Mercedes-Benz

What does the company do? Mercedes-Benz has one of the most widely recognised and valuable global brands. 2023 was a year full of challenges for the automotive sector, including consumer discretionary pressures, heightened competition, and deceleration in demand for electric vehicles (“EVs”). Mercedes Benz’ strategy ‘to build desirable cars’ supports its leading market position. The company targets the premium end of the automotive market and, in doing so, it has better pricing power, robust margins and earnings resilience compared to peers. This strategy, and a focus on cost optimisation, has allowed it to invest in innovative technology and development to progress in areas of automation and the future electric powertrain. With a strong net cash balance sheet and healthy returns, Mercedes-Benz offer an attractive dividend in addition to an appealing buyback. Why do we like the investment? The company’s commitment to plug-in hybrids and all electric cars is highlighted by its ambitious targets. The company spends 24% of its capital expenditure and 32% of its operating expenditure on low carbon transport technologies and offers an electric alternative in every segment in which it competes. The company is planning to install 10,000 Mercedes-Benz high-power chargers in core markets. In addition, the company has made progress to decarbonise its own production and that of its supply chain. While Mercedes-Benz depends on consumer, regulatory and infrastructure developments to support its transition, the Investment Manager believes the company is well placed to lead in this dynamic environment.