Down 14% In The Last Trading Session, Where Is Adobe Stock Headed?
  5. Will Higher Federal Government Spending, Gen AI Drive Digital Security Stocks Like CrowdStrike Higher?
  6. Up 30% In A Year Is FedEx Stock A Better Pick Over UPS?

In the U.S., while the overall market remained relatively flat through November, unit sales of SUVs/Crossovers rose 7% year-over-year, forming 38% of the passenger vehicle market in the country. Sales of the Mercedes GLC sport utility vehicle more than tripled last month in the country. The U.S. automotive market seems to have plateaued after six consecutive years of strong growth rates, following the recession. The re-filling of fleets took place aggressively over the last several years, and now the consumer demand has slowed down, as expected. While the light-duty vehicle sales in the U.S. have remained relatively flat this year, premium vehicle sales are in fact down 10% because a chunk of these sales (~80%) are formed by cars, the demand for which has fallen drastically in the last year or two. Mercedes still has been able to weather the storm on the back of its strong lineup of SUVs, Crossovers, and even Vans.

On the other hand, Mercedes has witnessed solid growth in China as well, catching up to Audi and BMW in the country. In China, SUVs are the best-selling mini-segment. While passenger vehicle sales were up 17.2% year-over-year in November, buoyed by government tax breaks, and high discounts offered by dealers, SUV sales rose 41.5% to comprise ~40% of China’s overall passenger vehicle sales. In fact, a massive rise in China for Mercedes due to more than 15 new or revamped models, expansion of the dealer network to approximately 500 dealerships, extension of local production capacity, where in addition to the C- and E-Class, the two SUVs GLA and GLC are being built, all these helped ensure that China became the automaker’s single largest market last year. Mercedes’ SUV lineup increased volume sales by 37.6% year-over-year through November, while overall sales rose 11.8%.

While Mercedes has boosted Daimler’s results so far this year, lower than expected sales for Daimler Trucks, especially in the NAFTA region have had a bearing on the group’s financials. Daimler Trucks and Buses form ~25% of Daimler’s valuation, as per our estimate. The NAFTA region forms ~40% of net unit sales for Daimler Trucks, where year-over-year sales were down 40% in Q3. The demand for medium and heavy trucks remained strong all through last year in the U.S. on the back of robust freight activity, fleet utilization, and growing profitability for fleet operators as crude oil prices continued to decline at a fast pace, but the demand has weakened this year. Weak overall investment is expected to decrease demand for Class 6-8 trucks by ~15% in 2016.

Daimler Truck unit sales are expected to decline significantly in 2016 compared to 2015 levels. Daimler is looking to continue to invest heavily in products and technology, which is why the free cash flow in 2016 is expected to “significantly” decrease from the figure of 5.9 billion euros in 2015. However, the underlying performance of Daimler’s most valued division, Mercedes-Benz, has remained strong throughout this year.

Have more questions on Daimler? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Daimler AG

Get Trefis Technology