Seeking Alpha
Research analyst, long/short equity, tech
Profile| Send Message|
( followers)  

Daimler AG’s (DAI) flagship brand is Mercedes-Benz which includes cars, vans, SUVs, coaches and trucks, and competes with Toyota (NYSE:TM) and The Ford Motor Company (NYSE:F). We estimate that Mercedes-Benz contributes around 34% of the $54 Trefis price estimate of Daimler AG’s stock.

The number of Mercedes-Benz vehicles sold globally declined from a high of nearly 1.4 million in 2007 to about 1.1 million in 2009 due to intense competition and the global economic crisis that triggered an overall drop in auto demand. We expect economic improvement along with demand from emerging markets to lead to a rapid increase in Mercedes-Benz vehicle sales in the future.

Peak Mercedes-Benz Sales to Recover By 2011

We expect sales of Mercedes-Benz vehicles to nearly reach the 2007 peak by 2011 and for sales to exceed 1.8 million units by the end of our forecast period, implying about 2% market share within the global auto market.

You can modify the forecast above to see how Daimler’s stock is impacted by the number of Mercedes-Benz vehicles sold.

We expect Mercedes-Benz vehicle sales to improve for the following reasons:

1. Focus on Emerging Markets, Particularly China, for Cars

Daimler is increasingly focusing on China, which is the biggest luxury market for cars in the world. Mercedes-Benz cars sales in the Chinese market more than doubled in Q1 of 2010 to 27,000 vehicles, compared to the same period a year ago. Mercedes-Benz is maintaining its growth as well as strengthening its position as a premium brand. We expect Daimler to continue focusing on emerging markets such as China, India and Latin America in the long term.

2. Gaining Share

We expect Mercedes-Benz to gain market share from Honda’s (NYSE:HMC) Acura, Ford’s Mercury (expected to be phased out) and Toyota’s Lexus. Mercedes-Benz faces the biggest competition from German car makers BMW and Audi.

You can see our complete model of the Daimler AG stock here.

Disclosure: No positions

Source: Mercedes-Benz Will Drive Growth for Daimler