BMW AG vs Daimler AG

[Mick Briesgau]

Super thread over here!

I'm, just as Martinbo (sorry Martinbo ) , an old bloke (40+) too . I remember quite well, that in my youth Mercedes was the non plus ultra (W 116 and W 126) The mercs were almost always the more expensive ones. But that didn't prevent Mercedes being one of the best earning companies. Nowadays, when I see an A-Klasse, it's sometimes even cheaper than it's rivals.

Well, I'm not buying Mercedes because it's less expensive as its rivals. I buy Mercedes because it's one hell of a car, perfect drive for mine everyday 300 kilometers use and for it's heritage and history. I don't give a damn whether or not it sold more E-Klasse than A6. Better yet, I'd prefer them to sell less! If quality is right, I am happy to pay more for it. Bit of exclusivity wouldn't harm either. If I want the best sold car, I buy a Golf.

And less sold, doesn't mean less earned. Porsche is living proof of that.

 

[EnI]

And less sold, doesn't mean less earned. Porsche is living proof of that.

Yes, but Porsche brand has always been more exclusive than eg. Mercedes-Benz or BMW. Not to mention their core business are niche sports cars, not eg mainstream cars like sedans.

But even Porsche HAD TO add SUVs in its portfolio, and a sedan (Panamera) as well. Not to mention the diesel engine. I'm not sure SUVs & diesel models by Porsche would be possible without VAG.

Having a big&strong parent allows you more synergies in financing, R&D, purchasing, production etc - all of that lowers the costs -> more profit.

Eg. MB & BMW are FORCED into partnerships as well, but since they want to stay independent, they rather gain economies of scale from massive product expansion than becoming a part of a bigger carmaker.

Being niche & exclusive + being independent at same time is not viable in the long run. Not in automotive industry. Yes, there are some cases (eg. AM, Tesla, Fisker) but they won't stay independent for long IMHO. C'mon ... even MB & BMW had to seek partnerships to survive ... be sure the above mentioned manufacturers are even more dependent on cooperation. And since they are small & weak, with no leverage (except Tesla), they are destined to be submissive partners.

Only option to preserve exclusivity & niche status of MB & BMW is to sell the business to eg. VAG, GM, Ford etc. But who really wants that? Nobody.

 

[Mick Briesgau]

Yes, but Porsche brand has always been more exclusive than eg. Mercedes-Benz or BMW. Not to mention their core business are niche sports cars, not eg mainstream cars like sedans.
But even Porsche HAD TO add SUVs in its portfolio, and a sedan (Panamera) as well.

But even for this more mainstream models (Cayenne and Panamera) they're asking more money than the competition does. And customers pay for it.

By the way, long time ago, I know, but mercedes-Benz used to be much more exclusive than Porsche is nowadays in the 20's to 50's of the last century.

 

[EnI]

But even for this more mainstream models (Cayenne and Panamera) they're asking more money than the competition does. And customers pay for it.

By the way, long time ago, I know, but mercedes-Benz used to be much more exclusive than Porsche is nowadays in the 20's to 50's of the last century.

Perhaps MB was more exclusive due to brand cachet (due to MB luxury sedans ... vs Porsche's raw & spartan sports cars) but definitely not due to sales & production volume compared to Porsche - since volume wise Porsche has always been more exclusive than MB. At least post-WW2. Since pre-WW2 the situation was different - back then even eg. Skoda was a prestigious & exclusive brand.

 

[Mick Briesgau]

Perhaps MB was more exclusive due to brand cachet (due to MB luxury sedans ... vs Porsche's raw & spartan sports cars) but definitely not due to sales & production volume compared to Porsche - since volume wise Porsche has always been more exclusive than MB. At least post-WW2. Since pre-WW2 the situation was different - back then even eg. Skoda was a prestigious & exclusive brand.

Right you are. Times, they are changing....... Isn't that weird, about Skoda I mean.

 

[Hofmeister]

But whats BMW worth excluding RR, MINI, BMW Motorrad and Husqvarna? Surely only when the value of those sub-brands/brands are excluded from BMW's worth can one get a true estimation of BMW's value in comparison to MB Automobiles? Or am I missing something?

 

[Ultimate Car Guy]

But whats BMW worth excluding RR, MINI, BMW Motorrad and Husqvarna? Surely only when the value of those sub-brands/brands are excluded from BMW's worth can one get a true estimation of BMW's value in comparison to MB Automobiles? Or am I missing something?

It's hard to say becasue all of those companies are completely integrated within BMW.

Rolls Royce: has it's own manufacturing facility in Goodwood but is heavily dependent on BMW's Dingolfing (Bodyshell), Munich (Engines) and Eisenach (Parts) factories. All R&D is conducted at BMW's FIZ in Munich.

Another thing to note is that RR has high margins which are offset by low volumes.

MINI: has it's own manufacturing facility in Oxford, but like RR is heavily dependent on BMW's Hams Hall (Engines) and Eisenach (Parts) plants. Also like RR, all R&D is conducted at BMW's FIZ in Munich.

MINI has high turnover but comparatively-speaking, low margins.

BMW Motorrad and Husqvarna: also has it's own manufacturing facilities in Berlin and Italy but is not primarily dependent on BMW's automotive production network. Also like RR and MINI, all R&D is conducted at BMW's FIZ in Munich.

BMW's Motorrad Divsion is profitable but in the context of the group, it's very small. Running BMW Motorrad is similar to running a BMW South Africa.

If you were to strip-out each of these companies from the BMW group, they each would not be worth much given that a lot of their key operations are either owned, run and are dependent on BMW-owned resources.

Out of these brands, BMW is the only entity that comparitively-speaking is both high-volume and high-margin.

BMW as a stand-alone company is worth close to that 45 billion.

 

[Merc1]

Simply don't buy that one at all, BMW by itself worth 42 billion? Nah. Would need to see what their actual value is per industry analysts not speculative investors.

M

 

[Ultimate Car Guy]

Simply don't buy that one at all, BMW by itself worth 42 billion? Nah. Would need to see what their actual value is per industry analysts not speculative investors.

M

What do you mean by this? And on what basis are you making this claim? These investors get their information from the analysts.

That 45 billion (not 42) is derived from what the market is willing to pay for the company i.e. it's share price.

If you multiply BMWs most recent share price by the number of shares it has issued, then you will get a figure roughly 45 billion euros. This is what's referred to as the "market capitalisation" and represents the price if hypothetically one wanted to purchase the entire company outright.

I'll even do the calculation for you:

BMW Common Stock (2011): 601,995,000
BMW Preferrred Stock (2011): 53,571,000
TOTAL BMW Stock (2011): 655,566,000

BMW Share Price (19 December '12): 71.54 Euros

BMW Market Capitalisation = 655,566,999 x 71.54
= 46,899,191,640 Euros
= approximately 45 billion euros

 

[Mr. Mercedes]

UCG do you know what the earnings/returns of each company are relative to market capitalisation?

 

[Sunny]

http://www.bloomberg.com/quote/BMW:GR

http://www.bloomberg.com/quote/DAI:GR

 

[Ultimate Car Guy]

UCG do you know what the earnings/returns of each company are relative to market capitalisation?

Per Sunny's Bloomberg link:

BMW:

Current P/E Ratio (ttm) 10.0196
Earnings Per Share (EUR) (ttm) 7.1600
Market Cap (M EUR) 45,775.16

Daimler:

Current P/E Ratio (ttm) 7.8442
Earnings Per Share (EUR) (ttm) 5.2300
Market Cap (M EUR) 43,790.54

On the abovelisted metrics, BMW is just simply beating Daimler. The market is saying that BMW is more valuable than Daimler.

This is very disappointing for Daimler becasue the company is larger than BMW. They have both automotive AND commercial vehicle opertions.

 

[K-A]

Simply don't buy that one at all, BMW by itself worth 42 billion? Nah. Would need to see what their actual value is per industry analysts not speculative investors.

M

You really don't think BMW is worth $42 Billion?

Ford is valued at $44 Billion. Even with all the excess brands under Fords belt (which nowadays aren't worth much at all), I'd say the BMW brand is easily seeable as worth at least as much as the entire Ford umbrella.

 

[K-A]

BMW:

Current P/E Ratio (ttm) 10.0196
Earnings Per Share (EUR) (ttm) 7.1600
Market Cap (M EUR) 45,775.16

Daimler:

Current P/E Ratio (ttm) 7.8442
Earnings Per Share (EUR) (ttm) 5.2300
Market Cap (M EUR) 43,790.54

Well there it is, once again Merc1 argues and berates me for assuming what was right. Not only do INVESTORS (who make up the worth of a company as it is a Public Company which consists of investors) value BMW more than M-B, but they do so due to factual analysis (not simply assumptions).

If Daimlers Market Cap is $43B, and BMW Groups is $45B, and Daimler purportedly has a larger portion of its Market Cap factored into its much larger Commercial estate than BMW does its "side-projects", not to mention being a much larger company than BMW AG who's success is still comparatively in the growing phases (a "new kid" comparative to M-B, and gaining more sales ground in recent times), then we start to see exactly why those "investors" see BMW brand as double the worth of Mercedes brand.

Trailing worth shows that BMW is considered higher valued than the Mercedes brand today, and most importantly, FUTURE GROWTH prospects show that they perceive BMW is a much better bet than M-B, and that's what the market invests on. Just look at the P/E ratios, M-B at a 7.8, which is staggeringly lowly valued (which means the market is assuming Daimler will grow practically NOTHING), and BMW's at an also very modest 10 (which shows that between the two, the market assumes and invests in a higher growth rate from BMW).

If the market gave Daimler a 10 P/E, then they'd inch ahead in overall Market Cap, but we'd still have to factor in their much larger Commercial portion which would still signify a higher assumed worth for BMW brand (VS Mercedes brand), considering the metrics those Investors analysis used. And at the end of the day, BMW's EPS is considerably higher than Daimlers.

What surprises me is how low the P/E ratio is for both cars, especially Daimler. I guess I can understand as even though successful, automotive brands have lots of fear and uncertainty constantly attached to their growth and stability prospects (an economic downturn and the first to get hit are automotives), but Daimler being at a 7 shows that the market literally has no confidence in the future of the company. BMW's 10 is a little more "healthy" for a volatile market like cars, but even that seems pretty pressed down.

 

[klier]

Great thread guys! Very informative and non-biased! Keep it up, I love reading this stuff.

 

[Merc1]

You really don't think BMW is worth $42 Billion?

Ford is valued at $44 Billion. Even with all the excess brands under Fords belt (which nowadays aren't worth much at all), I'd say the BMW brand is easily seeable as worth at least as much as the entire Ford umbrella.

Ford doesn't have anything under its "umbrella" anymore, except Lincoln which is just a on paper brand at best.

If the BMW brand itself, not factoring in Rolls/Mini/Motorad is worth that much I don't see how Mercedes could be worth half of that. If you're going to take out Benz's truck business then it doesn't seem to be a fair calculation to compare just Mercedes-Benz to BMW's whole portfolio.

M

 

[Merc1]

BMW:

Current P/E Ratio (ttm) 10.0196
Earnings Per Share (EUR) (ttm) 7.1600
Market Cap (M EUR) 45,775.16

Daimler:

Current P/E Ratio (ttm) 7.8442
Earnings Per Share (EUR) (ttm) 5.2300
Market Cap (M EUR) 43,790.54

Well there it is, once again Merc1 argues and berates me for assuming what was right. Not only do INVESTORS (who make up the worth of a company as it is a Public Company which consists of investors) value BMW more than M-B, but they do so due to factual analysis (not simply assumptions).

If Daimlers Market Cap is $43B, and BMW Groups is $45B, and Daimler purportedly has a larger portion of its Market Cap factored into its much larger Commercial estate than BMW does its "side-projects", not to mention being a much larger company than BMW AG who's success is still comparatively in the growing phases (a "new kid" comparative to M-B, and gaining more sales ground in recent times), then we start to see exactly why those "investors" see BMW brand as double the worth of Mercedes brand.

Trailing worth shows that BMW is considered higher valued than the Mercedes brand today, and most importantly, FUTURE GROWTH prospects show that they perceive BMW is a much better bet than M-B, and that's what the market invests on. Just look at the P/E ratios, M-B at a 7.8, which is staggeringly lowly valued (which means the market is assuming Daimler will grow practically NOTHING), and BMW's at an also very modest 10 (which shows that between the two, the market assumes and invests in a higher growth rate from BMW).

If the market gave Daimler a 10 P/E, then they'd inch ahead in overall Market Cap, but we'd still have to factor in their much larger Commercial portion which would still signify a higher assumed worth for BMW brand (VS Mercedes brand), considering the metrics those Investors analysis used. And at the end of the day, BMW's EPS is considerably higher than Daimlers.

What surprises me is how low the P/E ratio is for both cars, especially Daimler. I guess I can understand as even though successful, automotive brands have lots of fear and uncertainty constantly attached to their growth and stability prospects (an economic downturn and the first to get hit are automotives), but Daimler being at a 7 shows that the market literally has no confidence in the future of the company. BMW's 10 is a little more "healthy" for a volatile market like cars, but even that seems pretty pressed down.

No I questioned why you take whatever and run with it. Not how the calcuation was done and that was in another thread.

M

 

[K-A]

If you're going to take out Benz's truck business then it doesn't seem to be a fair calculation to compare just Mercedes-Benz to BMW's whole portfolio.

M

The whole point of that article was to estimate the worth of BMW and Mercedes brand (not parent companies), factoring both "excess" out of each portfolio. The whole point was to say that BMW AG being valued higher than Daimler AG by bonafide Market Cap, is telling in regards to how significantly higher BMW brand may be than Mercedes brand, considering more of Daimlers portfolio consists of "excess" than BMW's does.

 

[Mr. M]

Just wanted to add as well that while BMW can share its small Prince engine in the Mini with PSA, the 7er's chassis with the Ghost, BMW electronics in RR/Mini (and other platform sharing agreements - if there are any?) to spread costs, Daimler is pretty much standing alone in developing its products which makes it extremely costly. Does Daimler share engines or technology with any other car manufacturer? I can only remember the Ssangyong cars which used its engines, and of course the uneasy sharing with Chrysler.

I also had a chat with some industry speculators, and they say that BMW also knows very well how to plough their cash into equity and bond investments, being very successful and allowing it to put that high ROI back into R&D, dealer discounts, etc. It is as much a car maker as it is an investment vehicle.

 

[aleks_16]

Zonda uses Amg engines, too. The coorparation with renault/nissan will also feature some engine sharing i guess.