It’s been more than a year since Daimler CEO Dieter Zetsche vowed that Mercedes-Benz would reclaim the number one place in the premium segment from BMW by the end of the decade. He even sent a letter to his employees, saying that the company “should be far ahead of the pack”.
For the time being, though, the gap is widening, instead of closing and the three-pointed star is still trailing both BMW and Audi in the race for the number one spot.
The latest report by Bloomberg says that market capitalization at BMW is up to €45 billion (US$58.8 billion) compared to €42.2 billion (US$55.5 billion) for Daimler. After subtracting around €20 billion (US$26.3 billion) for its truck business, investors value the Mercedes-Benz passenger car division at €22 billion (US$28.9 billion), or less than half the value of its Munich-based rival.
That’s a huge blow for Mercedes-Benz, which only two years ago, had a market capitalization €15.5 billion (US$20.4 billion) higher than BMW.
“The market is saying that the prospects for Mercedes are much worse than for BMW”, said Hans-Peter Wodniok, an analyst for Germany-based Kronberg. “The market’s always right”, he added. “In terms of innovation, BMW is the leader.”
The reasons cited are a sluggish growth in China and slow expansion in high-volume segments such as compact SUVs along with an image that doesn’t appeal to younger buyers.
Despite the company having already initiated a cost-cutting program that will shave US$1.3 billion in expenses annually, things are not looking good: “The market’s confidence in Daimler management is pretty much at rock bottom”, Singapore-based Max Warburton, an analyst for Bernstein, told Bloomberg. “Investors have little or no confidence that current management will be able to do what is necessary to close the gap to BMW.”
Since Zetsche, whose contract expires at the end of next year, took over as CEO in 2006, Daimler share value has decreased by 10 percent. In the same period, BMW saw its own stock price skyrocket by 89 percent. As a result, 68 percent of analysts recommend buying BMW shares compared to just 40 percent for Merc stock.
“We have very clear strategies for all our divisions focused on both growth and efficiency”, said Florian Martens, a spokesman for Daimler. Aiming to revamp sales in the world’s largest new car market, the company decided to combine its two separate sales units (one for imported and one for locally made vehicles) into one and appointed Hubertus Troska to oversee its Chinese operations.
Shanghai-based Automotive Foresight consultancy firm MD Yale Zhang notes that Mercedes has an “overwhelming” potential to increase its sales in China, as “every consumer understands the value of Mercedes and the logo”.
Sure they do. The problem, so far, is getting them to buy the product…
By Andrew Tsaousis
PHOTO GALLERY
