Daimler AG; A German Powerhouse
A Corporate Analysis
Christopher Coote
May 2020
The Daimler Automotive Group is a German based automotive manufacturer that was originally established in 1926 and continues to thrive today. Daimler, a powerhouse of the auto industry and the parent company of luxury car brand Mercedes-Benz, took in an annual revenue of 167.4 billion euros last year alone (Beauchemin, 2016). Their mission is to “focus on innovative and green technologies as well as on safe and superior automobiles that appeal and fascinate” (Kennard, 2019). Moreover Daimler executives have expressed that their vision is to “follow a consistent path towards intelligent connectivity of our vehicles, autonomous driving and new mobility concepts.” (Jones). The corporation has found success in their recent pursuits as they are a leader in the field of autonomous driving technology.
In an attempt to advance their technological developments as well as expand their target market and gain a competitive edge, it would be in Daimler’s best interest to develop and introduce a hydrogen fueled car. H₂ powered vehicles are the future of the auto industry as they produce no carbon emissions and therefore burn 100% clean energy. Although there are many safety and financial complications with the mass production of hydrogen vehicles, Daimler has the opportunity to be the pioneers of this technology as no other automotive company currently offers it. Consumers are always looking for the newest technology in any given industry and would therefore be interested in purchasing vehicles fueled by alternative energy sources. Moreover, Daimler predominately sells luxury automobiles that generally appeal to the upper-class consumer. This allows them to maintain decent profit margins while selling expensive technology as their customers will likely not mind paying premiums on these new cars.
Hydrogen powered cars rely on a single fuel cell that is designed to harness the energy produced by the reaction of hydrogen gas and oxygen gas upon catalyzation by a reactive metal isotope such as platinum-192 (Hennin, 2018). The chemical energy harnessed from this reaction is used to charge large batteries that in turn, power an electric drivetrain and turn the wheels. As long as they are provided with an ample supply of hydrogen, the batteries could in theory run forever. This innovation would align perfectly with their mission statement as hydrogen powered cars have a very minimal impact on the environment. Furthermore, burning H₂ is an automotive concept that certainly “appeals and fascinates” (Kennard, 2019).
A CORPORATE ANALYSIS: Daimler AG is a global powerhouse that embodies many corporate strengths. Their variety of brands allows them to sell to many diverse markets. Brands such as Western Star and Frieghtliner appeal to commercial customers in the transportation industry while brands like SmartCar and Mitsubishi-Fuso are designed for the public consumer. Their flagship brand Mercedes Benz has dominated the luxury car market for decades. Moreover, Daimler offers non-automotive services such as Mercedes Financial which allows for an even wider customer base. In addition to the strength of their brands, Daimler is financially strong and distributes their capital in a highly effective manner. They spend 9.1 billion euros annually on research and development (Kennard 2019). On top of being an industry leader in R&D, Daimler owns 7.5 billion euros worth of property, facilities and production equipment. These assets act as securities for the company and allow them to invest in new ventures with limited risk.
Despite being a powerhouse, Daimler has certain corporate weaknesses that cannot be overlooked. Due to the fact they are based out of Europe, they tend to encounter complications and added expenses when exporting products to the North American market. This includes but is not limited to; export tariffs, cross-atlantic shipping costs, currency exchange rates and intercontinental commerce regulations (Beauchemin, 2016). Additionally, Daimler is forced to sell “North American adaptations” of their vehicles in order to compete with domestic auto manufacturers. Some complications include producing left-hand drive vehicles and equipping cars with NHTSA approved air bags. This inevitably ends up costing Daimler extra and subsequently reduces profit margins.
In terms of opportunities, Daimler has many. Daimler has enough capital to buy smaller companies and subsequently add to their roster of sub-brands. Their 2018 annual report states that as a company, they have 2.9 billion euros of “free cash flow” (Jones, 2018). In the past, this money has been allocated to buy competitor automotive companies such as SmartCar. Not only does this give Daimler an opportunity to further distinguish their parent brand, but it also eliminates competition and frees up market share. An additional opportunity would be the Mercedes AMG Formula One race team. Led by principal investor Toto Wolff, the AMG race team is powerhouse of the motorsport world. Among many things, the race team provides Daimler with fantastic advertising opportunities. It also facilitates the innovation of new powertrain, suspension and transmission systems. One might argue that Mercedes AMG has dominated the track almost as much as they dominate the consumer market.
Finally, one must consider the corporate threats that Daimler AG faces. The biggest threat to the company is the constantly changing environmental regulations that all automakers must take into account. Most Daimler vehicles rely upon large, powerful gasoline engines. As environmental conditions worsen and climate change becomes a bigger concern, the demand for V8, V10 and V12 engines continues to decrease. These inefficient engines, the engines Daimler has built its empire around are becoming the technology of the past. In order to keep up with current consumer demands as well as meet government regulations, Daimler brands must focus on the development of low emission powertrains and engines rely on cleaner energy sources. Although Daimler Automotive Group suffers from inevitable weaknesses and faces certain threats, they are without a doubt a force to be reckoned with when it comes to the automotive industry.
Work Cited
Beauchemin, F. (2016). Daimler: growth in unit sales and revenue — EBIT and dividend at high levels. Retrieved from https://media.daimler.com/marsMediaSite/en/instance/ko/Daimler-growth-in-unit- sales-and-revenue — EBIT-and-dividend-at-high-levels.xhtml?oid=42464844.
Hennin, G. (2018). How Do Hydrogen Fuel Cell Vehicles Work? Retrieved from https://www.ucsusa.org/resources/how-do-hydrogen-fuel-cell-vehicles-work.
Jones, M. (n.d.). Our Business Units. Retrieved from https://www.daimler.com/company/business-units/.
Kennard, L. (2019). Daimler Global Media Site. Retrieved from https://media.daimler.com/marsMediaSite/en/instance/ko/Start.xhtml?oid=483625
N. A. Sedans, SUVs, Coupes & Wagons. (n.d.). Retrieved from https://www.mercedes-benz.ca/en/home#.
