Considering that the number of cars sold worldwide was 75 million in 2019 and that the 2023 forecast still sees this number just above 70 million, we are before an industry still somewhat in recovery mode in terms of volumes, while profit margins have increased more or less all across the board. Once the pandemic hit and caused supply chain bottlenecks, many manufacturing companies, on one side, found themselves unprepared, on the other, they discovered the new possibilities that were given by an environment where supply is well lower than demand. A company like Mercedes can afford to do this without being hurt and actually being benefited. In hindsight, a few year after the pandemic changed the world, we see how Mercedes understood before many other companies where the industry needed to go: reducing volumes gives more pricing power and enables a company to pick its customers choosing the wealthier ones. Mercedes 2023 Capital Markets Presentation In particular, among top-end luxury vehicles, Mercedes' own brands such as Maybach and AMG, which give life to products many wealthy customers desire and crave. Mercedes understood this at the end of the decade and in 2019 it started reshaping its model portfolio to put as much effort as possible in pushing its customers from the entry luxury segment to the core and top-end luxury ones. In particular, while during the last decade automakers - and Mercedes, too - focused primarily on volumes, the strategy is now quite different and aims at profitability. However, what I think many investors still aren't aware of is the major strategy shift the company decided to undertake before the pandemic hit. Just to give an idea of how powerful the brand is, for the past 10 years it has always been among the top 10 best global brands in the world. Mercedes-Benz is a company needing no presentation. In fact, what strikes me is how Mercedes is being able to push its average selling price per vehicle closer and closer to Porsche's while the multiples it trades at are significantly lower. In this article I would like to share how I am reviewing the company after I initiated my position last year. I am talking about the German auto-maker Mercedes-Benz Group AG ( OTCPK:MBGAF OTCPK:MBGYY). While names such as Ferrari ( RACE) and Porsche ( OTCPK:DRPRF), which I both own, immediately come to mind when we look at luxury vehicles, there is another big player that, though with quite some differences from the other two, is betting big on reshaping its model portfolio by reducing its exposure to the entry luxury segment and increase by 60% its top-end luxury sales. In addition, the wealthier the end-market is, the more insulated it can be from a recession. In particular, I have been more and more focusing on top-end vehicles manufacturers, where volumes are lower and margins are high. In the car industry, while all eyes have once again been on Tesla ( TSLA), I have a few other names I am picking which I consider safer long-term bets. While the market has seen a huge comeback for the 2022-beaten-down-tech stocks, there are other sectors that have not been idle. Jetcityimage/iStock Editorial via Getty Images Introduction
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