Daimler is planning to separate its truck business and increase its investor appeal as a brand focussed on the electric and luxury car business. The final decision could be taken at the shareholders’ meeting expected to be held at the end of the 3rd quarter.
On Wednesday, renowned German carmaker Daimler announced its plans to spin-off Daimler Trucks & Buses, the world's largest manufacturer of trucks and buses. The move is being seen as an effort on Daimler's part to increase investor appeal as a brand focused on the electric and luxury car business. The decision follows the example of other German companies such as Siemens AG, after investors pressed boards to break up conglomerates. Following the split up, Daimler AG will be renamed as Mercedes-Benz and list its truck & bus business separately by year-end. During a conference call on Wednesday, CEO Ola Kallenius said, "Mercedes-Benz cars and Daimler Truck divisions are different businesses with different clientele, technology and capital needs. We believe they will operate more efficiently as independent entities, equipped with strong liquidity and free from the constraints of a conglomerate structure".
The move also highlights the Mercedes-Benz car brand's efforts to challenge electric and premium vehicle manufacturers such as Tesla Inc, BMW, Porsche, and others. Kallenius said he expects the standalone Mercedes-Benz business to compete with Tesla, and earn a higher valuation from investors over time. He further added, "it's all about transformation and winning in the electric vehicle and car software segment".
Under the planned separation, most of the stakes in Daimler Trucks would be distributed to Daimler shareholders. Sources at Daimler said that a final decision on the split would be taken at the shareholders’ meeting expected to be held at the end of the third quarter. Following the decision, the business could be listed on the Frankfurt Stock Exchange by the end of 2021.
Kallenius and Daimler Trucks chief Martin Daum told analysts that one reason for splitting the businesses was that commercial trucks and luxury car makers are pursuing different approaches to reduce carbon emissions. Heavy-duty truck makers are investing heavily in hydrogen fuel cell technology, while on the other hand, luxury vehicle manufacturers are focussing more on batteries.
Bernstein analyst Arndt Ellinghorst said that it made no industrial and cultural logic for combining these two different businesses. Analysts said the truck business did not add to Daimler’s share price and that the break up was logical and extremely positive for shareholders.
Stock markets were upbeat and reacted strongly to the announcement. Daimler shares closed at 64.56 euros on Wednesday, up by 8.91%.
Daimler Trucks delivered around half a million trucks and buses in 2019. It generated 40.2 billion euros ($48.34 billion) in revenue from trucks and 4.7 billion euros in revenue from buses. In the truck market, Daimler faces stiff competition from traditional rivals such as Volvo, Paccar Inc and Volkswagen AG unit Traton. It is gearing up to bring fully-electric heavy-duty trucks to compete with Tesla’s much-awaited semi-truck model.
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