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Mercedes-Benz Profit Surge And Lead In Assisted Driving Make It Attractive

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Man driving luxury car Mercedes-Benz S class

Man driving luxury car Mercedes-Benz S class

Viktor4ik/iStock Editorial via Getty Images

Mercedes-Benz Group AG (OTCPK:MBGAF, OTCPK:MBGYY) has agelong attracted luxury automotive customers based connected nan engineering, prestige, and creation estimation of high-priced car models specified arsenic its flagship S-Class sedan. Investors were ne'er arsenic enthusiastic astir nan stock, perchance because of nan confusing Daimler AG firm name, which meant small successful markets extracurricular of Europe. The erstwhile Daimler AG was besides heavy invested successful large trucks, which made nan institution harder to analyse successful comparison to axenic carmakers.

The automaker solved its personality and labeling puzzle successful 2021 by separating into 2 companies: Mercedes-Benz Group AG focused connected cars and vans; Daimler Truck Holding AG (OTCPK:DTRUY) has Mercedes arsenic a awesome shareholder.

Very smart! Like Ferrari (RACE), Ford (F), and Toyota (TM), nan Mercedes car marque - highly esteemed among elite names - now serves arsenic nan sanction of nan carmaker's stock.

Perchance to dream

No doubt, CEO Ola Källenius hoped that Mercedes, an automaker migrating toward electrification, mightiness get immoderate of Tesla, Inc.'s (TSLA) P/E magic arsenic well. So far, that hasn't happened; nan stock value has fallen astir 10% successful nan past year, presently trading astatine an anemic P/E of six. Tesla's P/E is presently a hairsbreadth beneath 60.

Still, nan financial results since nan divided are impressive, evidenced by nan fourth-quarter and 2022 year-end results released early Friday. YOY gross is up 16% for nan quarter, 12% for nan year. Net income is up 63% for nan quarter, 34% for nan twelvemonth to a robust 14.8 cardinal Euros. Global car income roseate 5% for nan twelvemonth to 2,040,719 - 149,227 aliases 7.3% of which were battery-electric vehicles (BEVs).

table

Mercedes-Benz Group AG Q4 and 2023 (Mercedes-Benz)

Return connected income for 2022 was astir 15%, a reflection of nan comparative profitability of luxury vehicles compared to lower-priced models. Most world automakers struggle to execute an 8% return connected sales.

As for 2023:

The institution is taking a prudent position and sees portion income of Mercedes-Benz Cars astatine nan prior-year level. Overall Top-End conveyance income are expected to beryllium somewhat supra anterior year, acknowledgment to caller additions to nan portfolio, including nan caller EQS SUV and later nan Mercedes-Maybach EQS SUV. Sales of artillery electrical vehicles (BEV) are expected to astir double. The adjusted Return connected Sales (ROS) is expected successful nan scope of 12% to 14%. Net pricing is expected to beryllium somewhat positive. Based connected existent assumptions it is targeted to compensate inflation-related costs increases, proviso concatenation interruptions and one-time commodity charges. The utilized conveyance business is expected to beryllium somewhat antagonistic versus 2022.

Drive Pilot arrives

Mercedes-Benz engineering prowess has translated into a breakthrough successful autonomous tech, namely nan SAE Level 3 certification successful Nevada of its Drive Pilot feature. This allows constricted autonomous driving nether definite conditions. With Drive Pilot - already ineligible successful Germany since past May - a motorist tin safely move nan driving usability complete to nan conveyance astatine speeds up to 40 miles per hour, typically successful a business specified arsenic dense postulation and only connected a constricted entree freeway.

car

Drive Pilot trial car (Mercedes-Benz Group AG)

Mercedes says nan system, though constricted for nan clip being, tin run safely astatine up to 80 mph.

"In nan modern world, clip is 1 of nan astir precious commodities, and giving backmost clip to our customers is simply a halfway constituent successful our strategy to build nan world's astir desirable cars," nan automaker said in a property release. "Our DRIVE PILOT takes a awesome measurement guardant successful achieving that, and places america astatine nan very forefront of invention successful nan crucially important section of automated driving."

Mercedes stipulates, however, that nan driver must beryllium prepared to return complete if nan strategy recognizes an emergency aliases immoderate anomaly. Otherwise, nan car comes to a stop, turns connected nan emergency flasher, and opens nan doorway locks to accommodate a first responder.

The characteristic will beryllium disposable later this twelvemonth arsenic an action connected nan 2024 Mercedes S Class and nan 2024 EQS battery-powered sedan. The automaker has applied for certification successful California and expects to do truthful crossed nan U.S.

Game changer?

Autonomous driving, though lagging down early forecasts arsenic to really quickly it tin beryllium achieved, carries important ineligible and financial implications for world mobility enterprises. Several China-based and different startups are pursuing nan innovation, which yet could return drivers wholly retired of nan equation - though experts disagree whether that's possible. Development costs are precocious - Ford Motor Company (F) precocious closed its Argo AI portion dedicated to autonomous.

Tesla has travel nether dense disapproval successful nan aftermath of respective accidents for trading its precocious driver assistance strategy (ADAS) arsenic "full self-driving." On Thursday, Tesla said it is voluntarily recalling 362,758 vehicles equipped pinch nan company's experimental driver-assistance software, which is marketed arsenic Full Self-Driving Beta aliases FSD Beta, successful nan U.S. Tesla's announcement said nan package whitethorn origin crashes; nan institution said it will present an over-the-air package update to cars to reside nan issues.

General Motors Company's (GM) Cruise connection is operating a mini fleet of driverless robotaxis successful San Francisco and plans to grow to different locations. GM sees robotaxis arsenic a awesome root of early income. GM besides offers connected immoderate of its models a Super Cruise option, which allows drivers to return their hands disconnected nan instrumentality and feet disconnected nan pedals connected constricted entree highways, though eyes must beryllium kept connected nan road. Super Cruise and Ford's akin Blue Cruise are rated astatine SAE Level 2.

The Mercedes strategy relies connected radar, LIDAR, camera, and precocious mapping features, successful summation to different sensors. With Drive Pilot, Mercedes could beryllium mounting itself isolated from nan title successful nan luxury section - and besides mounting nan barroom for different luxury makers that now will look unit to connection a akin feature.

sensor array

Drive Pilot sensor array (Mercedes-Benz Group AG)

The year-end financials came pinch an announcement that nan guidance and supervisory boards will propose a 5.20 Euro yearly dividend astatine nan company's yearly gathering successful early May. Assuming nan dividend is adopted, that would construe to astir a 7% output astatine nan existent stock price. An income-oriented investor could bargain coming and waste successful 3 months - aliases bent connected if nan shares proceed to recover.

The biggest consequence for Mercedes-Benz is user guidance to BEVs, peculiarly successful nan U.S. But nan automaker has answered Americans' interest astir nan deficiency of a robust charging infrastructure by committing successful January to build its own chargers successful nan U.S. - a strategy that has worked good for Tesla.

I complaint Mercedes-Benz Group AG communal shares and nan ADRs a Buy.

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

This article was written by

Doron Levin floor plan picture

I americium a journalist based successful Detroit, having spent almost my full profession penning astir business and economical subjects for The Wall Street Journal, New York Times, Detroit Free Press and Bloomberg. I'm nan writer of 2 books and americium an acknowledged master connected nan world automotive industry.

Disclosure: I/we person a beneficial agelong position successful nan shares of TM, F either done banal ownership, options, aliases different derivatives. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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