Luxury carmakers: score draw ahead
VfB Stuttgart have not beaten Bayern Munich in the German football league for 10 years. But in the corporate arena, the Swabians have reason to crow over their Bavarian rivals. Daimler on Sunday said it sold 2.08m Mercedes-Benz cars in 2016. That should push its volumes above those of Munich-based rival BMW, and fulfil a pledge made in 2011 to retake the crown of world’s biggest luxury car manufacturer by 2020. Dieter Zetsche, Daimler’s chief executive, should enjoy the moment while it lasts.
His triumph has been to focus on what matters to customers rather than engineers, sometimes a hard trick to pull off at an engineering company. This has underpinned six years of double-digit percentage growth in Mercedes volumes. Like peers, Daimler benefited from robust demand in China and strong growth in leasing.
None of that is about to change. But last year’s sweet spot in terms of product range — with every major model recently renewed — will be harder to repeat. Daimler’s push into compact cars worked well; its earlier boxlike A-class was a poor effort, its curvy new one is a vast improvement. It has also caught up in high-margin SUVs, which now account for a third of sales, about the same as BMW.
All this success means comparatives will be tough in 2017. BMW, by contrast, is still to reap the benefits of its new 5-series (on sale this year) and 3-series (in 2018). It has also been selling pure electric vehicles, albeit in small volumes and at very little profit, for some time. Mercedes has been slower to market with electric cars, though will launch new ones in 2018.
Non-German rivals are upping their game, too. Jaguar Land Rover sold 580,000 vehicles in 2016, more than double its 2011 sales volume. Tesla remains a niche player, shifting 76,000 cars in 2016. But its orders are up 50 per cent on last year.
Bigger volumes are not necessarily a winning formula for better returns. Net of leasing-related debt, Daimler is valued slightly more highly (relative to earnings before interest, tax, depreciation and amortisation) than BMW, reflecting its better margins. But the latter’s shares have outperformed Daimler’s since Mr Zetsche made his pledge (and the Dax has beaten both).
In football terms, 2016 could be considered a 2-1 victory for Daimler over BMW. Expect something more akin to a 1-1draw this year.